HB 5478 — AN ACT SUPPORTING "LEARN AND EARN" INTERNSHIP OPPORTUNITIES.

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391 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 27 $ FY 28 $ Revenue Serv., Dept.

GF - Potential None See Below Revenue Loss Revenue Serv., Dept.

GF - Cost None Up to 75,000 Revenue Serv., Dept.

GF - Potential None 130,000 Cost State Comptroller - Fringe GF - Potential 21,500 97,466 Benefits1 Cost Office of Workforce Strategy GF - Cost 2.7 million 5.4 million Board of Regents for Higher OF - Cost 134,900 134,900 Education UConn OF - Cost 134,900 134,900 Constituent Units of Higher OF - Cost See Below See Below Education Note:

GF=General Fund;

OF= Other Funds Municipal Impact:

None Explanation The bill establishes a variety of programs and incentives related to internship participation among college students.

The fiscal impact of these changes is described below.

Sections 1 and 4 result in costs of $134,900 annually beginning in FY to both the Connecticut State Colleges and Universities (CSCU) and UConn.

Section 1 requires both constituent units to establish a program 1The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller.

The estimated active employee fringe benefit cost associated with most personnel changes is 41.82% of payroll in FY 27.

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391 to assist small businesses in offering paid internships that meet certain criteria.

Section 4 requires the constituent units to jointly develop a quality seal for certain internships in the state.

It is anticipated that each constituent unit will need to hire a State Program Manager to fulfill these requirements, resulting in a salary cost of $98,700 and a fringe costs of $36,200 at each unit.

Section 2 results in annual costs to the constituent units beginning in FY 27.

It requires each constituent unit to provide stipends to Pell grant recipient students enrolled in their institution to support costs associated with internship participation.

The costs will vary based on the number of students who receive a stipend, and the value of such stipend.

As an illustration:

If 14,000 students across CSCU and UConn received stipends totaling $1,000, the cost would be approximately $14 million ($4 million for UConn and $10 million for CSCU).

Section 3 has no fiscal impact.

It requires institutions of higher education to report certain information about internships available to their own students.

It is anticipated that the constituent units can meet this requirement with existing resources.

Section 5, which adds salaries paid to interns in a program that received the state quality seal as expenses eligible for the human capital investment tax credit against the corporation business tax, results in a potentialGeneralFundrevenuelossbeginninginFY 28.

Themagnitude of the revenue loss depends on (1) the number of interns working in a qualifying program, and (2) the amount of pay received by such interns.3 Section 6, which expands the stranded tax credit program to include Fall 2025 undergraduate enrollment at UConn, the Connecticut State Universities, and total enrollment at CT State, was approximately 85,000 combined.

The illustration assumes that 27% to 53% of that total population are Pell recipients (varies by institution), and 35% to 50% of Pell recipient students would participate in an internship in a year.

3The credit is equal to 25% of the amount paid to qualifying interns.

It is estimated thatthereareapproximately37,850internshipsinConnecticutannually.

Itisuncertain how many would qualify for the quality seal under the bill.

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391 salaries paid to interns in a program that received the state quality seal, results in a potential revenue loss of up to $30 million in aggregate beginning as early as FY 28.

Any potential revenue loss would depend on the Department of Economic and Community Development (DECD) approving credits under the program.

Section 7 results in an estimated cost of $2.7 million in FY 27 and $5.4 million in FY 28 and annually thereafter to the Office of Workforce Strategy (OWS) to award grants to federally tax-exempt nonprofits to offset intern salaries.

It is anticipated that OWS would require one full- time administrator at an annualized cost of $146,100 ($103,000 in salary and $43,100 in fringe benefits) to manage the program.

The annual cost of the grants will be dependent upon (1) the number of qualifying organizations that apply and (2) the cost of salaries paid to the interns at those organizations.

For illustrative purposes, assuming 2,500 internships qualify for this program and on average interns worked 500 hours in a year at the state's minimum wage rate, the total grants awarded would be $5.3 million.

Section 8, which establishes a tax credit for pass-through entities for salaries paid to interns in an internship program that received the state quality seal, results in a potential General Fund revenue loss beginning in FY 28.

The magnitude of the revenue loss depends on (1) the number of interns working in a qualifying program, and (2) the amount of pay received by such interns.

Section 8 also results in (1) a one-time cost to the Department of Revenue Services of up to $75,000 in FY 28 associated with programming updates to the CTax tax administration system and 4The stranded tax credit program is capped at $50 million in the aggregate;

$20 million in credits have been allocated in total as of FY 25.

