Joan Hartley

Senate Approves Bill Extending the Manufacturing Apprenticeship Tax Credit to Support Small Manufacturers

State Senator Joan Hartley (D-Waterbury, Naugatuck, and Middlebury), Senate Chair of the Commerce Committee and Co-Chair of the Manufacturing Caucus, championed the Senate’s approval of Senate 98. The bill would allow the manufacturing apprenticeship tax credit to be available to pass-through entities. This extension of the tax credit would benefit small and mid-sized manufacturers, many of whom are pass-through entities, in helping them offset the cost of training new employees and apprentices.

Senate Bill 98 received the collective support of the Connecticut Business and Industry Association, the National Federation of Independent Business, and the Waterbury Regional Chamber. The bill now advances to the state House of Representatives for consideration.

“Extending the manufacturing apprenticeship tax credit to pass-through entities has been a long-sought goal of the manufacturing business community and I’m confident that this is the year that we are able to get this over the finish line,” said Sen. Hartley. “This tax credit expansion would help manufacturing companies, primarily smaller manufacturers, be able to meet a surge in demand for services and products. Yet, they are hampered in their ability to meet this demand due to challenges in finding skilled workers. The greater ability to utilize the tax credit would strengthen apprenticeship opportunities, while reducing training costs for manufacturers.”

In its current form, the manufacturing apprenticeship tax credit can only be applied to the corporation tax. This limitation means that many small and mid-sized manufacturers that are pass-through entities, such as LLC’s and S-corporations, are unable to claim the tax credit. Senate Bill 98’s extension of the manufacturing apprenticeship tax credit to the pass-through entities, allowing them to reduce their personal income or affected business entity tax liability, would put them on a more level playing field with larger manufacturing companies who can afford to train new apprentices, and potentially retain them as employees.

The expansion of the tax credit would support the availability of manufacturing apprenticeship opportunities and building up a trained manufacturing workforce. An aim that is eagerly sought by the manufacturing job sector in Connecticut, which is struggling to find workers.

55 percent of Connecticut manufacturers surveyed said they experienced difficulty finding workers in 2021, according to a same-year report produced by the Connecticut Business and Industry Association. The same reported cited that 36 percent of manufacturers said a lack of necessary skills or experience among applicants contributed to hiring difficulties. A workforce need that is made more urgent by an aging manufacturing workforce. Over one-third of manufacturing workers in Connecticut are above 55 years old, according to the state Department of Labor,

Smaller manufacturers may be more reluctant to provide apprenticeship opportunities because they would have to divert the time of their small number of employees toward training apprentices and it would affect business productivity.

By extending the manufacturing tax credit to pass-through entities, it would incentivize smaller manufacturers to “hire and train the workers they need, while easing the effect on their bottom lines,” as explained in testimony from the Waterbury Regional Chamber. Additionally, CBIA noted in its testimony that the extension of the manufacturing apprenticeship tax credit would give smaller manufacturers with older employees more of an opportunity to train new workers, while reducing the financial costs to train them.