HOUSE 3rd Reading Unamended April 18, 2016 HOUSE Amended 2nd Reading April 15, 2016Second Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 16-1087.01 Esther van Mourik x4215HOUSE BILL 16-1301 HOUSE SPONSORSHIP Garnett, SENATE SPONSORSHIP Scheffel, House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT Concerning an income tax credit for Colorado businesses that offer high-quality apprenticeships for top jobs, and, in connection therewith, making an appropriation. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill provides an income tax credit to qualified Colorado businesses that meet certain criteria and retain pre-apprentices or apprentices. The credit is administered by the Colorado department of labor and employment. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) A robust workforce is essential to the economic development and vitality of the state; (b) In an effort to maintain a relevant and capable workforce, businesses should provide high-quality on-the-job training in conjunction with education by offering residencies, pre-apprenticeships, and apprenticeships that can lead to employment at the businesses; and (c) The intended purpose of the tax expenditure in this act is to offset a small portion of the cost to the businesses to create these experiential learning opportunities for the state's youth. SECTION 2. In Colorado Revised Statutes, add 39-22-538 as follows: 39-22-538. Income tax credit for a business that offers and fulfills pre-apprenticeships and apprenticeships - definitions - rules. (1) As used in this section, unless the context otherwise requires: (a) "Apprenticeship program" means a registered apprenticeship program with the office of apprenticeship in the United States department of labor or a like apprenticeship program as identified by the department of labor and employment or the work force development council. (b) "Construction industry apprenticeship program" means an apprenticeship program registered with the office of apprenticeship in the United States department of labor that trains individuals for careers in the construction industry. (c) "Construction industry pre-apprenticeship program" means a program or set of strategies that: (I) Is designed to prepare individuals for careers in the construction industry by facilitating the entry of individuals into a registered construction industry apprenticeship program; (II) Has a documented relationship with at least one apprenticeship program registered with the office of apprenticeship in the United States department of labor; and (III) Meets the "quality pre-apprenticeship program" standards maintained by the employment and training administration of the United States department of labor. (d) "Credit certificate" means a statement issued by the department of labor and employment certifying that the taxpayer qualifies for the tax credit allowed in this section and specifying the amount of the credit allowed. (e) "Department of labor and employment" or "department" means the department of labor and employment created in section 24-1-121, C.R.S. (f) "Qualified taxpayer" means a taxpayer doing business in the state that meets the requirements set forth in paragraphs (b) and (c) of subsection (2) of this section. (g) "Residency program" means a program defined by the work force development council or the department of labor and employment that: (I) Provides individuals with a set of well-defined occupational skills and abilities by teaching both theoretical and practical concepts primarily through on-the-job training and related instruction; and (II) Ensures the individual receives a form of compensation for such on-the-job training. (h) "Taxpayer" means a resident individual or a domestic or foreign corporation subject to the provisions of part 3 of this article. (i) "Top jobs" has the same meaning as provided in section 24-46.3-104 (2), C.R.S. (j) "Work force development council" or "council" means the state work force development council created in section 24-46.3-101, C.R.S. (2) (a) On or before August 15, 2016, and on or before July 1, 2017, July 1, 2018, and July 1, 2019, the work force development council shall publish on the council's website, and shall send to the department of labor and employment, a list of top jobs with the greatest regional and state demand for the income tax years commencing the January following the year the list is posted. (b) Except as provided in paragraph (c) of this subsection (2), in order to be qualified, a taxpayer must be a business in the state that offers top jobs identified on the list published by the work force development council as specified in paragraph (a) of this subsection (2), and a business that: (I) Has a residency program or an apprenticeship program; (II) Is aligned with a postsecondary education or employment opportunity; (III) Employs a sufficient number of residency or apprenticeship case managers to monitor student participation in the residencies or apprenticeships; (IV) Provides students with training or course work that is designed to prepare the students for the residency or apprenticeship; (V) Implements adequate safety and supervisory safeguards for the students participating in the residency or apprenticeship; and (VI) Retains at least one resident or apprentice. (c) In order to be qualified, a construction industry taxpayer must be a construction industry business in the state that offers top jobs identified