NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB-522

SOURCES OF INFORMATION

Taxation and Revenue Department

State Department of Education

SUMMARY

Synopsis of HTRC Amendment

The HTRC amendments place administrative responsibility with the School to Work Office of the Department of Finance and Administration rather than under the State Department of Education. The school-to-work office operates 17 school-to-work regional partnerships. (The State Department of Education had suggested the administrative shift.) The HTRC amendment also sunsets the bill one year earlier than was originally proposed. The legislation is now repealed in 2002 rather than in 2003.

The HTRC amendments do not alter the expected fiscal impacts.

Synopsis of Bill

HB 236 would create a new credit under the Personal Income Tax and the Corporate Income Tax. The purpose of the credit is to encourage businesses to hire youth participating in certified school-to-career programs.

Sections 1 & 2: Section 1 creates the credit under the Personal Income Tax and Section 2 creates the credit under the Corporate Income Tax. The Taxation and Revenue Department would allocate 1,000 personal income tax certificates and 1,000 corporate income tax certificates each year to the Superintendent of Public Education. The certificates would serve as evidence for a taxpayer's eligibility for the tax credit. Each of the Sections have the following requirements.

• The credit is limited to 50% of the gross wages paid to a qualified student participating in a certified school-to-work program. A qualified student is between 14 and 21 years of age.



• The maximum aggregate credit per business shall not exceed 50% of the gross wages paid to no more than 10 qualified students employed for up to 320 hours in a taxable year.



• The total credit cannot exceed $12,000.00 per year and can only be used to offset the tax liability of the taxpayer. Any unused portion may be carried forward for three years.
• The program would be a pilot program. The maximum number of certificates allowed would be limited to no more than 1,000.




Section 3 proposes a temporary provision which would allow any unused credit to be carried forward a maximum of three years from the date the credit arose even though the credit has been repealed.





There is no effective date. Therefore, it is presumed to be 90 days after adjournment (May 20, 1998). This proposal would apply to taxable years beginning on or after January 1, 1999, and has a delayed repeal of January 1, 2002, except for the temporary provision.





FISCAL IMPLICATIONS





The Taxation and Revenue Department has estimated that the tax credit would reduce general fund revenues by $824 thousand if the program is attractive to employers. The estimate is based on the assumptions that there are a total of 1000 student employees who work for the allowed 320 hours at the minimum wage of $5.15 per hour. The estimate shown in the table assumes the program does work as intended.





ADMINISTRATIVE IMPLICATIONS





The Taxation and Revenue Department stated that limiting the administrative impact on the department depends primarily on resolving certain technical issues. They say that if these technical issues are resolved, the administrative impact on the department would be noticeable but could be accommodated within existing resource levels. Tax form changes, development of a certification form, data processing system changes and procedural changes could be accomplished for the first year at a cost of about $9,000, depending on what other changes are enacted for the tax year. Ongoing costs would be relatively small unless there were a substantial number of taxpayers with unapplied carry-forward tax credits. (See Taxation and Revenue Department FIR for a complete discussion of technical issues.





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Attachment