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OLR Bill Analysis
sHB 6440
AN ACT ESTABLISHING THE JOBSCT TAX REBATE PROGRAM.
SUMMARY
This bill establishes the JobsCT tax rebate program under which
companies in specified industries may earn rebates against the
insurance premiums, corporation business, and pass-through entity
(PE) taxes for reaching certain job creation targets. The rebate is based
on (1) the number of new full-time equivalent employees (FTEs) the
business creates and maintains, (2) these FTEs’ average wage, and (3)
the state income tax that would be paid on this average wage for a
single filer.
Under the bill, the rebate program is administered by the
Department of Economic and Community Development (DECD). A
business is eligible for the program if it is subject to at least one of the
above taxes and in an industry related to finance, insurance,
manufacturing, clean energy, bioscience, technology, digital media, or
any similar industry, as determined by the DECD commissioner.
Generally, the business must create and maintain at least 25 new FTEs
to claim a rebate. The bill establishes minimum wage requirements
that the new FTEs must meet to qualify for the rebate but allows the
DECD commissioner to waive these requirements for FTEs meeting
other criteria (i.e., “discretionary FTEs”).
Generally, the rebate equals 25% of the state income tax paid by the
new FTEs (50% for FTEs in an opportunity zone or distressed
municipality). The bill establishes a minimum rebate of $1,000 per new
FTE ($750 per discretionary FTE) and a maximum of $5,000 per new or
discretionary FTE. However, it doubles the minimum amounts for
rebates earned, claimed, or payable before January 1, 2024 (i.e., $2,000
per new FTE and $1,500 per discretionary FTE). It allows businesses to
receive rebates in up to seven successive years, beginning with the 2021HB-06440-R000236-BA.DOCX
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second year after it is accepted into the program. The rebate is
refundable if it exceeds the business’s tax liability and may exceed the
existing insurance premiums and corporation business tax credit
limits. The bill caps the aggregate amount of rebates awarded at $40
million per fiscal year.
Separately, the bill requires DECD, when awarding economic
development financial assistance, to prioritize applicants that
demonstrate a willingness (as determined by the commissioner) to
make jobs available to unemployed individuals, low -income
individuals, dislocated workers, individuals training for nontraditional
employment, veterans, and individuals with disabilities to the extent
consistent with any state or regional economic development strategy.
Lastly, the bill repeals obsolete language concerning insurance
premiums and corporation business tax credit caps.
EFFECTIVE DATE: July 1, 2021, and applicable to taxable years
commencing on or after January 1, 2022, except that (1) a provision
concerning the order of corporation business tax credits is applicable to
income years commencing on or after January 1, 2022, and (2) the
provision concerning DECD financial assistance is effective July 1,
2021.
§ 1 — JOBSCT REBATE PROGRAM ELIGIBI LITY
Under the bill, an eligible business qualifies for the rebate if it
creates and maintains at least 25 new or discretionary FTEs. New FTEs
are those that did not exist in the state when the business applies to the
DECD commissioner for acceptance into the program. They exclude
FTEs (1) acquired due to a merger or acquisition, (2) employed in the
state by a related person (e.g., entities controlled by the business)
within the previous 12 months, or (3) hired to replace FTEs that existed
in the state after January 1, 2020. The bill allows the DECD
commissioner to issue implementation guidance.
To qualify as a new FTE, an employee must be paid wages sourced
to the state of at least 85% of the median household income for the 2021HB-06440-R000236-BA.DOCX
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location where the position is primarily located or $37,500, whichever
is greater. Both measures are proportionally reduced for fractional
FTEs (e.g., the wage floor is $18,750 for a 0.5 FTE).
The bill creates an exception to these wage requirements for new
discretionary FTEs (see below).
§ 1 — PROGRAM APPLICATION
Application (§ 1c)
The bill requires businesses seeking the rebates to apply to the
DECD commissioner on a form he prescribes. The form may include
the following:
1. the number of new FTEs the business will create,
2. the number of FTEs it currently employs,
3. feasibility studies or business plans regarding the projected
number of new FTEs,
4. projected state and local revenue reasonably derived from the
increased FTEs, and
5. any other information needed to determine whether there will
be net benefits to the economy of the state and the municipality
or municipalities where the business is located.
The bill allows the commissioner to require the business to submit
additional information to evaluate an application.
DECD Review and Approval (§ 1c)
The bill requires the DECD commissioner, when reviewing the
application, to determine whether (1) the business can reasonably meet
the hiring targets and other metrics stated in the application and (2) the
proposed job growth would (a) provide a net benefit to economic
development and employment opportunities in the state and (b)
exceed the number of jobs the business had before January 1, 2020.
Under the bill, the business must meet each of these requirements to be
eligible for the rebates. 2021HB-06440-R000236-BA.DOCX
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The bill requires the DECD commissioner to approve or reject the
application within 90 days after receiving it. He may approve the
application in whole or in part or approve it with amendments. If he
rejects an application, he must identify the defects and explain the
specific reasons for the rejection.
