Researcher: TA Page 1 4/25/22
OLR Bill Analysis
HB 5127
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 (i.e., a qualified business) 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 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 2 4/25/22
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 rebate amount awarded at $40 million per
fiscal year.
Lastly, the bill repeals obsolete language about insurance premiums
and corporation business tax credit caps.
EFFECTIVE DATE: July 1, 2022, and applicable to taxable years
commencing on or after January 1, 2023, except that a provision about
the order of corporation business tax credits is applicable to income
years commencing on or after January 1, 2023.
§ 1 — JOBSCT REBATE PROGRAM ELIGIBILITY
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 (i.e., qualified wages) of at least 85% of the median
household income for the 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 (§ 1(c))
Under the bill, qualified businesses seeking the rebates must apply to 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 3 4/25/22
the DECD commissioner on a form he prescribes. The form may require
the following information:
1. the number of new FTEs the business will create,
2. the number of FTEs it currently employs,
3. feasibility studies or business plans for 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 (§ 1(c))
The bill requires the DECD commissioner, when reviewing the
application, to determine whether (1) the qualified 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 rebate program.
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, in part, or 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. 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 4 4/25/22
Discretionary FTEs (§ 1(c))
Under the bill, a discretionary FTE is an FTE paid qualified wages
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, in part, or 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.
§ 1 — AWARDING THE REBATE
Contract and Allocation Notice (§ 1(c))
The bill requires the DECD commissioner to enter into a contract with
an approved qualified business. The contract must at least include the
business's consent for DECD to access data from other state agencies,
including the Labor Department, for audit and enforcement purposes.
Additionally, if the commissioner approves the business for new
discretionary FTEs, the contract must include the required wage that the
business must pay them. 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 5 4/25/22
After signing the contract, the bill requires the DECD commissioner
to issue the approved qualified 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 (§ 1(i) & (j))
The bill requires approved qualified businesses to provide
information to the DECD commissioner, annually by January 31 during
their rebate period, 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 (§ 1(h))
The bill allows a business to receive a rebate for up to seven
successive calendar years. It prohibits DECD from granting a rebate
until at least 24 months after the commissioner approves the business’s
application.
Annual Report (§ 1(k))
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 (§ 1(d))
Under the bill, FTEs may be full-time (i.e., employees who work at 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 6 4/25/22
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 (§ 1(e))
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.
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
2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 7 4/25/22
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 (§ 1(f))
Under the bill, the process for calculating the rebates for new
discretionary FTEs is the same as the process for calculating the rebates
for new FTEs (see above). Additionally, new discretionary FTEs have
the same $5,000 per FTE cap as new FTEs. However, the floor for new
discretionary FTEs is (1) $750 per FTE generally and (2) $1,500 for credits
earned, claimed, or payable before January 1, 2024.
FTE Minimum (§ 1(e), (f) & (h))
The bill prohibits a business from receiving a rebate if it does not
maintain at least 25 new FTEs or new 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 FTEs or new
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 (§ 1(g))
The bill limits the aggregate rebate amount 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 CREDIT 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 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 8 4/25/22
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.
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 2021, he designated the following
25 municipalities as distressed:
Ansonia Bridgeport Chaplin
Derby East Hartford East Haven
Griswold Groton Hartford
Meriden Montville New Britain
New London Norwich Plainfield
Putnam Sprague Sterling
Stratford Torrington Voluntown
Waterbury West Haven Winchester
Windham
Opportunity Zones
The federal Opportunity Zone program, created as part of the 2017 2022HB-05127-R000597-BA.DOCX
Researcher: TA Page 9 4/25/22
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 Change of Reference - FIN
Yea 21 Nay 1 (03/22/2022)
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 46 Nay 5 (04/06/2022)