AB 151: Income taxes: credits: apprenticeships.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-05-20
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law provides for the establishment of apprenticeship programs in various trades, to be approved by the Chief of the Division of Apprenticeship Standards in any trade in the state or in a city or trade area whenever the apprentice training needs justify the establishment.
This bill, for taxable years beginning on or after January 1, 2016, and before January 1, 2020, would allow a credit against the taxes imposed under those tax laws in an amount equal to $1 for each hour a registered apprentice worked in the taxable year, up to $2,000 for each registered apprentice for up to 10 registered apprentices, as defined, trained by the taxpayer in the taxable year. This bill would provide that the credit would have an aggregate cap of $10,000,000 for each calendar year. This bill would require the Division of Apprenticeship Standards in the Department of Industrial Relations, among other things, to establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of the credit. This bill would also require the Division of Apprenticeship Standards to prepare reports for each of the 5 calendar years beginning on January 1, 2017, and before January 1, 2022, containing specified information relating to the credits, to be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2018.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law provides for the establishment of apprenticeship programs in various trades, to be approved by the Chief of the Division of Apprenticeship Standards in any trade in the state or in a city or trade area whenever the apprentice training needs justify the establishment.
This bill, for taxable years beginning on or after January 1, 2017, 2016, and before January 1, 2021, 2020, would allow a credit against the taxes imposed under those tax laws in an amount equal to $1 for each hour a registered apprentice worked in the taxable year, up to $2,000 for each registered apprentice, as defined, trained by the taxpayer in the taxable year. This bill would require the Division of Apprenticeship Standards in the Department of Industrial Relations, among other things, to establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of the credit. This bill would also require the Division of Apprenticeship Standards to prepare reports for each of the 5 calendar years beginning on January 1, 2018, 2017, and before January 1, 2023, 2022, containing specified information relating to the credits, to be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2019 2018.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law provides for the establishment of apprenticeship programs in various trades, to be approved by the Chief of the Division of Apprenticeship Standards in any trade in the state or in a city or trade area whenever the apprentice training needs justify the establishment.
This bill, for taxable years beginning on or after January 1, 2017, and before January 1, 2021, would allow a credit against the taxes imposed under those tax laws in an amount equal to $2,000 for each registered apprentice, as defined, trained by the taxpayer in the taxable year. This bill would require the Division of Apprenticeship Standards in the Department of Industrial Relations, among other things, to establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of the credit. This bill would also require the Division of Apprenticeship Standards to prepare reports for each of the 5 calendar years beginning on January 1, 2018, and before January 1, 2023, containing specified information relating to the credits, to be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2019.
This bill would take effect immediately as a tax levy.
(a)The Division of Apprenticeship Standards shall prepare reports on the apprenticeship income tax credits allowed under Sections 17053.11 and 23667 of the Revenue and Taxation Code. The reports shall be for each of the five calendar years beginning on January 1, 2017, and before January 1, 2022, and shall include, but not be limited to, the following information:
(1)The number of companies or businesses taking advantage of the apprenticeship income tax credit.
(2)The number of apprentices participating in the apprenticeship programs and the number of apprentices who completed an apprenticeship program which was the basis of the apprenticeship income tax credits allowed under Sections 17053.11 and 23667 of the Revenue and Taxation Code.
(3)The number of apprentice program graduates hired by the taxpayer after the apprenticeship training was completed for which the taxpayer was allowed a credit under Sections 17053.11 and 23667 of the Revenue and Taxation Code for training that apprentice.
(4)Information on the employment status of individuals who have completed an apprenticeship to the extent the information is available.
(5)The fiscal impact of the apprenticeship income tax credits.
(b)This report shall be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2018.
(c)This section shall be repealed on January 1, 2023.
SEC. 2.Section 17053.11 is added to the Revenue and Taxation Code, to read:17053.11.(a)For each taxable year beginning on or after January 1, 2016, and before January 1, 2020, there shall be allowed a credit against the net tax, as defined in Section 17039, in an amount equal to one dollar ($1) for each hour a registered apprentice worked during the taxable year, up to two thousand dollars ($2,000), for each registered apprentice trained by the taxpayer in the taxable year. year, not to exceed 10 registered apprentices per taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 2,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced net tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)The aggregate amount of credits allowed under this section and Section 23667 shall not exceed ten million dollars ($10,000,000) for each calendar year.
(h)
(i)This section shall remain in effect only until December 1, 2020, and as of that date is repealed.
SEC. 3.Section 19560.3 is added to the Revenue and Taxation Code, to read:19560.3.(a)The Franchise Tax Board shall provide the Division of Apprenticeship Standards in the Department of Industrial Relations with any information necessary to prepare the report required pursuant to Section 3073.7 of the Labor Code.
(b)This section shall be repealed on January 1, 2023.