The bill allows the commissioner to combine the approval of an
application with the exercise of any of his other powers, including
providing other financial assistance.
Discretionary FTEs (§ 1c)
Under the bill, a discretionary FTE is an FTE paid wages sourced to
the state who does not meet the bill’s wage requirements (see above)
but is approved by the DECD commissioner. The bill allows the
commissioner to approve an application in whole or in part or approve
it with amendments if a majority of the new discretionary FTEs meet
the following criteria:
1. are receiving, or have received, services from the Department of
Aging and Disability Services because of a disability;
2. are receiving employment services from the Department of
Mental Health and Addiction Services or participating in
employment opportunities or day services operated or funded
by the Department of Developmental Services;
3. have been unemployed for at least six of the preceding 12
months;
4. have been convicted of a misdemeanor or felony;
5. are veterans;
6. lack a postsecondary credential and are not currently enrolled
in a postsecondary institution or program; or
7. are currently enrolled in a workforce training program fully or
substantially funded by the employer that results in the
individual earning a postsecondary credential. 2021HB-06440-R000236-BA.DOCX
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§ 1 — AWARDING THE REBATE
Contract and Allocation Notice (§ 1c)
The bill requires the DECD commissioner to enter into a contract
with an approved qualified business. The contract must at least
include consent by the business for DECD to access data from other
state agencies, including the Labor Department, for audit and
enforcement purposes. Additionally, if the business is approved for
discretionary FTEs, the contract must include the required wage that
the business must pay the discretionary FTEs.
After signing the contract, the bill requires the DECD commissioner
to issue the business a rebate allocation notice that certifies its
eligibility to claim the rebate if it meets the terms stated in the notice.
The notice must state the maximum rebate available for the rebate
period and the specific terms the business must meet to qualify.
Voucher (§ 1i & j)
The bill requires approved qualified businesses to provide
information to the DECD commissioner, annually by January 31, on
the number of new or discretionary FTEs created or maintained during
the previous calendar year and their qualified wages. It allows DECD
to audit this information.
The bill requires DECD to issue a rebate voucher to an approved
qualified business by March 15 in each year of the rebate period. The
voucher must state the rebate amount and the taxable year against
which the rebate may be claimed. The bill requires the DECD
commissioner to annually provide the revenue services commissioner
with a report detailing all rebate vouchers. (The bill does not specify a
deadline for this report.)
Rebate Period (§ 1h)
The bill allows a business to receive a rebate for up to seven
successive calendar years. It prohibits the DECD commissioner from
granting a rebate until at least 24 months after he approves the
business’s application. 2021HB-06440-R000236-BA.DOCX
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Annual Report (§ 1k)
The bill requires the DECD commissioner to annually report to the
Office of Policy and Management beginning January 1, 2023, on the
rebate program’s expenses and the number of FTEs and discretionary
FTEs created and maintained. The commissioner must submit the
report in consultation with the state comptroller’s office and state
auditors.
§ 1 — REBATE CALCULATION
FTE Calculation (§ 1d)
Under the bill, FTEs may be full-time (i.e., employees who work at
least 35 hours per week) or part-time employees. One FTE consists of a
job in which an employee works or is expected to work at least 1,750
hours in a calendar year (i.e., 35 hours per week for 50 weeks). For
employees who work fewer than 1,750 hours, an FTE fraction is
calculated by dividing the number of hours worked by 1,750. The bill
allows the DECD commissioner to adjust the FTE calculation.
New FTEs (§ 1e)
Under the bill, an approved qualified business must employ at least
25 new FTEs in Connecticut by December 31 in the calendar year that
is two years before the calendar year in which it claims the rebate. For
purposes of calculating the rebate, new FTEs refers to the number of
new FTEs (1) created two years before the rebate year or (2)
maintained in the year before the rebate year, whichever is less.
The rebate is based on (1) the number of new FTEs created or
maintained (see above), (2) their average wage, and (3) the state
income tax that would be paid on this average wage for a single filer.
Generally, if the new FTEs are in an opportunity zone or distressed
municipality (i.e., “designated locations,” see BACKGROUND), the
rebate equals 50% of the average state income tax that would be paid
by these employees, multiplied by the number of employees. If the
new FTEs are outside of these locations (i.e., “other locations”), the
rebate equals 25% of the average state income tax that would be paid
by these employees, multiplied by the number of employees. 2021HB-06440-R000236-BA.DOCX
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Under the bill, the total rebate is calculated by adding the rebate
amount from the designated locations to the amount from the other
locations, as shown in Figure 1 below.
Figure 1: JobsCT Rebate Calculation
New FTEs in designated locations New FTEs in other locations
Total
rebate
amount
x + x =
50% of the income tax that would
be paid on these employees’
average wage
25% of the income tax that would
be paid on these employees’
average wage
Rebate Floor and Ceiling. The bill generally establishes a rebate
floor of $1,000 per new FTE, regardless of where it is created.
However, for tax credits earned, claimed, or payable before January 1,
2024, the rebate floor equals $2,000 per new FTE. It caps the rebates at
$5,000 per new FTE.
