Researcher: SM Page 1 3/29/21
OLR Bill Analysis
HB 6435
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), thus 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 manufacturing apprenticeship 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 a conforming change and numerous technical
changes.
EFFECTIVE DATE: July 1, 2021, and applicable to income or tax
years beginning on or after January 1, 2021.
PASS-THROUGH ENTITIES
The bill allows the owners and partners of pass-through entities to
use the manufacturing apprenticeship tax credit to reduce their
personal income or PE tax liability. If the entity is an S corporation or is
treated as a partnership for federal tax purposes, its shareholders or
partners may claim the credit. If the entity is a single-member LLC and
does not file a separate federal tax return (i.e., a “disregarded entity”), 2021HB-06435-R000161-BA.DOCX
Researcher: SM Page 2 3/29/21
the owner may claim the credit.
CREDIT SALE, ASSIGNMENT, OR TRANSFER ELIMINATED
Although current law allows pass-through entities to earn the
manufacturing apprenticeship tax credit, it bars their owners from
claiming the credit. Instead, it only allows them to cash in their credits
by selling, assigning, or transferring them to businesses that may apply
them against the corporation business tax, utility companies tax, and
petroleum products gross earnings tax. The bill eliminates this
authorization for income years beginning on or after January 1, 2021.
By law, unchanged by the bill, businesses organized as C
corporations that employ apprentices may claim the credit against the
corporation business tax liability.
COMMITTEE ACTION
Commerce Committee
Joint Favorable
Yea 22 Nay 0 (03/11/2021)