SEC. 4.Section 23667 is added to the Revenue and Taxation Code, to read:23667.(a)For each taxable year beginning on or after January 1, 2016, and before January 1, 2020, there shall be allowed a credit against the tax, as defined in Section 23036, in an amount equal to one dollar ($1) for each hour a registered apprentice worked during the taxable year, up to two thousand dollars ($2,000) for each registered apprentice trained by the taxpayer in the taxable year. year, not to exceed 10 registered apprentices per taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 2,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)The aggregate amount of credits allowed under this section and Section 17053.11 shall not exceed ten million dollars ($10,000,000) for each calendar year.
(h)
(i)This section shall remain in effect only until December 1, 2020, and as of that date is repealed.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
(a)The Division of Apprenticeship Standards shall prepare reports on the apprenticeship income tax credits allowed under Sections 17053.10 17053.11 and 23667 of the Revenue and Taxation Code. The reports shall be for each of the five calendar years beginning on January 1, 2018, 2017, and before January 1, 2023, 2022, and shall include, but not be limited to, the following information:
(1)The number of companies or businesses taking advantage of the apprenticeship income tax credit.
(2)The number of apprentices participating in the apprenticeship programs and the number of apprentices who completed an apprenticeship program which was the basis of the apprenticeship income tax credits allowed under Sections 17053.10 17053.11 and 23667 of the Revenue and Taxation Code.
(3)The number of apprentices that were apprentice program graduates hired by the taxpayer after the apprenticeship training was completed for which the taxpayer was allowed a credit under Sections 17053.10 17053.11 and 23667 of the Revenue and Taxation Code for training that apprentice.
(4)Information on the employment status of individuals who have completed an apprenticeship to the extent the information is available.
(5)The fiscal impact of the apprenticeship income tax credits.
(b)This report shall be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2019. 2018.
(c)This section shall be repealed on January 1, 2024. 2023.
SEC. 2.Section 17053.10 17053.11 is added to the Revenue and Taxation Code, to read:17053.10.17053.11.(a)For each taxable year beginning on or after January 1, 2017, 2016, and before January 1, 2021, 2020, there shall be allowed as a credit against the net tax, as defined in Section 17039, in an amount equal to one dollar ($1) for each hour a registered apprentice worked during the taxable year, up to two thousand dollars ($2,000), for each registered apprentice trained by the taxpayer in the taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 4,000 2,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced net tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)This section shall remain in effect only until December 1, 2021, 2020, and as of that date is repealed.
SEC. 3.Section 19560.3 is added to the Revenue and Taxation Code, to read:19560.3.(a)The Franchise Tax Board shall provide the Division of Apprenticeship Standards in the Department of Industrial Relations with any information necessary to prepare the report required pursuant to Section 3073.7 of the Labor Code.
(b)This section shall be repealed on January 1, 2024. 2023.
SEC. 4.Section 23667 is added to the Revenue and Taxation Code, to read:23667.(a)For each taxable year beginning on or after January 1, 2017, 2016, and before January 1, 2021, 2020, there shall be allowed as a credit against the tax, as defined in Section 23036, in an amount equal to one dollar ($1) for each hour a registered apprentice worked during the taxable year, up to two thousand dollars ($2,000) for each registered apprentice trained by the taxpayer in the taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 4,000 2,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)This section shall remain in effect only until December 1, 2021, 2020, and as of that date is repealed.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
(a)The Division of Apprenticeship Standards shall prepare reports on the apprenticeship income tax credits allowed under Sections 17053.10 and 23667 of the Revenue and Taxation Code. The reports shall be for each of the five calendar years beginning on January 1, 2018, and before January 1, 2023, and shall include, but not be limited to, the following information:
(1)The number of companies or businesses taking advantage of the apprenticeship income tax credit.
(2)The number of apprentices participating in the apprenticeship programs and the number of apprentices who completed an apprenticeship program which was the basis of the apprenticeship income tax credits allowed under Sections 17053.10 and 23667 of the Revenue and Taxation Code.
(3)The number of apprentices that were hired by the taxpayer after the apprenticeship training was completed for which the taxpayer was allowed a credit under Sections 17053.10 and 23667 of the Revenue and Taxation Code for training that apprentice.
(4)Information on the employment status of individuals who have completed an apprenticeship to the extent the information is available.
(5)The fiscal impact of the apprenticeship income tax credits.
(b)This report shall be submitted to the Assembly and Senate Appropriations Committees, the Assembly Revenue and Taxation Committee, and the Senate Governance and Finance Committee on or before March 1 of the following calendar year, commencing March 1, 2019.
(c)This section shall be repealed on January 1, 2024.
SEC. 2.Section 17053.10 is added to the Revenue and Taxation Code, to read:17053.10.(a)For each taxable year beginning on or after January 1, 2017, and before January 1, 2021, there shall be allowed as a credit against the net tax, as defined in Section 17039, in an amount equal to two thousand dollars ($2,000) for each registered apprentice trained by the taxpayer in the taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 4,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced net tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)This section shall remain in effect only until December 1, 2021, and as of that date is repealed.
SEC. 3.Section 19560.3 is added to the Revenue and Taxation Code, to read:19560.3.(a)The Franchise Tax Board shall provide the Division of Apprenticeship Standards in the Department of Industrial Relations with any information necessary to prepare the report required pursuant to Section 3073.7 of the Labor Code.