5DECD cannot approve use of stranded credits by a business until the capital project or human capital investment generates state revenue that exceeds the credits to be used.

6The credit is equal to 25% of the amount paid to qualifying interns.

It is estimated thatthereareapproximately37,850internshipsinConnecticutannually.

Itisuncertain how many would qualify for the quality seal under the bill.

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391 myconneCT online portal, as well as form modification, and (2) a potentialongoing cost ofupto $184,366beginning inFY 28for upto two Revenue Examiners ($65,000 each for salary and $27,183 each for fringe benefits).

The potential cost is dependent on the volume and amount of credits claimed.

Section 9 has no fiscal impact.

It requires the Department of Administrative Services (DAS) to conduct a survey of state agencies concerning internship programs.

The Out Years The annualized ongoing fiscal impact identified above would continueintothefuturesubjecttoinflation andparticipationinspecified internships.

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391 OLR Bill Analysis sHB 5478 AN ACT SUPPORTING "LEARN AND EARN" INTERNSHIP OPPORTUNITIES.

SUMMARY This bill establishes various programs and creates tax credits to support internships.

It:

1.

requires the UConn Board of Trustees and Board of Regents for Higher Education to each establish a program to train and support small businesses in offering paid internships that meet certain criteria;

2.

requires each board to establish a program to give stipends to students at their institutions who receive a federal Pell grant and have an internship opportunity;

3.

requires the boards to jointly establish a state quality seal for internship programs;

4.

requires the Office of Workforce Strategy (OWS) to award grants to federally tax-exempt nonprofit organizations to offset intern salaries;

5.

adds salaries paid to interns in a program that received the state quality seal as expenseseligible for thehumancapital investment tax credit against the corporation tax;

6.

expands the stranded tax credit program to include intern salaries paid as part of a program that received the state quality seal as eligible human capital investments under the tax credit program;

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391 7.

establishes a new tax credit for salaries paid to interns in an internship program that received the state quality seal for an S corporation, limited liability company, limited liability partnership, or limited partnership;

and 8.

requires various reports on the programs the bill creates and reports on higher education institution and state agency internship programs.

EFFECTIVE DATE:

July 1, 2026, except (1) the grant program is effective January 1, 2027, and (2) provisions on tax credits are effective January 1, 2027, and applicable to income years beginning on and after that date.

§ 1 — ASSISTANCE FOR SMALL BUSINESS INTERNSHIP PROGRAMS The bill requires the UConn Board of Trustees and Board of Regents for Higher Education to each, within funds appropriated for this purpose, establish a program to train and support small businesses with up to 50 employees so they can offer certain paid internships.

A paid internshipqualifiesifaboardfindsithasatleastsixoftheeightNational Association of Colleges and Employers career readiness competencies (see BACKGROUND).

The boards must conspicuously post information about the program on their websites, including application forms and small business eligibility requirements.

The bill requires the boards to provide small businesses in the program with specialized support unique to the business’ industry and location, including (1) internship management training, (2) job description development, (3) help setting the skills an intern will learn and the intern’s learning opportunities, and (4) guidance on assessing internship performance.

Annually, beginning by January 1, 2027, the bill requires the UConn president and Connecticut State Colleges and Universities (CSCU) sHB5478 / File No.

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391 chancellor to report to the Higher Education and Employment Advancement Committee on each small business supported by the program, including the supports provided to it and number of internships offered by it.

§ 2 — INTERNSHIP STIPENDS The bill requires the UConn Board of Trustees and Board of Regents for Higher Education to each, within funds appropriated for this purpose, establish a program to give stipends to students at their institutions who receive a federal Pell grant and have an internship opportunity.

Each board can set the stipend amount and it must be used to offset costs related to the internship, such as transportation and clothing.

The boards must conspicuously post information about the program on their websites, including eligibility guidelines, application forms, and stipend amounts.

Annually, beginning by January 1, 2027, the bill requires the UConn president and CSCU chancellor to report to the Higher Education and Employment Advancement Committee on the number of students receiving stipends under the program.

§ 3 — REPORT FROM HIGHER EDUCATION INSTITUTIONS ON INTERNSHIPS By January 1, 2027, the bill requires each higher education institution in the state to report to the Higher Education and Employment Advancement Committee on the paid internship opportunities available to their students through their career services office, including the types of employers offering internships, quality measures used to ensure students have a valuable experience, and other relevant information.