on the list published by the work force development council as specified in paragraph (a) of this subsection (2), and have at least one: (I) Employee who graduated from a construction industry pre-apprenticeship program and who has been accepted into a construction industry apprenticeship program as a registered apprentice during the year for which the qualified taxpayer is seeking a tax credit allowed pursuant to this section; or (II) Employee who is a registered apprentice enrolled in a construction industry apprenticeship program during the year for which the qualified taxpayer is seeking a tax credit allowed pursuant to this section. (3) (a) For tax years commencing on or after January 1, 2018, but prior to January 1, 2021, at the discretion of the department of labor and employment as specified in subsection (4) of this section, there is allowed to a qualified taxpayer an annual tax credit with respect to the income taxes imposed by this article in an amount determined by the department pursuant to paragraph (d) of subsection (5) of this section for each resident, apprentice, or individual in a construction industry pre-apprenticeship program or in a construction industry apprenticeship program who is retained by the qualified taxpayer. (b) The department of labor and employment may not issue a tax credit certificate to a qualified taxpayer for the same resident, apprentice, or individual in a construction industry pre-apprenticeship program or construction industry apprenticeship program who is retained by the qualified taxpayer for more than five consecutive income tax years, subject to the annual approval process set forth in subsections (4) and (5) of this section, and subject to the limitation on the number of income tax years the income tax credit is allowed as set forth in paragraph (a) of this subsection (3). If the income tax credit allowed in this section is extended by future amendment of this section for any additional income tax years after the income tax year commencing on or after January 1, 2021, the department of labor and employment shall determine whether a qualified taxpayer has claimed a tax credit allowed in this section for a particular resident, apprentice, or individual in a construction industry pre-apprenticeship program or construction industry apprenticeship program in previous income tax years and shall not issue more than five credit certificates to such qualified taxpayer for such resident, apprentice, or individual in a construction industry pre-apprenticeship program or construction industry apprenticeship program over the total number of income tax years this income tax credit is available. (c) The only tax credits allowed in the income tax year commencing on or after January 1, 2020, but before January 1, 2021, may be for those credit certificates issued by the department of labor and employment for the unused portion of the one million dollars per income tax year limitation allowed in paragraph (a) of subsection (4) of this section. (4) (a) The department of labor and employment, in its discretion, may issue credit certificates totaling up to one million dollars per income tax year, and the unused portion of the one million dollars per income tax year may be used by the department of labor and employment to issue more than one million dollars in credit certificates in future income tax years, so long as the department of labor and employment does not issue credit certificates totaling more than three million dollars during the income tax years for which the credit allowed in subsection (3) of this section is available. (b) A taxpayer shall submit a complete written application for conditional approval to the department of labor and employment by the deadline established in rules promulgated by the department. The application must include identification of the selected resident, apprentice, or individual in a construction industry pre-apprenticeship program or in a construction industry apprenticeship program, and the actual or anticipated start date of the selected resident, apprentice, or individual in a construction industry pre-apprenticeship program or in a construction industry apprenticeship program. (c) The department of labor and employment shall promulgate rules for the administration of the issuance of the credit certificates for the credit allowed in this section, including application requirements, guidelines for sharing a credit certificate between or among qualified taxpayers who participate in multi-employer apprenticeship programs, and guidelines regarding the issuing of the credit certificate. The rules must be posted on the department of labor and employment's website no later than October 1, 2016. (5) (a) The department of labor and employment shall review each application for a conditional approval submitted by a taxpayer. Based on the application submitted and the department's rules, the department may offer conditional approval to a taxpayer for a credit certificate. The conditional approval must include the specific terms that must be met by the taxpayer to qualify for the credit. (b) A taxpayer who receives conditional approval for a credit allowed in this section shall notify the department of labor and employment promptly if the resident, apprentice, or individual in a construction industry pre-apprenticeship program or in a construction industry apprenticeship program is either not selected or not