(b)This section shall be repealed on January 1, 2024.
SEC. 4.Section 23667 is added to the Revenue and Taxation Code, to read:23667.(a)For each taxable year beginning on or after January 1, 2017, and before January 1, 2021, there shall be allowed as a credit against the tax, as defined in Section 23036, in an amount equal to two thousand dollars ($2,000) for each registered apprentice trained by the taxpayer in the taxable year.
(b)For purposes of this section, registered apprentice means an individual who meets all of the following requirements:
(1)Is 16 years of age or older at the time of application into the program.
(2)Meets one of the following requirements:
(A)Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program.
(B)Has obtained a high school diploma or General Education Development credential while participating in the apprenticeship.
(3)Is trained by the taxpayer through an apprenticeship program that meets all of the following requirements:
(A)The apprenticeship program is approved by the Chief of the Division of Apprenticeship Standards pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and is also registered with the Office of Apprenticeship at the United States Department of Labor.
(B)The program is provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code.
(C)The minimum term in hours for the program is 4,000 hours.
(c)(1)(A)A credit shall only be allowed under this section for the taxable year if the taxpayer has received the certificate described in subparagraph (B) from the Division of Apprenticeship Standards in the Department of Industrial Relations. A certificate is required for each taxable year. The taxpayer shall provide a copy of the certificate to the Franchise Tax Board upon request.
(B)The Division of Apprenticeship Standards shall do all of the following:
(i)Establish a procedure for taxpayers, in the form and manner jointly prescribed by the Division of Apprenticeship Standards and the Franchise Tax Board, to apply and receive a certificate for purposes of this section.
(ii)Verify that the taxpayer is training during the taxable year an individual that meets the requirements to be a registered apprentice as described in subdivision (b).
(iii)Provide the taxpayer with a certificate for the registered apprentice. The certificate shall contain the name of the taxpayer and the name of the apprentice, a brief description of the apprenticeship, the primary location of the apprenticeship, and any other information the Division of Apprenticeship Standards or the Franchise Tax Board deems relevant.
(iv)Annually provide the Franchise Tax Board with a list of the names of the taxpayers that received certificates and the names of the registered apprentices of the taxpayer. The list may also contain any other information from the certificates.
(v)Inform the Franchise Tax Board if the Division of Apprenticeship Standards has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program after the taxpayer has received a certificate.
(2)The Division of Apprenticeship Standards may adopt rules and regulations as reasonably necessary to effectuate this subdivision, but shall consult with the Franchise Tax Board.
(d)In the case where the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the net tax in the following year, and succeeding four years, if necessary, until the credit is exhausted.
(e)The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, except as otherwise specified in subdivision (c).
(f)(1)Except as provided in paragraph (2), if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, any unused carryover of the credit shall be canceled and any previously claimed credit that reduced tax shall be recaptured by increasing the tax imposed by this part for the taxable year in which the training is terminated.
(2)Paragraph (1) shall not apply if the training of a registered apprentice was terminated due to any of the following:
(A)The registered apprentice voluntarily leaves the apprenticeship program.
(B)The registered apprentice, before the end of the completion of the apprenticeship program described in paragraph (3) of subdivision (b), becomes disabled and unable to perform the services of that program, unless that disability is removed before the close of the period of that program and the taxpayer fails to offer reinstatement to the program for that apprentice.
(C)The training of a registered apprentice was terminated due to the misconduct, as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations, of that apprentice.
(D)The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
(g)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense shall be reduced by the amount of the credit allowed by this section.
(h)This section shall remain in effect only until December 1, 2021, and as of that date is repealed.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
|
Date
|
Status
|
|---|---|
| Jan 15, 2015 | Read first time. To print. |
| Jan 16, 2015 | From printer. May be heard in committee February 15. |
| Feb 2, 2015 | Referred to Com. on REV. & TAX. |
| Apr 21, 2015 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Apr 22, 2015 | Re-referred to Com. on REV. & TAX. |
| May 18, 2015 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| May 19, 2015 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 9. Noes 0.) (May 18). |
| May 20, 2015 | Read second time and amended. |
| May 21, 2015 | Re-referred to Com. on APPR. |
| May 27, 2015 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| May 28, 2015 | In committee: Held under submission. |
| May 28, 2015 | Joint Rule 62(a), file notice suspended. |
| May 28, 2015 | Joint Rule 62(a), file notice suspended. (Page 1613.) |
| Jan 31, 2016 | Died pursuant to Article IV, Sec. 10(c) of the Constitution. |
| Feb 1, 2016 | From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. |
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Date
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Description
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Location
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Votes
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|
|---|---|---|---|---|
| May 18, 2015 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
AB 151
Page 4
Date of Hearing: May 27, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB 151
(Rodriguez) – As Amended May 20, 2015
Policy Committee: |
Revenue and Taxation |
Vote: |
9 - 0 |
Urgency: Yes State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill creates a tax credit, for registered apprentices trained by taxpayers, under both the personal income tax and corporation tax laws, for tax years beginning on or after January 1, 2016, and before January 1, 2020, equal to $1 for each hour a registered apprentice worked during the taxable year, subject to a maximum of $2,000, not to exceed 10 registered apprentices each taxable year. The bill specifies the aggregate tax credits allowed per calendar year shall not exceed $10 million. In summary, this bill:
1) Defines a "registered apprentice" as an individual who satisfies all of the following:
a) Is 16 years of age or older at the time of application into the program.
b) Meets one of the following: (i) has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program (GED program); or (ii) has obtained a high school diploma or GED credential while participating in the apprenticeship.
c) Is trained by the taxpayer through an apprenticeship program.
