March 26, 2018

CT’s smaller producers retrying for apprenticeship tax credit

Photo | Contributed
Photo | Contributed
Workers on the shop floor at Waterbury’s Noujaim Tool Co., which has had success with its apprenticeship program.
Gregory Seay

Connecticut's small- and mid-size manufacturers are trying again to persuade state lawmakers and the governor to grant them access to a tax credit open to larger producers that train apprentices on their shop floors.

Senate Bill 261 would extend the state's manufacturing apprenticeship tax credit to so-called "pass-through entities.'' This is, observers say, at least the third legislative attempt in five years at adopting a measure that many state producers say would make it less costly and less risky for them to hire, train and retain new workers.

The Connecticut Business & Industry Association (CBIA) and Waterbury Regional Chamber have aligned with individual manufacturers, encouraging passage of the bill now pending in the Commerce Committee.

The measure essentially would allow investors in, or owners of, small- to mid-size manufacturers set up as pass-through entities to claim as a credit against their Connecticut income-tax returns a portion of their companies' investments in apprenticeship training.

"It's something manufacturers have been asking for for some years now,'' said David Krechevsky, policy director for the Waterbury Regional Chamber of Commerce, whose members include many Naugatuck Valley manufacturers.

Both chambers of the state legislature embraced a similar measure two to three years ago, but Gov. Dannel P. Malloy vetoed it, citing concerns about its impact on the state's revenue.

Tax credits typically reduce the volume of taxes collected by municipalities, states and the federal government.

"They think it will open the floodgates for anyone to start looking for exemptions that they can put on their income taxes,'' said Melissa Biggs, a lobbyist for small- and mid-size manufacturers, including the New Haven Manufacturers Association, under the umbrella of the Connecticut Association of Smaller Manufacturers.

Both associations' members, who support the tax-credit expansion, are primarily suppliers and subcontractors to many of Connecticut's top manufacturers, including the aeroparts and building-systems divisions of United Technologies Corp., plus Electric Boat and Kaman Corp.

But while state law allows those so-called "C-corporations" to take a credit against their corporate income taxes for each apprentice they hire and train, manufacturers with 100 or fewer workers, and organized as S-corporations, limited-liability companies or partnerships, cannot.

CBIA lobbyist Eric Brown said the apprenticeship program "is one of the most successful things going on to try to address the [manufacturing] labor shortage in Connecticut."

Last year, an estimated 3.5 million U.S. manufacturing jobs, including thousands in Connecticut, were unfilled, according to government data.

While S.B. 261 would expand the population of manufacturers eligible for the apprentice-training tax credit, eligible companies and their investors would be limited in the number of apprentices who qualify for the credit.

Currently, the limit is one apprentice for each certified machinist, tool-and-die maker or other qualified journeyman trade, up to a maximum of two apprentices, said the Waterbury Chamber's Krechevsky.

To qualify for a third apprentice, eligible manufacturers must have three or more certified tradespeople on staff.

Waterbury machine-shop Executive Vice President Selim G. Noujain is a former state representative who says he backed the 2016 tax-credit expansion effort.

Noujain says the state's concerns about the revenue impact of expanding the apprenticeship-training tax credit to pass-throughs overlooks the positive impacts from more of its residents gainfully employed.

For instance, he says his family's Noujaim Tool Co. Inc. spends $2,000 a month to provide health coverage to each of its workers and their families.

If they were jobless, Noujain said, the state likely would have to bear the healthcare costs for those households.

One lingering concern among smaller manufacturers is the persistent poaching of their staffs by larger companies that exploit the training apprentices get at small shops with higher pay and benefits and career opportunities.

Biggs says some manufacturers fret that, if S.B. 261 passes, public lists of participants in the apprenticeship program would make them more vulnerable to poachers.

But Noujaim says his company has put 12 workers through its apprenticeship program — all of whom are still there.

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