retained, in which case the conditional approval must be canceled. In the event a conditional approval is canceled, the department of labor and employment may offer a different conditional approval to a taxpayer pursuant to the department of labor and employment's rules, so long as such conditional approval still meets the limitations specified in paragraph (a) of subsection (4) of this section. (c) The taxpayer who received conditional approval as specified in paragraph (a) of this subsection (5) shall submit a request for the issuance of a credit certificate by the deadlines established in the department of labor and employment's rules. (d) If the department of labor and employment determines the employer is a qualified taxpayer and such qualified taxpayer has provided all necessary documentation, the department of labor and employment shall issue a credit certificate to the qualified taxpayer in an amount not to exceed two thousand five hundred dollars for the retention of each resident or individual in a construction industry pre-apprenticeship program and in an amount not to exceed five thousand dollars for the retention of each apprentice or individual in a construction industry apprenticeship program. The department has the discretion to vary the amount of the credit, subject to the maximum amount, based on the number of qualified taxpayers who received conditional approval for the credit period and based on the number of residents, apprentices, or individuals in a construction industry pre-apprenticeship program or in a construction industry apprenticeship program that each qualified taxpayer retains. (e) The credit certificate must be submitted by the qualified taxpayer to the department of revenue with the qualified taxpayer's income tax return. (6) If the credit exceeds the amount of income tax due on the income of the taxpayer for the tax year during which the credit certificate was issued, the amount of the tax credit not used as an offset against income taxes in such income tax year may not be allowed as a refund, but may be carried forward and applied against the income tax due in each of the five succeeding income tax years, but must first be applied against the income tax due for the earliest of the income tax years possible. (7) If a taxpayer receiving a credit allowed in this section is a partnership, limited liability company, S corporation, or similar pass-through entity, the taxpayer may allocate the credit among its partners, shareholders, members, or other constituent taxpayers in any manner agreed to by such partners, shareholders, members, or other constituent taxpayers. The taxpayer shall certify to the department of labor and employment the amount of the credit allocated to each partner, shareholder, member, or other constituent taxpayer, and the department shall issue credit certificates in the appropriate amounts to each partner, shareholder, member, or other constituent taxpayer. Each partner, shareholder, member, or other constituent taxpayer shall be allowed to claim such amount subject to any restrictions set forth in this section. (8) The department of labor and employment may audit a qualified taxpayer's documentation up to twelve months following the issuance of any credit certificate. (9) Notwithstanding section 24-1-136 (9) and (11), C.R.S., the department of labor and employment shall include information regarding all credit certificates issued pursuant to this section, including conditional approvals, the names of qualified taxpayers, and the amounts issued, in an annual report required to be presented to the general assembly. (10) No later than November 1, 2017, and no later than November 1 of each year thereafter through November 1, 2019, the department of labor and employment shall provide the department of revenue with an electronic report of the qualified taxpayers who were issued a credit certificate for the preceding calendar year or any fiscal year ending in the preceding calendar year, and any credits disallowed pursuant to paragraph (b) of subsection (5) of this section for any year, that includes the following information: (a) The qualified taxpayer's name; (b) The qualified taxpayer's Colorado account number and federal employer identification number; (c) The amount of the credit certificate; and (d) Any associated names, Colorado account numbers, and federal employer identification numbers or social security numbers, if the credit allowed in this section is allocated from a pass-through entity pursuant to subsection (7) of this section. SECTION 3. Appropriation. (1) For the 2016-17 state fiscal year, $78,969 is appropriated to the department of labor and employment. This appropriation is from the general fund. To implement this act, the department may use this appropriation as follows: (a) $71,368 for use by workforce development council, which amount is based on an assumption that the council will require an additional 1.0 FTE; and (b) $7,601 for the purchase of legal services. (2) For the 2016-17 state fiscal year, $7,601 is appropriated to the department of law. This appropriation is from reappropriated funds received from the department of labor and employment under paragraph (b) of subsection (1) of this section. To implement this act, the department of law may use this appropriation to provide legal services for the department of labor and employment. SECTION 4. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.