2) Requires an "apprenticeship program:" 1) to be approved by the by the Chief of the Division of Apprenticeship Standards, in the Department of Industrial Relations (DAS), and registered with the Office of Apprenticeship at the US Department of Labor; 2) to be provided pursuant to an apprenticeship agreement under California labor law; and 3) to consist of a term of at least 4,000 hours.
3) Requires DAS to establish procedures for applications and the verification, allocation, and certification of credits, and provide ongoing information to the FTB with respect to the taxpayers that received certificates.
4) Requires DAS to prepare an annual report on the apprenticeship tax credit program for each of the five calendar years, beginning on January 1, 2017, and submit the report to the Legislature on or before March 1 of the relevant calendar year, beginning March 1, 2018.
5) Allows a taxpayer to carry forward the apprenticeship tax credit up to five years or until the credit is exhausted.
6) Provides that any unused carryover of the apprenticeship tax credits shall be canceled and any previously claimed credit that reduced the taxpayer's tax shall be recaptured if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, subject to certain exceptions.
7) Provides that any other deduction allowed for the taxpayer for any amount paid or incurred in training a registered apprentice as a trade or business expense shall reduce the amount of the credit allowed under this program.
FISCAL EFFECT:
1) Potentially significant costs to DAS and FTB to develop processes and regulations to administer the program.
2) Estimated GF revenue decreases of $200,000, $500,000, and $700,000 in FY 2015-16, FY 2016-17, and FY 2017-18, respectively.
COMMENTS:
1) Purpose. According to the author, registered apprenticeship programs expand the pool of skilled workers and provide individuals with the flexibility to acquire knowledge and training, while still earning income. The author claims employers voluntarily sponsor or participate in apprenticeship programs as a cost effective way of training employees with specifically desired skills. The author believes providing tax incentives to employers will expand apprenticeship training opportunities, providing additional entry points into the job market.
Proponents argue apprenticeships can be particularly important tools for helping young people of color. They assert this bill will incentivize employers to help young adults to gain valuable skills and complete their high school education.
2) Tax Credits vs Investment in Training. Opponents argue that, while the aim of promoting more apprenticeships is laudable, tax credits are ill-suited to achieving it. They assert hiring credits have little track record of improving overall hiring, and are not a cost-effective means of achieving hiring goals. Instead, opponents claim California has a variety of training funds that involve direct training and oversight for the same purposes proposed in this bill, and those programs are more effective and could be strengthened through direct investment. The Committee may wish to consider whether increased funding to existing programs, such as the Employment Training Panel (ETP), as discussed in comment 4 below, to support and expand the existing apprenticeship programs, would be a more efficient approach to achieving the policy goals of this bill.
3) National Registered Apprenticeship Program. The National Apprenticeship Act of 1937 established a registered apprenticeship system, creating a training model that combines on-the-job learning, classroom instruction, and mentoring. Apprentices earn a paycheck while in training, and employers are provided a valuable and competent workforce. Equally important, the program offers career pathways leading to industry recognized credentials, giving employers opportunities to improve the competencies of their workers while giving workers opportunities to acquire skills and expertise, advance, and increase earnings.
Either the US Department of Labor or a State Apprenticeship Agency administers the National Apprenticeship Act. However, the programs are sponsored by individual businesses or employer associations, and may be partnered with labor organizations through collective bargaining agreements. The programs range from one to six years, and for each year of the apprenticeship, the apprentice will normally receive 2,000 hours of on-the-job training and a recommended minimum of 144 hours of related classroom instructions.
The Registered Apprenticeship is primarily funded by industry, allowing the public sector to leverage investments made by the private sector. The US government does not provide incentives to potential sponsors to utilize Registered Apprenticeship programs. According to a recent evaluation, participants in Registered Apprenticeship programs had substantially higher earnings than nonparticipants, and the social benefits of the programs have important implications for states, regions, and local communities. These benefits include enhanced worker productivity and skill levels, increased worker earnings, a larger revenue base, and reduced utilization of government-provided assistance, such as unemployment compensation and food stamps.
4) California Apprenticeship Programs. Currently, California has the largest apprenticeship system in the nation. Apprenticeship programs are offered in occupations that meet specific state-approved standards, registered with and approved by the DAS. The majority of registered apprenticeship programs are in building and construction trades. However, there are significant numbers of apprentices in training as barbers, cosmetologists, firefighters, machinists, auto mechanics and public safety officers among the DAS's more than 600 approved apprenticeship program sponsors.
