Governor Ned Lamont recently signed into law a new tax incentive program for employers which he describes as a “targeted, earn-as-you-grow incentive program for businesses to expand in or relocate to Connecticut.”
Previously a grant program, the new JobsCT rebate program provides refundable tax credits for companies in certain industries that create and retain at least 25 jobs in a given year. FML is working with employers to determine if they qualify and to take the steps to claim this credit.
Does your business qualify for the JobsCT rebate program?
The first criteria to look at is your industry. To qualify for the JobsCT credit, a company must be doing business in Connecticut related to:
- Bioscience
- Clean energy
- Digital media
- Finance
- Insurance
- Manufacturing
- or any similar industry approved by the Connecticut Department of Economic and Community Development (DECD)
Next, the company needs to be on a hiring spree. Eligible taxpayers must add at least 25 new or discretionary full-time employees (FTEs) to qualify for the credit. They all have to be on board by December 31 in a given year starting with 2021. Then those employees have to be kept on board at least 2 years before taxpayers can start claiming the credit, which can be claimed for up to 7 years.
These have to be fairly high-paying jobs as well. To count toward the 25 FTE minimum, a new employee must earn 85 percent of the median household income for the municipality where the FTE position is primarily located or $37,500, whichever is higher. On average in CT, 85 percent of the median household income is $67,877 based on 2020 census data, though it’s much higher or lower in certain towns.
There are some restrictions to keep in mind as well.
- Employees added through a merger or acquisition don’t count
- Nor do people who were employed by a controlled affiliate in the year before the company applies for the credit
- Restoring jobs that already existed in CT before the pandemic doesn’t count either
Once the criteria has been met (and there are many more nuances not covered here), how is the credit claimed and what does it amount to?
Applying for and claiming the JobsCT tax credit
DECD provides a form to apply for the credit. If accepted, for tax years beginning on or after January 1, 2023, qualified businesses can claim a credit against corporation business or pass-through entity tax liability, or an offset against insurance premium tax liability.
The rebate is funded by a portion of the income tax revenue generated by the new FTEs. The amount of the credit a company can claim equals 25 percent of the income tax that the new FTEs it used to apply to the program would pay. That amount is doubled if the FTEs are in an opportunity zone or distressed municipality. The minimum credit per new FTE is $2,000 for each new FTE for credits earned, claimed or payable before January 1, 2024; and $1,000 for each new FTE for credits earned, claimed or payable on or after January 1, 2024. There is a $5,000 per year cap for each FTE. The credit is refundable if it exceeds the company’s tax liability.
This can add up. Imagine a company that hired 25 new qualifying FTEs and retains them for 9 years. The company could potentially claim a credit of $8,000 per employee years 3-9, totaling $200,000 over that span.
Reporting and record keeping requirements
By January 31 of each year, a company claiming the credit must report the number of new FTEs created or maintained during the previous calendar year and the wages they’re earning.
If your business may be eligible for JobsCT, please don’t hesitate to contact me or my FML colleagues to assist.