§ 4 — STATE QUALITY SEAL FOR INTERNSHIP PROGRAMS By January 1, 2027, the bill requires the UConn Board of Trustees and Board ofRegents for Higher Education to jointly establish a state quality seal for internship programs.

The boards must identify the sHB5478 / File No.

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391 qualifications for the seal, including (1) assigning mentors to interns, (2) providing opportunities to learn through observation, and (3) clear communication about expectations and skills to be learned.

By that same date, the boards must identify businesses that meet these criteria and award them the state quality seal.

Annually, beginning by January 1, 2028, the boards must jointly report to the Higher Education and Employment Advancement Committee on businesses that received a seal in the prior calendar year.

§§ 5, 6 & 8 — TAX CREDITS FOR INTERNSHIP SALARIES Human Capital Investment Tax Credit (§ 5) The bill adds salaries paid to interns in a program that received the state quality seal as expenses eligible for the human capital investment tax credit against the corporation tax.

The credit amount equals 25% of the amount paid to interns.

Under existing law, expenses eligible for this credit include (1) job training;

(2) work education programs, including those offered by higher education institutions;

(3) donations or capital contributions to higher education institutions related to technology;

(4) activities related to developing a child care center for employees’ children;

(5) donations or capital contributions to a nonprofit for developing a child care center for children in the community;

and (6) child care subsidies for employees.

By law, the credit equals 25% of the child care related expenses and 10% for other types of expenses.

By law, these credits cannot exceed the amount a corporation owes in corporation business tax, an unused tax credit can be carried forward for the next five years, and a corporation claiming this tax credit cannot claim another credit for the same expense.

Stranded Tax Credits (§ 6) The bill expands the stranded tax credit program, which allows a business to exchange accumulated research and development tax credits for undertaking certain in-state capital projects or human capital sHB5478 / File No.

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391 investments.

It does so by including intern salaries paid as part of a program that received the state quality seal as eligible human capital investments.

Under the existing stranded tax credit program law, eligiblehumancapitalinvestmentsaresimilar,butnotidenticalto,those described above as eligible for the human capital investment tax credit.

By law, a taxpayer must apply to the Department of Economic and Community Development (DECD) with information about the project or investment under the stranded tax credit program.

DECD cannot approve use of the credits by a business until the capital project or human capital investment generates state revenue that exceeds the credits to be used.

The law imposes a $50 million aggregate cap on exchanging stranded credits.

Tax Credit for Intern Salaries (§ 8) The bill establishes a tax credit for an S corporation, limited liability company, limited liability partnership, or limited partnership for 25% of the amount paid as salaries to interns in an internship program that received thestate quality seal.It allows thebusiness ownersto apply the credit against their state personal income tax liability (other than the withholding tax).

The bill appears to make the credit nonrefundable by capping the credit amount allowed to any business entity at the amount of income tax due from the entity.

(These entities do not pay income tax at the entity level, however.) The bill allows the credit to be carried forward for five years, and prohibits claiming a different tax credit based on the same intern expenses.

§ 7 — GRANTS TO NONPROFITS FOR INTERN SALARIES Beginning with FY 27, the bill requires OWS to, within available appropriations, award grants to federally tax-exempt nonprofits to offset intern salaries.

OWS must award grants on a first-come, first- served basis in the amount of 25% of an organization’s expenses for intern salaries.

OWS must conspicuously post the grant application sHB5478 / File No.

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391 form on its website.

Beginning by January 1, 2028, the bill requires OWS to annually report on the program to the Higher Education and Employment Advancement Committee.

§ 9 — REPORT ON STATE AGENCY INTERNSHIP PROGRAMS ThebillrequirestheDepartmentofAdministrativeServicestosurvey and report to the Higher Education and Employment Advancement Committee by January 1, 2027, on state agency internship programs, including whether an agency (1) has paid internships and job descriptions and (2) requires interns to report to a supervisor and provides mentoring.

BACKGROUND National Association of Colleges and Employers (NACE) Career Readiness Competencies NACE is a professional association connecting college career services professionals, early talent recruiting, university relations professionals, and businesses that serve this community.

NACE tracks and provides information on employment of college graduates.

NACE’s eight career readiness competencies are:

1.

career and self-development, 2.

communication, 3.

critical thinking, 4.

equity and inclusion, 5.

leadership, 6.

professionalism, 7.

teamwork, and 8.

technology.

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391 COMMITTEE ACTION Higher Education and Employment Advancement Committee Joint Favorable Substitute Yea 18 Nay 0 (03/17/2026) sHB5478 / File No.

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