320: Credit for Employment of TANF Recipients (2024)

Who files this form

Form 320 is used to claim the Credit for Employment of TANF Recipients. The form identifies these filers:

• C corporations.
• S corporations claiming the credit at the corporate level.
• Partnerships passing the credit through to corporate partners.
• Exempt organizations with unrelated business taxable income (UBTI).

The credit is no longer available to individual taxpayers.

What you'll need

Have the following information ready to complete the form:

• Business name, location, and Employer Identification Number.
• Average numbers of qualified employment positions for the current and immediately preceding taxable years, plus positions eligible for another Arizona income tax credit.
• Numbers of new employees hired and qualified new employees.
• Employee names, Social Security numbers, hire dates, and whether each employee was an Arizona resident and receiving TANF benefits on the hire date.
• Wages paid during the current taxable year, wages subsidized as provided by A.R.S. §46-299, and whether each employee is in the first, second, or third year of employment.
• For carryovers, the originating taxable year, original credit amount, and amount previously used.

Corporate partners also need their Forms 320-P to report pass-through amounts. Corporations claiming the credit at the corporate level and exempt organizations with UBTI report the credit amounts on Arizona Form 300.

How to file

Include Form 320 with your tax return.

Partnerships must complete a separate Form 320-P for each corporate partner and furnish that partner a copy. Partnerships do not complete Parts 6 and 7 of Form 320.

If you have more than 25 qualifying employees, complete additional Form 320-1 schedules and include them behind that page. If you are claiming a credit for more than 11 qualifying employees, complete additional Form 320-2 schedules and include them behind that page.

Common mistakes

• Do not claim this credit as an individual taxpayer. The form says it is no longer available to individuals.
• Do not take a subtraction for the same wage expense for which you claim a credit.
• Do not overlook the wage-expense add-back. The form directs C corporations, S corporations claiming at the corporate level, partnerships passing the credit through to corporate partners, and exempt organizations with UBTI claiming a current-year credit to add back qualifying wage expenses under “Additions related to Arizona tax credits.”
• Partnerships should not complete Parts 6 and 7. Complete and furnish a separate Form 320-P for each corporate partner.
• Include additional employee schedules when you exceed the number of employees listed on the printed schedule.

Questions people ask

Can an individual taxpayer claim this credit?

No. The form states that this credit is no longer available to individual taxpayers.

How is the maximum number of qualifying net new employees calculated?

Subtract the preceding year's average qualified employment positions from the current year's average. Then subtract positions eligible for any other Arizona income tax credit. Line 11 uses the smaller of that result on line 8 or the number of qualified new employees on line 10.

What credit percentages appear on the form?

The form lists 25% for qualifying net new employees, 33.33% for previously qualified employees in their second year of continuous employment, and 50% for previously qualified employees in their third year of continuous employment.

What wage limits does Form 320-2 use?

For each employee, use wages paid during the current taxable year less wages subsidized as provided by A.R.S. §46-299. The maximum allowable wages are the lesser of that amount or $2,000 for a first-year employee, $3,000 for a second-year employee, or $3,000 for a third-year employee.

Where does a corporate partner report pass-through amounts?

A corporate partner enters the total current-year pass-through amounts from all Forms 320-P on Form 320, line 15.

Official sources

• https://azdor.gov/forms