What is the Kansas Apprenticeship Act tax credit for employers?

Plain-English summary

Kansas Notice 23-04 explains the Kansas Apprenticeship Act, created by 2023 House Bill 2292 (Sections 1-6). Section 3 creates a Kansas income tax credit for eligible employers that employ apprentices under a registered apprenticeship agreement and program. (Eligible employers include for-profit, nonprofit, and healthcare employers, as defined in Section 2.)

Credit for tax years 2023-2025 (Section 3(a)). For tax years commencing after December 31, 2022 and ending before January 1, 2026, an eligible employer that employs an apprentice through at least part of the probationary period (and still employs the apprentice when it is completed) may claim a credit of up to $2,500 per apprentice, for up to 20 apprentices per year. The exact amount comes from a scale -- reflecting the wages and other investment in the apprentice -- that the Secretary of Revenue sets with the Secretary of Commerce. The credit may be claimed for the same apprentice no more than four times (across up to three successive following years).

Credit for tax years after 2025 (Section 3(b)). For tax years commencing after December 31, 2025, the credit is up to $2,750 per apprentice (up to 20 per year) where the employer employs the apprentice for a continuous period of at least 25% of the required apprenticeship time, taken in the year after the requirement is met and for up to four successive years for one apprentice.

Extra credit for younger apprentices (Section 3(c)). In addition to the Section 3(b) credit, an employer may claim up to $500 more per apprentice (for up to 10 apprentices a year) if the apprentice is enrolled in a secondary or postsecondary career-and-technical education program, is under 18 when the credit is claimed, has been employed at least 90 days, and participates in a qualifying federally funded program (Carl D. Perkins Act or Workforce Innovation and Opportunity Act programs).

Limits (Section 3(d)). The credits are not refundable or transferable, but may be claimed pro-rata by owners of eligible pass-through entities. The aggregate of all these credits may not exceed $7,500,000 each year, and the aggregate of the credits plus related grants under Section 4 may not exceed $10,000,000 each year. Employers must enter an agreement with the Secretary of Commerce on employment or training goals, and the Secretary of Commerce must certify the employer met the requirements before a credit is allowed.

What this means for you

Employers who hire apprentices

• If you employ apprentices under a registered apprenticeship program, you can claim a Kansas income tax credit of up to $2,500 per apprentice (tax years 2023-2025) or up to $2,750 (2026 on), for up to 20 apprentices a year.
• For younger apprentices in qualifying career-technical or workforce programs, you may add up to $500 per apprentice for up to 10 apprentices.
• The credit is not refundable or transferable, and you must have an agreement with, and certification from, the Secretary of Commerce.
• Watch the statewide caps ($7.5 million for credits, $10 million including grants) -- credits are awarded on approval.

Pass-through owners and tax professionals

• Owners of eligible pass-through entities can claim the credit on a pro-rata basis.
• The credit is available starting with tax years commencing after December 31, 2022; track the four-times-per-apprentice limit and the certification requirement.

Common questions

How much is the credit? Up to $2,500 per apprentice for tax years 2023-2025 and up to $2,750 for tax years after 2025, for up to 20 apprentices per year, plus up to $500 more for up to 10 qualifying younger apprentices.

Is it refundable or transferable? No, but owners of pass-through entities may claim it pro-rata.

When can employers start claiming it? For tax years commencing after December 31, 2022.

What must an employer do first? Enter an agreement with the Secretary of Commerce and be certified as meeting the requirements before the credit is allowed.

Is there an overall cap? Yes -- $7,500,000 per year for the credits, and $10,000,000 per year for credits plus related grants.

Citations and references

• House Bill 2292 (2023), Sections 1-6 -- the Kansas Apprenticeship Act; Section 3 creates the income tax credits described above.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 23-04

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 23-04

                          KANSAS APPRENTICESHIP ACT TAX CREDIT

                                       (JULY 17, 2023)

  During the 2023 Legislative Session House Bill 2292 was passed and signed into law.

Section 1 provides that sections 1 through 6 of the Bill may be cited as the Kansas apprenticeship
act. Section 2 provides definitions, and Section 3 creates income tax credits for certain eligible
employers who employ an apprentice.

  Section 2 provides definitions for the terms (a) "Act", (b) "Apprentice"; (c) "Apprenticeship

agreement", (d) "Apprenticeship program"; (e) "Eligible employer"' (f) "Eligible nonprofit
employer, (g) "Eligible healthcare employer", (h) "Intermediary"; (i) "Registered apprenticeship
agreement"; (j) "Registered apprenticeship program"; (k) "Secretary"; and (l) "Sponsor".

  Section 3(a)(1) creates an income tax credit for tax years commencing after December 31,

2022, and ending before January 1, 2026, for eligible employers that employ an apprentice
pursuant to a registered apprenticeship agreement and in accordance with a registered
apprenticeship plan for at least all or a portion of the probationary period and employs the
apprentice at the time such probationary period is completed. Specifically, the Section provides:

         Section 3(a)(1). For tax years commencing after December 31, 2022, and ending
   before January 1, 2026, a credit shall be allowed against the income tax liability
   imposed upon an eligible employer pursuant to the Kansas income tax act that employs
   an apprentice pursuant to a registered apprenticeship agreement and in accordance with
   a registered apprenticeship plan for at least all or a portion of the probationary period,
   as defined for that apprenticeship in the registered apprenticeship program standards,
   work process schedule otherwise known as appendix A or as designated by the
   secretary, and so employs the apprentice at the time such probationary period is
   completed. The tax credit shall be claimed by such eligible employer for the taxable
   year in which the apprentice completed the probationary period while employed by
   such eligible employer or the taxable year next succeeding the calendar year in which
   the apprentice completed the probationary period while employed by such eligible
   employer, as determined by the secretary and set forth in the agreement with the
   secretary pursuant to subsection (d). Subsequent credits may be claimed for up to three
   successive calendar years, or portions thereof, next succeeding the date on which the
   probationary period of the apprentice was met, by any eligible employer who
   subsequently employs such apprentice in all or a portion of such year. Such credit shall
   be claimed by the eligible employer for the taxable year in which the apprentice was
   employed or the taxable year next succeeding the calendar year in which the apprentice
   was employed as determined by the secretary and set forth in the agreement with the
   secretary as provided by subsection (d). The amount of the credit shall be up to $2,500,
   as determined pursuant to paragraph (2), for each apprentice so employed and may be

 awarded for up to 20 apprentices employed in each taxable year per eligible employer.
 The credit shall not be awarded for employment of the same apprentice more than four
 times.

 Section 3(a)(2) provides the Secretary of Revenue, in consultation with the Secretary of

Commerce, shall establish a scale reflecting ranges of wages and other expenditures an eligible
employer has invested in an apprentice and a corresponding tax credit amount. The credit shall be
awarded in accordance with the scale, after approval and issuance pursuant to Section 3(d).

   Section 3(b) creates an income tax credit for tax years commencing after December 31, 2025,

for eligible employers that employ an apprentice pursuant to a registered apprenticeship agreement
in accordance with a registered apprenticeship plan for a continuous period of time constituting at
least 25% of the apprenticeship time-period required by the registered apprenticeship program.
Specifically, the Section provides:

       Section 3(b). For tax years commencing after December 31, 2025, a credit shall
 be allowed against the income tax liability imposed upon an eligible employer pursuant
 to the Kansas income tax act that employs an apprentice pursuant to a registered
 apprenticeship agreement and in accordance with a registered apprenticeship plan for
 a continuous period of time constituting at least 25% of the apprenticeship time period
 required by the registered apprenticeship program. The credit shall be taken in the tax
 year next succeeding the calendar year in which the employment requirement to claim
 the credit is met. The credit may subsequently be taken in successive tax years based
 on up to a cumulative total of four successive calendar years of employment for an
 individual apprentice. The amount of the credit shall be up to $2,750 for each
 apprentice employed, not to exceed 20 such credits for apprenticeships in any taxable
 year per eligible employer. The secretary may authorize a credit for employment of
 less than a full calendar year pursuant to rules and regulations adopted by the secretary
 of commerce. The credit shall be approved and issued pursuant to subsection (d).

 Section 3(c)(1) provides a credit to an eligible employer, in addition to the credit provided

by Section 3(b), if the apprentice:

 (A) Is enrolled in a secondary or postsecondary career and technical education
     program;
 (B) is under 18 years of age at the time the credit is claimed;
 (C) has been employed by the eligible employer for at least 90 days; and
 (D) is participating in:
     (i) An apprenticeship program registered with the secretary and funded
           through the Carl D. Perkins career and technical education act of 2006,
           public law 109-270, as revised by the strengthening career and technical
           education for the 21st century act, public law 115-224;
     (ii) an adult basic education and literacy program funded under title II of the
           workforce innovation and opportunity act, public law 113-128; or
     (iii) a public workforce program funded under title I and title III of the workforce
           innovation and opportunity act, public law 113-128.

 Section 3(c)(2) provides the additional credit shall not exceed $500 for each apprentice and

may be claimed for no more than 10 apprentices in a tax year, after approval and issuance pursuant
to Section 3(d).

  Section 3(d)(1) provides the credits in subsections (a), (b), and (c) shall not be refundable or

transferable. They may be claimed on a pro-rata basis by owners of eligible pass-through entities.

  The aggregate amount of all credits for all eligible employers shall not exceed $7,500,000

each year. The aggregate amount of all tax credits for all eligible employers issued under Section
3 in addition to all grants awarded pursuant to Section 4 shall not exceed $10,000,000 each taxable
year.

 Section 3(d)(2) require the eligible employer to enter into an agreement with the Secretary

of Commerce regarding conditions and attainment of specified employment or training goals for
allowance of credits.

  Section 3(d)(3) requires submission of required information in the manner and form required

by the Secretaries of Revenue and Commerce, and provides the Secretary of Commerce must
certify the eligible employer as having met the requirements for the credit to the Secretary of
Revenue prior to a credit being allowed.

 Section 3(e) provides participation in an apprenticeship program is not union affiliation.

  Section 3(f) permits adoption of rules and regulations by either the Secretary of Commerce

or the Secretary of Revenue

 Section 3(g) requires the Secretary of Commerce to make an annual report to the Legislature.

 As stated in the statutory language above, the apprenticeship credits will be available to, and

may be claimed by eligible employers, starting with tax years commencing after December 31,
2022.

                                  TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                               Taxpayer Assistance Center
                              Kansas Department of Revenue
                              Scott Office Building, 1st Floor
                                     120 SE 10th Ave
                                      P. O. Box 3506
                                 Topeka, KS 66601-3506
                                   Phone: 785-368-8222
                                    Fax: 785-291-3614