SB 98 — AN ACT EXTENDING THE MANUFACTURING APPRENTICESHIP TAX CREDIT TO PASS-THROUGH ENTITIES.

Senate General Assembly SubstituteFile Bill No.

98560 February Session, 2022 ANSubstitute ACTSenate EXTENDINGBill THENo. MANUFACTURING APPRENTICESHIP TAX CREDIT TO PASS-THROUGH ENTITIES.

98 Senate, April 21, 2022 The Committee on Finance, Revenue and Bonding reported through SEN.

FONFARA of the 1st Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT EXTENDING THE MANUFACTURING APPRENTICESHIP TAX CREDIT TO PASS-THROUGH ENTITIES.

(a) (1) There shall be allowed a credit for any taxpayer against the tax imposed under this chapter, chapter 228z or chapter 229, other than the liability imposed by section 12-707, for any income or taxable year with respect to each apprenticeship in the manufacturing trades commenced by such taxpayer in such year under a qualified apprenticeship training program as described in subsection (d) of this section, certified in accordance with regulations adopted in accordance with the provisions of chapter 54 by the Labor Commissioner and registered with the Labor Department under section 31-22r, in an amount equal to six dollars per hoursSB98 multipliedby/ theFile totalnumber ofhoursworkedduring theincome or taxable year by apprentices in the first half of a two-year term of apprenticeship and the first three-quarters of a four-year term of apprenticeship, provided the amount of credit allowed for any income or taxable year with respect to each such apprenticeship may not exceed seven thousand five hundred dollars or fifty per cent of actual wages paid in such [income] year to an apprentice in the first half of a two-year LCO \\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-00098-R01 of 4 SB.docx Substitute Bill No.

98560 term1 ofsSB98 apprenticeshipFile orNo. in the first three-quarters of a four-year term of apprenticeship, whichever is less.

560 hour multipliedby the totalnumber ofhoursworkedduring theincome or taxable year by apprentices in the first half of a two-year term of apprenticeship and the first three-quarters of a four-year term of apprenticeship, provided the amount of credit allowed for any income or taxable year with respect to each such apprenticeship may not exceed seven thousand five hundred dollars or fifty per cent of actual wages paid in such [income] year to an apprentice in the first half of a two-year term of apprenticeship or in the first three-quarters of a four-year term of apprenticeship, whichever is less.

(b) There shall be allowed a credit for any taxpayer against the tax imposed under this chapter for any income year with respect to each apprenticeship in plastics and plastics-related trades commenced by such taxpayer in such year under a qualified apprenticeship training program as described in subsection (d) of this section, certified in accordancesSB98 with/ regulationsFile adopted in accordance with the provisions of chapter 54 by the Labor Commissioner and registered with the Labor Department under section 31-22r, which apprenticeship exceeds the averagenumberofsuchapprenticeshipsbegunbysuchtaxpayerduring the five income years immediately preceding the income year with respect to which such credit is allowed, in an amount equal to four dollars per hour multiplied by the total number of hours worked during LCO {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-00092 of 4 R02-SB.docx } Substitute Bill No.

98560 the2 incomesSB98 yearFile byNo. apprentices in the first half of a two-year term of apprenticeship and the first three-quarters of a four-year term of apprenticeship, provided the amount of credit allowed for any income year with respect to each such apprenticeship may not exceed four thousand eight hundred dollars or fifty per cent of actual wages paid in such income year to an apprentice in the first half of a two-year term of apprenticeship or in the first three-quarters of a four-year term of apprenticeship, whichever is less.

560 accordance with regulations adopted in accordance with the provisions of chapter 54 by the Labor Commissioner and registered with the Labor Department under section 31-22r, which apprenticeship exceeds the averagenumberofsuchapprenticeshipsbegunbysuchtaxpayerduring the five income years immediately preceding the income year with respect to which such credit is allowed, in an amount equal to four dollars per hour multiplied by the total number of hours worked during the income year by apprentices in the first half of a two-year term of apprenticeship and the first three-quarters of a four-year term of apprenticeship, provided the amount of credit allowed for any income year with respect to each such apprenticeship may not exceed four thousand eight hundred dollars or fifty per cent of actual wages paid in such income year to an apprentice in the first half of a two-year term of apprenticeship or in the first three-quarters of a four-year term of apprenticeship, whichever is less.

(d) For purposes of this section, a qualified apprenticeship training programsSB98 shall/ requireFile atNo. least four thousand but not more than eight thousand hours of apprenticeship training for certification of such apprenticeship by the Labor Department.

560 3 sSB98 File No.

560 program shall require at least four thousand but not more than eight thousand hours of apprenticeship training for certification of such apprenticeship by the Labor Department.

LCOThis {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-00093act ofshall 4take R02-SB.docxeffect }as Substitutefollows Billand No.shall amend the following sections:

98 This act shall take effect as follows and shall amend the following sections:

CE Joint Favorable Subst.-LCO C/R FIN FIN Joint Favorable Subst.-LCO LCOsSB98 {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-00098-/ 4File ofNo. 4 R02-SB.docx }

560 4 sSB98 File No.

560 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 23 $ FY 24 $ Department of Revenue Services GF - Revenue Up to 1.4 Up to 1.4 Loss million million Department of Revenue Services GF - Cost Less than None 100,000 Note:

GF=General Fund Municipal Impact:

None Explanation The bill, which allows pass-through entities to claim manufacturing apprenticeship tax credits against the personal income tax or pass- through entity tax, results in a revenue loss of up to $1.4 million annually beginning in FY 23.

This also results in a one-time cost of less than$100,000 inFY 23to theDepartment ofRevenue Servicesassociated with updates to the online Taxpayer Service Center to allow pass- through entities to claim the credit on their tax forms.

This is based on data indicating there are currently 6,510 registered apprentices, of which approximately 200 are in manufacturing trades.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to fluctuation in the number of manufacturing apprentices.

Sources:

Connecticut Department of Labor Connecticut State Apprenticeship Council sSB98 / File No.

560 5 sSB98 File No.

560 OLR Bill Analysis sSB 98 AN ACT EXTENDING THE MANUFACTURING APPRENTICESHIP TAX CREDIT TO PASS-THROUGH ENTITIES.

SUMMARY This bill extends the manufacturing apprenticeship tax credit to the personal income tax and affected business entity tax (i.e., pass-through entity or PE tax), allowing owners or partners of pass-through entities, limited liability companies (LLCs), partnerships, and S corporations to claim it against these taxes.

Although current law allows pass-through entities to earn the credit, they can only sell, assign, or transfer it to a corporation, utility company, or petroleum products distribution company for application against their respective taxes.

The bill ends this practice.

By law, the credit is available for each apprentice under a qualified training program and equals the lesser of $6 per hour the apprentice works, $7,500, or 50% of the actual apprenticeship wages.

Taxpayers may claim it in the first year of a two-year program or the first three years of a four-year program.

The bill also makes conforming and technical changes.

EFFECTIVEDATE:

July 1,2022,andapplicable to income or taxyears beginning on or after January 1, 2022.