Section 1240-01-50-.18 - TREATMENT OF INCOME FROM SELF-EMPLOYMENT(1) Determining Income From Self-Employment.(a) Annual Income. Income which is received annually, and/or which is an integral part of annual income will be totaled and prorated over 12 months, even if the income is received only once or over a period of time shorter than twelve months. Such income is usually derived from farming but may also apply to other self-employment enterprises. Annual income will be prorated over 12 months even if a person has income from sources other than self-employment. Income received once annually will be prorated over 12 months beginning with the month the income is received. Income which represents annual income but which is received periodically during a year will be totaled and averaged over 12 months. This average figure will be used to project future income (if all other factors remain relatively constant). If a self-employed person is under contract, the 12-month period begins the first month the person receives payment under the contract.(b) Income from Migrant Labor, Seasonal Work. An estimated average monthly income from migrant labor, seasonal farm work and other seasonal employment will be considered during the months it is received.(c) Monthly Self-Employment Income. When self-employment income is received monthly, the average monthly income will be estimated based on past income and substantial changes in circumstances which have occurred, such as an increase or decrease in business.(d) Self-Employment as Part of Total Income. Self-employment income which is obtained only for a specific period of time will be averaged over the months it is received.(e) Income From a New Business. When a self-employment enterprise has been in operation less than a year, the Families First grant will be based on current income and a change will be made at the time the AG reports income on which a more reasonable projection can be made, or when a pattern of average income is discovered.(2) Special Income Consideration.(a) Rental Property. 1. Income derived from rental property is considered as earned income if the individual is actively engaged in producing such income. "Actively engaged" means the individual has some responsibility in earning the income. This responsibility may include managerial activities. However, if the individual has no specific responsibility in earning the income, such as where rental properties are in the hands of rental agencies and the check is forwarded to the individual or where an individual rents farm land to others and receives a money payment, the income would not be classified as earned income. The cost of doing business is an allowable deduction regardless of whether the income is earned or unearned.(b) Capital Gains. The proceeds from the sale of capital goods or equipment are calculated in the same manner as a capital gain for Federal income tax purposes. Even if only 50% of the proceeds from the sale of capital goods or equipment is taxed for Federal income tax purposes, the worker shall count the full amount of the capital gain as income.(3) Costs Of Producing Income From Self-Employment.(a) When a member of the AG is self-employed, he/she shall be required to keep a record of expenses incurred in the production of this income.(b) Expenses. 1. Allowable costs of producing income from self-employment include, but are not limited to: (i) Identifiable costs of labor (salaries, employers share of Social Security, insurance, etc.);(ii) Stock, raw materials, seed and fertilizer, feed for livestock;(iii) Rent and cost of building maintenance;(iv) Business telephone costs;(v) Costs of operating a motor vehicle when required in connection with the operation of the business;(vi) Interest paid to purchase income producing property;(vii) Insurance premiums and taxes paid on income producing property;(viii) Costs of feed for work stock; and(ix) Costs of meals and equipment for children for whom day care is provided in the self-employed person's home2. Unallowable Deductions. The following are not considered as costs of producing self-employment income and shall not be deducted from the AG's self-employment income;(i) Payments on the principal of the purchase price of income producing real estate and capital assets, equipment, machinery and other durable goods;(ii) Net losses from previous periods;(iii) Federal, state, and local income taxes, money set aside for retirement purposes, and other work-related personal expenses (such as transportation to and from work). (These expenses are accounted for in the flat work expense deduction/disregard.);(iv) Costs of producing home produce intended for family consumption;(v) Family living expenses;(4) Determining Monthly Income When Averaged. For the period of time over which self-employment is determined, add all gross self-employment income (including capital gains), exclude the costs of producing the self-employment income, and divide the self-employment income by the number of months over which the income will be averaged.(5) Determining Monthly Income When Anticipated. For those AGs whose self-employment income is not averaged, but instead is calculated on an anticipated basis, add any capital gains the AG anticipates it will receive in the next 12 months (starting with the date the application is filed) and divide this amount by 12. Use this amount in successive months unless the anticipated amount of capital gains changes. Add the anticipated monthly amount of capital gains to the anticipated monthly self-employment income and subtract the cost of producing the income. Except for depreciation, calculate the cost of producing the self-employment income by anticipating the monthly allowable costs of producing the self-employment income.(6) Assistance Groups With Boarders.(a) AGs that take in boarders or that operate commercial boarding houses are considered self-employed. Identifiable expenses are allowed as a cost of doing business as in any self-employment enterprise.Tenn. Comp. R. & Regs. 1240-01-50-.18
Original rule filed December 2, 1996; effective February 15, 1997.Authority: T.C.A. §§ 4-5-201 et seq., 71-1-105, Public Acts of 1996, Chapter 950, and 45 C.F.R. 233.20.