In a bid to reshape Connecticut’s manufacturing sector and fortify its workforce with skilled workers, the Apprenticeship Tax Credit (ATC) was expanded last year to include S corporations, partnerships, and limited liability companies (LLCs) – collectively known as pass-through entities. For some, this flew under the radar, so we wanted to share this information so manufacturers can understand it and take advantage of this substantial benefit if they qualify.
The Evolution of ATC
Connecticut, long a hub of manufacturing expertise, has grappled with the challenge of finding and retaining a pool of adept craftspeople. In response to this demand, the Apprenticeship Tax Credit was designed as a catalyst to stimulate the growth of skilled workers through structured apprenticeship programs. Last year’s expansion ushered in a new era by welcoming pass-through entities into the fold of beneficiaries.
Traditionally, C corporations have enjoyed the benefits of the ATC, using it to offset their business income tax obligations. However, pass-through entities, while technically eligible since 2015, had to navigate a convoluted process of transferring or selling their ATC to another business entity for utilization. This cumbersome requirement has been removed, making it much easier for pass-through entities to use the credit for their own advantage.
Meeting Prerequisites for ATC Eligibility
To be eligible for the ATC, certain prerequisites must be met, as outlines by the Connecticut Department of Labor (CT DOL):
- The company must sponsor a qualified registered apprenticeship program.
- The business must be classified as a manufacturing establishment.
- Prior to claiming the credit, the company must work with CT DOL to calculate the ATC and acquire a tax credit certification letter.
- The apprenticeship program must adhere to the guidelines of a qualified Manufacturing Program, spanning between 4,000 hours (2 years) and 8,000 hours (4 years).
- The credit application is subject to specific limits based on the duration of the apprenticeship program.
Forging Ahead
In a sector that relies on skilled craftspeople, the extended Apprenticeship Tax Credit emerges as a pragmatic opportunity. Connecticut’s pass-through manufacturing entities can offset their training costs while cultivating a skilled workforce, which, in turn, fuels expansion. As this tax credit gains more exposure, Connecticut’s manufacturing landscape is poised to enjoy renewed growth, innovation and practical progress.
If you have questions or want help determining your eligibility and working with the CT DOL, reach out to us.