Income and Asset Considerations in Certain Circumstances 510-05-75

Ownership in a Business Entity 510-05-75-05

(Revised 7/1/14 ML #3406)

Assets. Property consisting of an ownership interest in a business entity (e.g. a corporation or partnership) that employs anyone whose assets are used to determine eligibility may be excluded as property essential to earning a livelihood if:

That individual’s employment is contingent upon ownership of the property; or
There is no ready market for the property. A ready market exists if the interest in the business entity (e.g. the corporation stock or partnership interest) may be publicly traded through a broker. A ready market does not exist when there are unreasonable limitations on the sale of the business interest, such as a requirement that the interest be sold at a price substantially below its actual value or a requirement that effectively precludes competition among potential buyers.

Example 1: An applicant works at a firm that has publicly traded stock. Employment at the firm requires ownership of some of the firm’s stock. Even though there is a ready market for the stock, it is excluded because the applicant is employed at the firm and that employment is contingent upon stock ownership.

Example 2: An applicant works on a private farm that has been incorporated. He owns some of the family farm stock, however, ownership of the stock is not required in order for him to be employed on the farm. Even though stock ownership is not an employment requirement, the stock is excluded because the applicant is employed on the farm and there is no ready market for the farm stock.

Example 3: An applicant is actively engaged in a partnership. There is no ready market for buying or selling a share in the partnership and the applicant must own part of the partnership in order to be employed by it. Accordingly, the applicant’s share in the partnership is excluded as an asset.

Income: Countable income from a business entity (e.g. a corporation or partnership) that employs anyone whose income is used to determine eligibility is established as follows:

If the applicant or recipient and other members of the Medicaid unit own the controlling interest in the business entity, calculate income using the medically needy self-employment rules described in 05-85-20; or
If the applicant or recipient and other members of the Medicaid unit own less than a controlling interest, but more than a nominal interest in the business:

From the business entity’s gross income, subtract any cost of goods for resale, repair, or replacement, CRP payments and patronage or cooperative dividends, and subtract any wages, salaries, or guarantees (but not draws), paid to actively engaged owners to arrive at the business entity’s adjusted gross income; and
From the adjusted gross income, establish the applicant or recipient’s income share based on the Medicaid unit's proportionate share of ownership in the business entity; and
Add any wages, salary, or guarantee paid to the applicant or recipient to the applicant or recipient’s income share; and
Apply the medically needy self-employment income disregards described in 05-85-20; and
Based on the applicant's or recipient's proportionate share of ownership in the business entity, establish the individual's share of the CRP payments and patronage or cooperative dividends as unearned income; or

If the applicant or recipient and other members of the Medicaid unit, in combination, own a nominal interest in the business entity, and are not able to influence the nature or extent of employment by that business entity, the individual's earned income as an employee of that business entity, plus any unearned income gained from ownership of the interest in the business entity.