Investing in Your Workforce: The Kansas Apprenticeship Act Tax Credit Explained
HOW BUSINESSES CAN BENEFIT FROM THE TAX CREDIT AND PROMOTE WORKFORCE DEVELOPMENT
The Kansas Apprenticeship Act, also known as H.B. 2292, was recently passed to promote and expand apprenticeships within local businesses, nonprofits, healthcare organizations and public schools. This Act provides grants and tax credits for those offering apprenticeships and scholarships with the goal of preparing students and workers for skilled occupations while meeting the needs of the state’s industries.
The Act provides tax credits for employers who employ apprentices under a registered apprenticeship agreement and plan. The credit is up to $2,500 per apprentice and can be claimed for up to three successive years. The Secretary of Revenue and the Secretary of Commerce will establish a sliding tax credit scale based on the wages and costs invested in the apprentice.
After 2025, eligible employers can claim an apprentice tax credit if they employ an apprentice under a registered apprenticeship agreement and plan for a successive period meeting 25% of the period required by the registered apprenticeship program. The tax credit is up to $2,750 per apprentice and can be claimed for up to four consecutive years.
Additionally, after 2025, eligible employers can claim a secondary credit for an apprentice in a career and technical education program who is under 18 and has been employed for at least 90 days. The credit is up to $500 and can be claimed for up to 10 apprentices per year per employer.
The Act limits the aggregate amount of credits to $7.5 million per year, which are nonrefundable and non-transferable. Eligible employers must enter an agreement with the Secretary of Revenue on the employment of apprentices and agree to the terms and conditions required.
The Act aims to expand apprenticeships in Kansas and provide a pathway for students and workers to prepare for skilled occupations. By offering grants, tax credits and scholarship grants to businesses, nonprofits, healthcare organizations and public schools, the Act encourages these entities to provide apprenticeships. In addition, apprenticeships allow students and workers to gain on-the-job training and experience while earning a wage, which can lead to employment opportunities in the future.
Who is Eligible?
The Kansas Apprenticeship Act tax credit is available for businesses in various industries, including manufacturing, construction, healthcare, information technology and many more. To be eligible, the employer must have an active apprenticeship program registered with the Department of Commerce. The apprenticeship program must meet specific requirements, including providing structured on-the-job training and related instruction. In addition, the employer must meet the following criteria to be eligible for the tax credit:
- The employer must be subject to the Kansas income tax.
- The employer must have a qualified apprentice employed in the state of Kansas.
- The employer must have made contributions to a qualified apprenticeship training fund.
- The employer must have filed all required tax returns and paid all taxes due.
If the employer meets all these criteria, they may be eligible for a tax credit of up to $2,500 per apprentice per year for up to three years. This tax credit can be used to offset the employer’s Kansas income tax liability.
How to Claim the Kansas Apprenticeship Act Tax Credit
To claim this tax credit, businesses must complete and submit the “Kansas Apprenticeship Tax Credit Claim Form” to the Kansas Department of Commerce. The form must be submitted within 90 days after the end of the taxable year in which the apprentice completed their first year of employment.
The form requires businesses to provide information about the apprentice, including their name, Social Security number and the date they were hired. Companies must also provide information about the wages paid to the apprentice during their first year of employment and the number of hours the apprentice worked. In addition, businesses must include a copy of the apprentice’s certificate of completion of the apprenticeship program issued by the Kansas Board of Regents or the U.S. Department of Labor, Office of Apprenticeship. The certificate must be submitted with the claim form or within 30 days after it is issued.
Once the claim form and supporting documentation are submitted, the Kansas Department of Commerce will review the application and determine if the business is eligible for the tax credit. If approved, the credit will be applied against the business’s Kansas state income tax liability for the taxable year the claim is made.
It’s important to note that businesses cannot claim both the Kansas Apprenticeship Act tax credit and the Federal Work Opportunity Tax Credit (WOTC) for the same apprentice. Also, the tax credit is subject to available funds, so it’s important to apply early and monitor the availability of funds.
The Kansas Apprenticeship Act tax credit is an excellent opportunity for businesses to invest in their workforce while receiving financial benefits. By hiring and training apprentices, companies cannot only improve their productivity and competitiveness but also help build a stronger workforce for the future. The tax credit provides a significant incentive for businesses to participate in apprenticeship programs and can help offset training costs and wages. However, companies should ensure they meet the eligibility requirements and follow the proper procedures for claiming the tax credit. Overall, the Kansas Apprenticeship Act tax credit is a win-win for businesses and their employees, promoting economic growth and creating opportunities for career advancement.
If you would like to discuss your company’s potential for tax savings through the Kansas apprenticeship tax credit, contact an Adams Brown advisor.