Generally, wages and benefits are paid to registered apprentices by employers participating in the apprenticeship programs, but apprenticeship program educational funding (known as related and supplementary instruction (RSI) or "Montoya Funds") are appropriated annually in the State Budget Act from Proposition 98 funds. The appropriations are made to the California Department of Education (CDE) and the California Community College Chancellor’s Office. The funds are then disbursed to high school districts, Regional Occupational Centers and Programs, and community college districts that contract with apprenticeship program sponsors. The CDE supports approximately 35 regional and occupational centers offering apprenticeship programs.
In March 2012, the ETP began funding apprenticeship training through an Apprentice Training Pilot Program as a way to supplement RSI funds. The Pilot funds RSI at the rate of $13 per hour and is capped at 154 hours per individual apprentice. Only DAS‐approved apprenticeship programs are eligible to apply. Apprenticeship training may stand alone, or be combined with pre‐apprenticeship and journeyman training. In March 2013, the ETP revised its apprenticeship guidelines to expand apprenticeship into new sectors such as healthcare.
4) Is Section 41 Already Doomed? Tax credits are often used to encourage or influence socially beneficial behavior, and provide relief to taxpayers who incur expenses from desired behavior. Tax credits are often more appealing than tax deductions as the taxpayer may take the same credit regardless of income.
This bill ignores the requirements of Section 41 of the revenue and taxation code, authorized just last year in SB 1335 (Leno), Statutes of 2014, which requires tax credits to articulate specific goals, purposes, and objectives for the credit, as well as establish performance indicators to measure the credit's success in achieving those goals. While the policy goals of this bill may be laudable, there is no indication the credits offered in this bill are appropriate to achieve the desired increase in apprenticeship training, and that taxpayers seeking the credit would not have invested in apprenticeship programs absent the credit. In addition, there are no metrics proposed with which to evaluate whether the credit is achieving its aims of increasing apprenticeship enrollments or training more people. Ensuring the Legislature conducts some objective and dispassionate evaluation of tax credits was the goal of SB 1335, and the committee might wish to consider whether this is precisely the type of tax credit for which Section 41 ought to apply.
5) Prior Legislation. AB 1569 (Rodriguez) of 2014 was substantially similar to this bill, and was held on the Suspense File of this committee.
Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081
AB 151
Page 8
Date of Hearing: May 18, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 151 (
Rodriguez) – As Amended April 21, 2015
Majority vote. Tax levy. Fiscal committee
SUBJECT: Income taxes: credits: apprenticeships.
SUMMARY:
Provides a temporary tax credit of up to $2,000 under both the
Personal Income Tax (PIT) and the Corporation Tax (CT) laws for each
registered apprentice trained by the taxpayer in the taxable year.
Specifically, this bill:
Allows a tax credit to a taxpayer, for each taxable year beginning on or after January 1, 2016, and before January 1, 2020, in an amount equal to $1 for each hour a registered apprentice worked during the taxable year, up to $2,000 for each registered apprentice trained by the taxpayer in the taxable year.
Defines a "registered apprentice" as an individual who meets all of the following requirements:
Is 16 years of age or older at the time of application into the program;
Meets one of the following requirements:
Has not obtained a high school diploma and is enrolled in high school or a General Education Development test preparation program (GED program); or,
Has obtained a high school diploma or GED credential while participating in the apprenticeship; and,
Is trained by the taxpayer through an apprenticeship program, as specified.
Requires an apprenticeship program to meet all of the following conditions:
It must be approved by the Chief of the Division of Apprenticeship Standards (the "DAS"), pursuant to Chapter 4 (commencing with Section 3070) of Division 3 of the Labor Code and be registered with the Office of Apprenticeship at the United States (U.S.) Department of Labor;
It must be provided pursuant to an apprenticeship agreement as described in Section 3077 of the Labor Code (LC); and,
The minimum term in hours for the apprenticeship program must be 2,000 hours.
Specifies that the apprenticeship tax credit is allowed only if the taxpayer has received a certificate from the DAS.
Requires the taxpayer claiming the apprenticeship tax credit to obtain a certificate for each taxable year and provide a copy of the certificate to the Franchise Tax Board (FTB) upon request.
Provides that a deduction otherwise allowed for any amount paid or incurred by the qualified taxpayer in training a registered apprentice as a trade or business expense must be reduced by the amount of the credit allowed by this bill.
Requires the DAS to do all of the following:
Establish a procedure for taxpayers, in the form and manner jointly prescribed by the DAS and FTB, to apply and receive a certificate;
Verify that the taxpayer is training an individual who meets the requirements of a registered apprentice during the taxable year, as provided;
Provide the taxpayer with a certificate for the registered apprentice;
Annually provide the FTB with a list of the names of taxpayers that received certificates and the names of registered apprentices. The list may also contain other information included on the certificates;
Inform the FTB if the DAS has knowledge that the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, after the taxpayer has received a certificate.