Discretionary FTEs (§ 1f)
Under the bill, the process for calculating the rebates for
discretionary FTEs is the same as the process for calculating the rebates
for new FTEs (see above). Additionally, discretionary FTEs have the
same $5,000 per FTE cap as new FTEs. However, the floor for
discretionary FTEs is (1) $750 per FTE generally and (2) $1,500 for
credits earned, claimed, or payable before January 1, 2024.
FTE Minimum (§ 1e, f & h)
The bill prohibits a business from receiving a rebate if it does not
maintain at least 25 new or discretionary FTEs (as applicable) in the
calendar year immediately before the calendar year in which the rebate
is being claimed.
Additionally, if a business fails to create 25 new or discretionary
FTEs in two consecutive calendar years, it must forfeit all remaining
rebate allocations unless the DECD commissioner recognizes
mitigating circumstances of a regional or national nature, including a
recession.
Rebate Caps (§ 1g) 2021HB-06440-R000236-BA.DOCX
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The bill limits the amount of rebates that may be awarded in a fiscal
year to (1) $10 million for discretionary FTEs and (2) $40 million
overall. It prohibits the DECD commissioner from approving an
application in whole or in part if doing so would result in exceeding
the applicable cap in any fiscal year.
§§ 2-5 — REBATES AND TAX CRED IT CAPS
Under the bill, JobsCT rebates are treated as credits against the
corporation business and PE taxes and offsets against the insurance
premiums tax. If the rebate against any of these taxes exceeds the
business’s liability for that tax, then the DRS commissioner must treat
the excess as an overpayment and refund it to the business without
interest.
The bill allows the JobsCT rebate to exceed existing law’s caps on
insurance premiums (generally 30-70% of the amount of tax owed by
the business) and corporation business tax credits (50.01% of the tax
due). Additionally, the bill requires that any JobsCT rebate against the
corporation business tax be claimed only after the business has
claimed any other available credits against the tax.
Under existing law, if a pass-through business (i.e., affected
business entity) is subject to the PE tax, its members (i.e., owners)
receive an offsetting credit at the personal or corporate income tax
level that equals 87.5% of the member’s direct and indirect share of the
PE tax paid by the pass-through business. The bill requires that the
members’ personal income tax credit be calculated before any JobsCT
rebate is applied to the business’s PE tax due.
§ 6 — FINANCIAL ASSISTANCE PRIORITY
The bill requires DECD, when awarding economic development
financial assistance (e.g., grants, loans, and tax credits), to give priority
to applicants that demonstrate a willingness (as determined by the
commissioner) to make jobs available to unemployed individuals, low-
income individuals, dislocated workers, individuals training for
nontraditional employment, veterans, and individuals with disabilities
to the extent consistent with any state or regional economic 2021HB-06440-R000236-BA.DOCX
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development strategy.
Table 1 below describes who these terms encompass.
Table 1: Prioritization Categories
Category Description
Dislocated
worker
Generally refers to (1) certain individuals who were recently
terminated or laid off from employment, (2) individuals who were
self-employed but are now unemployed due to general
economic conditions or because of natural disasters, or (3)
displaced homemakers (see below)
Displaced
homemaker
Someone who has been providing unpaid services to family
members in the home and who (1) has been dependent on
another family member's income but is no longer supported by
that income and (2) is unemployed or underemployed and is
experiencing difficulty obtaining or upgrading employment
Low-income
individual
Someone whose family income is less than 300% of the federal
poverty level (the bill does not specify which federal poverty
level measure to use)
Nontraditional
employment
Occupations or fields of work where individuals from one gender
comprise less than 25% of those employed in that field or
occupation
Veteran Any person who is a member of, was honorably discharged or
released under honorable conditions from, active service in the
armed forces
BACKGROUND
Distressed Municipalities
By law, the DECD commissioner must annually designate
distressed municipalities based on a combination of economic,
education, demographic, and housing criteria. In 2020, he designated
the following 25 municipalities as distressed:
Ansonia Bridgeport Bristol
Chaplin Derby East Hartford
East Haven Griswold Hartford
Meriden Montville New Britain
New Haven New London Norwich
Preston Putnam Sprague
Stratford Torrington Voluntown 2021HB-06440-R000236-BA.DOCX
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Waterbury West Haven Winchester
Windham
Opportunity Zones
The federal Opportunity Zone program, created as part of the 2017
federal Tax Cuts and Jobs Act (P.L. 115-97), is designed to spur
economic development and job creation in distressed communities by
providing federal tax benefits for private investments in the zones. The
program’s tax benefits are available to investors that reinvest gains
earned on prior investments in a qualified opportunity zone fund that
invests in zone businesses. Investors may receive additional tax
benefits if they hold their investments in the fund for at least five,
seven, or 10 years. Connecticut has 72 opportunity zones in 27
municipalities that were approved by the U.S. Treasury Department in
2018.
COMMITTEE ACTION
Commerce Committee
Joint Favorable Substitute
Yea 20 Nay 2 (03/16/2021)