Wages do not include any of the following:
(1) Meals and Lodging Furnished for
Employer's Convenience.
Meals and Lodging provided by an employer to a worker shall
not be considered wages if excluded from the definition of wages by the
Internal Revenue Service under the following conditions:
(a) they are provided at the employer's place
of business; and
(b) in the case of
lodging, the worker must accept the lodging as a condition of employment;
and
(c) they are provided for the
employer's convenience. Meals and lodging will be considered to be for the
convenience of the employer if there is a good business reason for providing
them including:
(i) To have workers available
at all times or for emergency calls.
(ii) Workers have a short meal
period.
(iii) Adequate eating and
lodging facilities are not otherwise available.
(2) Expense Reimbursement.
Expense reimbursements are excluded from the definition of
wages based upon the existence of an accountable plan as defined in Section
62 of the Internal Revenue Code.
(a) An accountable plan is any reimbursement
or other expense allowance arrangement, including per diem allowances providing
for ordinary and necessary expenses of traveling away from home, that meets all
of the following requirements:
(i) There is a
business connection. The expenses are paid or incurred by the worker in
connection with the performance of services as an employee of the
employer;
(ii) Information
sufficient to substantiate the amount, time, and business purpose of the
expenses must be submitted to the employer; and
(iii) Excess reimbursement amounts, as a
result of advances, are returned to the employer.
(b) A nonaccountable plan is any plan that
fails to meet any one or more of the requirements of an accountable plan.
Reimbursements in a nonaccountable plan are wages.
(3) Insurance Premiums Paid by the Employer.
Insurance premiums for health or life insurance paid by the
employer for workers generally or a class of workers are not wages under
Subsection
35A-4-208(5)(a).
(4) Sick Pay Excluded as Wages.
The following provisions regarding sick pay are established
to comply with the FUTA provisions contained in Section
3306(b) of the Internal
Revenue Code.
(a) Sick pay is not
wages if paid after the end of six months following the calendar month the
worker last worked for the employer.
(b) Sick pay, if paid by a third party such
as an insurance company, is not wages reportable by the employer unless the
third party notifies the employer of such sick pay payments. If the third party
does not notify the employer of the sick pay payments, the third party will be
liable for the unemployment contributions due on these payments.
(c) Payments made to a worker that are
received under a workers' compensation law are not wages.
(5) The Employer's Share of the Social
Security Tax and Medicare Tax.
(6)
Retirement Plan Payments Made by the Employer.
Payments made by the employer to retirement plans described
in Section 3306(b)(5) of the Internal
Revenue Code are not wages.
(7) Training Allowances.
Employment-related training allowances such as payments for
expenses necessary for school including tuition, fees, books and travel
expenses are not wages. However, payments for services performed as part of the
training, such as on-the-job training, are wages.
(8) Corporate Payments Not Considered Wages.
(a) The following payments are not considered
wages:
(i) Directors fees paid to directors
of a corporation for attending Board of Directors' meetings, reviewing and
studying reports, and establishing general company policies. Director services
do not include managerial services or other services that are part of the
routine activities of a corporation;
(ii) Distributions made to shareholders based
on stock ownership;
(iii)
Reimbursement for expenses that are reasonable and documented;
(iv) Loans supported by notes and reasonable
repayment schedules. Non-interest bearing notes that are payable upon demand
with no payment schedule are considered wages if the officer is performing
services for the corporation; and
(v) Documented returns of investment where
the officer has loaned or invested money in the corporation.
(b) If the amount of compensation,
if any, paid to a corporate officer is inadequate given the nature, duration,
frequency or significance of the service performed by that officer, other
payments made to the officer may be reclassified as wages if there is a lack of
documentation or insufficient document to support those other payments. This
applies to all corporations regardless of income tax reporting
status.
(9) Finder or
Referral Fees.
A fee paid to an individual for the referral of a potential
customer, provided that the transaction is in the nature of a single or
infrequent occurrence and does not involve a continuing relationship with the
person paying the fee, is not wages.
(10) Payments to Sole Proprietors.
Payments to sole proprietors, whether draws or payment for
services, are not wages. The sole proprietor is the employing unit rather than
an employee.
(11) Payments
to Partners.
Payments to partners, including draws and payment for
services, are not wages. The partners are the employing unit rather than
employees. However, payments to limited partners are wages because they do not
have the same rights and responsibilities as general partners.
(12) Supplemental Unemployment
Benefits (SUB).
Supplemental Unemployment Benefits are not wages if they meet
the requirements specified in Revenue Rulings 56-249, 58-128 and 60-330.
Because of the complexity of the factors involved, employers should request a
declaratory ruling from the Department on their specific SUB plan. The factors
required are as follows:
(a) the
benefits are paid only to unemployed former employees of the employer who is
providing the SUB Plan;
(b)
eligibility for benefits depends on the meeting of prescribed conditions
subsequent to the termination of the employment relationship with the
employer;
(c) eligibility for
benefits is contingent upon the former employee's maintaining eligibility for
state unemployment insurance benefits;
(d) the benefits ultimately paid are not
attributable to the performance of any service by the recipient for the
employer during the period of unemployment;
(e) no employee has any vested right, title,
or interest in or to the funds from which the SUB benefits will be paid;
and
(f) the funds for the payment
of SUB benefits is either established as an independent trust fund administered
by trustees, or as a separate account on the employer's general accounting
records.
(13) Stock
Options Excluded From Wages.
(a) There are
three kinds of stock options: incentive stock options, employee stock purchase
plan options, and non-statutory, also known as non-qualified stock
options.
(b) Incentive Stock
Options and Employee Stock Purchase Plan Options are defined by the Internal
Revenue Code.
(c) Payments
resulting from the exercise of an incentive stock option or an employee stock
purchase plan option, or from any disposition of stock acquired by exercising
such an option are not wages.
(14) St ipends.
Stipend payments are not wages. Stipends are payments in lieu
of actual expense reimbursements that help cover the costs of expenses such as
transportation, meals, and supplies associated with training, schooling,
meetings, and volunteer activities.