Prepare a report on the apprenticeship tax credit for each of the five calendar years beginning on January 1, 2017, and before January 1, 2022, and include in the report all of the following information:
The number of companies or businesses taking advantage of the apprenticeship income tax credit;
The number of apprentices participating in the apprenticeship programs and the number of apprentices who completed an apprenticeship program that was the basis of the apprenticeship tax credit;
The number of apprentice program graduates hired by the taxpayer after the apprenticeship training was completed for which the taxpayer was allowed a credit for training that apprentice;
Information on the employment status of individuals who have completed an apprenticeship to the extent the information is available; and,
The fiscal impact of the apprenticeship tax credits.
Submit an annual report on the apprenticeship tax credits to the Assembly and Senate Appropriations Committees, the Assembly Committee on Revenue and Taxation, and the Senate Governance and Finance Committee on or before March 1 of the calendar year, commencing with March 1, 2018.
Authorizes the DAS, in consultation with the FTB, to adopt rules and regulations as reasonably necessary to effectuate the implementation of the apprenticeship tax credit.
Authorizes the FTB to prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of the apprenticeship tax credit provisions.
Requires the FTB to provide DAS with any information necessary to prepare the reports on the apprenticeship tax credit, as specified.
Allows a taxpayer to carry forward the apprenticeship tax credit to the following tax year, and succeeding four years, if necessary, until the credit is exhausted.
Provides that any unused carryover of the apprenticeship tax credits shall be canceled and any previously claimed credit that reduced the taxpayer's tax shall be recaptured, as specified, if the training of a registered apprentice is terminated prior to the completion of the apprenticeship program, unless any of the following applies:
The registered apprentice voluntarily leaves the apprenticeship program;
The registered apprentice, before the completion of the apprenticeship program, becomes disabled and unable to perform, as specified, unless that disability is removed prior to the close of the apprenticeship program and the taxpayer fails to offer reinstatement to the program for that apprentice;
The training of a registered apprentice was terminated due to the apprentice's misconduct, as defined in Section 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations; or,
The training of a registered apprentice was terminated due to a substantial reduction in the trade or business operations of the taxpayer.
Takes effect immediately as a tax levy.
EXISTING LAW allows various tax credits designed to influence taxpayer behavior or to provide tax relief for taxpayers who incur certain expenses. These credits are created to incentivize taxpayers to engage in certain activities that taxpayers may not undertake in the absence of the credit.
FISCAL EFFECT: The FTB staff estimates that this bill will result in an annual revenue loss of $3.8 million in the fiscal year (FY) 2015-16, $11 million in FY 2016-17, and $14 million in FY 2017-18.
COMMENTS:
The Author’s Statement. The author provided the following statement in support of this bill:
"Registered apprenticeship programs are a key component of an overall strategy to expand the pool of skilled workers in our state and keep key sectors of our economy expanding. For apprentices, these programs provide them with the flexibility to acquire knowledge and training at the same time they are making a living. For employers, voluntarily sponsoring or participating in an apprenticeship program, [it] is a cost effective way of training employees creating a diversified and flexible pool of employees with the desired skills. Increasing the number of employers and industry sectors that offer apprenticeships would ensure that we continue to create and expand training opportunities and help more workers get into rewarding careers. It has been proven that apprenticeships work. As our economy continues to recover, we need to provide more opportunities for job training and entry into the job market."
Arguments in Support. The proponents argue that this bill "can be an important tool to reduce the horrendous unemployment rate among youth, particularly among youth of color." They assert that this bill encourage employers to give young job seekers "a chance" and encourage youth "to complete their high school education."
Arguments in Opposition. The opponents acknowledge the importance of apprenticeship programs as "a means of providing opportunities to enter the workforce in stable, well-paying jobs." However, the opponents are doubtful that "the use of tax credits is an effective way to increase apprenticeships." They note that, historically, "hiring credits in most forms have not worked, primarily because the decision to hire, or in this case, take on an apprentice, is a costly one for which tax credits are a negligible part of the cost." The opponents argue that employers "hire because of the employee value to the bottom line, not because of tax credits of $2000." Nonetheless, they admit that their "skepticism about the use of tax credits could be overcome by information demonstrating that these tax credits are more efficient than a direct subsidy program" and welcome an analysis demonstrating that "a more effective apprenticeship program would be created by tax credits rather than direct subsidies and placement of apprentice."
What Does this Bill Do? This bill proposes to create an income tax credit for five taxable years – from January 1, 2016, until January 1, 2020 - for employers who have established an eligible apprenticeship program approved by the DAS and is registered with the Office of Apprenticeship at the U.S. Department of Labor. Thus, this bill would subsidize the cost of training youth at the work site, up to $2,000 annually per each registered apprentice trained by the taxpayer. Only specified individuals who are 16 years of age or older would qualify as "registered apprentices." Generally, an individual must be enrolled in high school or a GED test preparation program. In order to claim the apprenticeship tax credit, a taxpayer must receive a certificate from the DAS for each taxable year in which the taxpayer intends to claim the credit. The taxpayer must ensure that a registered apprentice completes the training program; otherwise, the credit claimed by the taxpayer may be subject to recapture. However, the recapture provisions will not apply in the case where a registered apprentice left the program voluntarily; was unable to perform, as required by the program, due to acquired disability; or was terminated for misconduct or due to a substantial reduction in the trade or business operations of the taxpayer.
