AN ACT CONCERNING EMPLOYMENT TAX CREDITS.

This bill makes job creation tax credits transferable, in whole or in part, to one or more taxpayers. The credits may be sold, assigned, or otherwise transferred up to three times, beginning July 1, 2009, for income years beginning on or after January 1, 2009. By law, the credit must be claimed in the income year in which the company earned it, or it expires.

EFFECTIVE DATE: July 1, 2009 and applicable to income years beginning on or after January 1, 2009.

When a transfer occurs, the seller and buyer must jointly notify the Department of Economic and Community Development (DECD) commissioner within 30 days and provide (1) the credit voucher number, (2) the transfer date, (3) the amount of credits transferred, (4) the tax credit balance before and after the transfer, (5) the tax identification numbers of both parties, and (6) any other information the commissioner requires. Violation of the notice requirement disallows the credits until the parties comply.

Although the Department of Revenue Services (DRS) grants the tax credit, the bill does not require the DECD commissioner to notify DRS of the transfer.

By law, unchanged by the bill, a taxpayer claiming a job creation tax credit is in default if the number of new employees falls below that for which it claimed credits and they are not replaced by other new employees (excluding employees transferred from another location or from a related party). The taxpayer must repay (“recapture”) the credit according to the following schedule: 90% of the credit if the company defaults after one year, 65% after two, 50% after three, and 30% after four. The DECD commissioner must give both the taxpayer and the DRS commissioner notice of the repayment amount. Presumably, the recapture provision would apply to whichever taxpayer claims the credit, including a transferee.

By law, companies that create at least 10 new jobs in the state may be allowed a tax credit of up to 60% of the state income tax withheld from the new employees' wages for up to five successive years. The credit applies against corporation, utility company, and insurance premium taxes. Total credits for all eligible companies are limited to $ 10 million per fiscal year.

Yea

Nay

(03/10/2009)