Annual Reporting. This bill would require the DAS to prepare an annual report regarding the effectiveness of the apprenticeship tax credit, including the number of companies and apprentices participating in the program, the number of apprentices hired after the apprenticeship, and the fiscal impact of the apprenticeship tax credit, among other types of information. The annual report will be delivered to the Legislature for review.
Disconnected Youth. According to the report1 released by Measure America, a project of the Social Science Research Council, one in every seven Americans between the ages of 16 and 24 (or about 5.8 million young people in the country) is neither working nor is in school. The highest rate of youth disconnection among the country's most populous 25 metro areas was found in the Inland Empire: nearly one in every five young people, or 117,000 of approximately 620,000 teens and young adults. The national disconnection rate was 14.6%.
Among the factors associated with youth disconnection are high rates of poverty and unemployment, low levels of educational attainment, and high rates of disconnection identified over a decade ago. While youth disconnection is a complex problem with no easy solution, the new approaches identified by the U.S. Department of Labor show great promise. The key component of the overall strategy is a focus on job readiness and training. Apprenticeship programs allow people to obtain on-the-job experience and move into gainful employment. According to the U.S. Department of Labor, some 37,000 program sponsors signed for the Registered Apprenticeship program in the United States, representing over one-quarter million employers, industries and companies. The training programs serve a diverse population, including minorities, women, youth, and dislocated workers.
The 21st Century Registered Apprenticeship Program. The National Apprenticeship Act of 1937 (also known as the Fitzgerald Act) established the national Registered Apprenticeship system, offering a training model for diverse industry sectors which combines on-the-job learning, classroom instruction, and mentoring.2 Apprentices earn paychecks while in training and employers are assured of a valuable and competent workforce. Equally important, the program offers "a career pathways leading to industry recognized credentials, giving employers an avenue to elevate the competencies of their workers, and giving workers and their families opportunities for advancement and increased earnings as skills and expertise are acquired."3
Either the U.S. Department of Labor's Office of Apprenticeship or a State Apprenticeship Agency approved by the Secretary of Labor for federal purposes administers the National Apprenticeship Act. The program is sponsored by an individual business or an employer association and may be partnered with a labor organization through a collective bargaining agreement. Sponsors identify the minimum applicable qualifications and credentials. Those programs range from one to six years, with an average of four years. For each year of the apprenticeship, the apprentice will normally receive 2,000 hours of on-the-job training and a recommended minimum of 144 hours of related classroom instructions.4
The Registered Apprenticeship is primarily funded by industry, allowing the opportunity for the public sector "to leverage the significant investments made by the private sector in this industry-driven model." The U.S. does not provide incentives to potential sponsors to utilize Registered Apprenticeship program.5 According to a recent evaluation, the social benefits of Registered Apprenticeship are much larger than the social cost, where participants had substantially higher earnings than did nonparticipants.6 According the Report, the net social benefits of the Registered Apprenticeship Program have important implications for states, regions, and local communities - enhanced worker productivity and skill levels; increased worker earnings; a larger revenue base; and reduced utilization of government-provided assistance, such as unemployment compensation and food stamps.
California Apprenticeship Programs. Apprenticeship in California dates back to the Shelly-Maloney Apprenticeship Labor Standards Act of 1939. Currently, California has the largest apprenticeship system in the nation. Apprenticeship programs are offered in occupations that meet specific state-approved standards, registered with and approved by the DAS. There are over 800 apprenticeable occupations in California across a variety of industry sectors. The bulk of registered apprenticeship programs are in the construction sector - at present, about two-thirds of California's apprentices are in training in building and construction trades and occupations. However, there are significant numbers of apprentices in training as barbers, cosmetologists, firefighters, machinists, auto mechanics and public safety officers among the DAS's over 600 approved apprenticeship program sponsors.
Generally, wages and benefits are paid to registered apprentices by employers participating in the apprenticeship programs, but apprenticeship program educational funding (RSI or "Montoya Funds") are appropriated annually in the State Budget Act from Proposition 98 funds. The appropriations are made to the California Department of Education (CDE) and the California Community College Chancellor's Office. The funds are then disbursed to high school districts, Regional Occupational Centers and Programs, and community college districts that contract with apprenticeship program sponsors. The CDE supports approximately 35 regional and occupational centers offering apprenticeship programs for a specified length of time, usually three to five years, and include on-the-job training and classroom related and supplemental instruction.
In March 2012, the Employment Training Panel7 (ETP) began funding apprenticeship training through an Apprentice Training Pilot Program as a way to supplement RSI funds.8 The Pilot program funds RSI at the rate of $13 per hour and is capped at 154 hours per individual apprentice. Only DAS‐approved apprenticeship programs are eligible to apply. Apprenticeship training may stand alone or be combined with pre‐apprenticeship and journeyman training. As the March 2013 meeting, the ETP revised its apprenticeship guidelines to expand apprenticeship into new sectors, such as healthcare.9
Will the Proposed Tax Credit Increase Apprentice Enrollment? Many states and local communities have been actively "innovating 'on the ground,' incubating and scaling strategies and models that highlight Registered Apprenticeship's critical role in meeting complex 21st century workforce needs."10 Some states enacted business tax credits and employed utilization agreements, project labor agreements and other strategies to expand Registered Apprenticeship.11 Several states, including Arkansas, Connecticut, Michigan, Missouri, Rhode Island and Virginia, have established Youth Apprenticeship Tax Credit programs. In July 2000, the National Conference of State Legislatures (NCSL) reviewed school-to-career apprenticeship tax credit programs. The NCSL found that most states lacked sufficient data to analyze their credit's impact on apprenticeship enrollment. However, the State of Arkansas showed a 10% increase in the number of apprentices after the passage of the tax credit. Similarly, South Carolina has seen a 680% increase in the number of employers sponsoring apprentices since the implementation of an apprenticeship program in 2007, which includes a state tax credit of $1,000 for every apprentice that a business hires and $700,000 in direct state funding annually, among other subsidies.12
Although well intentioned, this bill represents an attempt to use the tax code to accomplish a public policy objective that may be better addressed through a direct outlay of state funds. As noted by the California Budget Project, nearly two-thirds of the projected 2020 labor force is already past high-school age, and meeting the needs of working adults requires changes in the areas that include financial aid policies; supportive services, such as child care and transportation; new approaches to teaching and curriculum design; and flexibility in the scheduling of classes. (California Budget Project, Mapping California's Workforce Development System: A guide to Workforce Development Programs in California, 2009.) It was also suggested that one promising strategy for addressing both the needs of workers and employers is employment and training programs that target a specific industry and work to meet its local labor market needs. (Id.) Would a stand-alone tax credit be sufficient to improve the state's workforce and to ensure that the state's workers have the skills needed to compete in the global marketplace? The Committee may wish to consider whether an increased funding to the ETP to support and expand the existing apprenticeship programs would be a more efficient approach to achieve these goals.
Credit vs. Deduction. Existing law already provides a tax incentive, in the form of a deduction for business expenses, for wages and benefits paid to employees. A tax credit is more valuable because it lowers the tax liability dollar-for-dollar. A deduction decreases the taxpayer's income; the value of a deduction depends on one's tax bracket. For example, if a taxpayer is in the 25% bracket, a $1,000 deduction would lower the taxpayer's tax bill by $250. In contrast, a $1,000 credit decreases the tax liability by the full $1,000, regardless of the tax bracket. Thus, the value of a tax credit is the same, regardless of the tax rate and, therefore, it is generally more appealing to taxpayers. In fact, the credit proposed by this bill may be so great that it may incentivize employers to hire an apprentice instead of an employee. Would this bill potentially result in the increased number of apprentices at the expense of full-time employees? The Committee may wish to consider whether the total amount of apprenticeship credit available to all employers in any given taxable year should be capped.
Prior Legislation: AB 1569 (Rodriguez), of the 2013-14 Legislative Session, was substantially similar to this bill. AB 1569 was held on the Assembly Committee on Appropriations' Suspense File.
REGISTERED SUPPORT / OPPOSITION:
Support
Council of California Goodwill Industries
Opposition
California Tax Reform Association
Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098
1 "Halve the Gap by 2030: Youth Disconnection in America’s Cities."
2 21st Century Registered Apprenticeship: Outeducate, Outbuild, Outinnovate, A shared Vision for Increasing Opportunity, Innovation, and Competitiveness for American Workers and Employers, Report from the Secretary of Labor's Advisory Committee on Apprenticeship, January 2013 (the “Report”).
3 Id., p. 4
4 Id., p. 13
5 Id., p.10
6 An Effectiveness Assessment and Cost-benefit Analysis of Registered Apprenticeship in 10 states, Mathematica Policy Research.
7 There are several workforce development programs in California; they are primarily administered through the Labor and Workforce Development Agency and the California Community College System. One of the largest programs of its kind in the nation is the Employment Training Panel (ETP), a business- and labor-supported state agency that funds job skill development initiatives that have good pay potential. The ETP provides customized training to new and current workers of California employers, particularly those facing out-of-state competition. One source of funding is provided by an assessment of one-tenth of 1% of unemployment insurance wages paid by every private, for-profit employer in California, as well as some non-profits amounting to no more than $7 per covered employee per year.
8 "Apprenticeship as a Critical Component of an “Earn and Learn” Job Training Strategy in California," White Paper produced on behalf of the California Workforce Investment Board by the Interagency Working Group on 'Earn and Learn' Job Training Strategies and Apprenticeship in California, December 2012.
9 Employment Training Panel, 2013-14 Strategic Plan, p.16.
10 The Report, p. 21.
11 Ibid.
12 Innovations in Apprenticeship, Center for American Progress, S. Steinberg and E. Gurwitz, September 2014, pp. 13-14.
Bill Author
Bill Co-Author(s):