*Finance, Revenue and Bonding Committee
JOINT FAVORABLE REPORT
AN ACT ESTABLISHING A TAX CREDIT FOR EMPLOYERS THAT PROVIDE PAID FAMILY AND MEDICAL LEAVE BENEFITS AND CONCERNING FAMILY AND MEDICAL LEAVE ACCOUNTS.
Disclaimer: The following JOINT FAVORABLE Report is prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose.
SPONSORS OF BILL:
Finance, Revenue and Bonding Committee
Rep. Laura M. Devlin, 134th Dist.
Rep. Brenda L. Kupchick, 132nd Dist.
Rep. Jason Perillo, 113th Dist.
Rep. Noreen S. Kokoruda, 101st Dist.
Rep. Terrie E. Wood, 141st Dist.
REASONS FOR BILL:
To incentivize businesses to provide paid family and medical leave to eligible employees.
Specifically this bill establishes a Family Medical Leave Act (FMLA) account program and the Connecticut Family and Medical Benefit Trust, administered by the state treasurer, in order to help individuals save private funds to provide financial support during periods of a job leave allowed under the FMLA. It exempts money deposited in the trust and interest earnings on it from state and local taxation. The bill requires the treasurer to establish the terms for FMLA account program participation, including and penalties for withdrawals used for ineligible purposes. It excludes FMLA account funds in determining eligibility for specified means-tested assistance programs (e.g., the Temporary Family Assistance program.)
The bill also establishes a personal and corporate income tax credit for small employers (50 or fewer employees) that provide paid family and medical leave benefits to their employees. The credit is (1) equal to 50% of the gross wages or compensation the employer paid to employees for approved leave during the income or tax year, as applicable and (2) capped at $2.5 million in the aggregate in each fiscal year.
RESPONSE FROM ADMINISTRATION/AGENCY:
NATURE AND SOURCES OF SUPPORT:
State Representative Themis Klarides, House Republican Leader: Rep. Klarides expressed her support for the bill stating that the proposal protects businesses within the state while supporting eligible employees. This tax credit will ease the burden of providing a costly employee benefit and ensure that CT businesses, that chose to offer such a benefit, can be competitive within the hiring pool. According to Rep. Klarides by creating a Family and Medical Savings Account Program, individuals who are not provided paid family medical leave can save for and prepare for the future without possible unintended consequences of saving on their own. She goes onto explain that companies could contribute to an employee's family and medical leave savings account in a similar way to contributing to a retirement program. This program benefits both employers while not picking winners and losers on a policy level.
Eric Gjede, Counsel for CBIA: CBIA supports the bill as an alternative approach to the far more expensive and one size fits all approach to mandating paid leave. According to Mr. Gjede it encourages CT small business to add workplace flexibility by providing tax incentives for implementing their own paid leave programs. This proposal also offers businesses a choice, and if the General Assembly is committed to the policy of paid family and medical leave, the business community prefers this method of pursuing this policy.
Christy Kovel, Director of Public Policy, Alzheimer's Association CT Chapter: Ms. Kovel offered her support for the bill noting that caregivers should not face financial ruin when they need to take time off from work to care for an ill loved one, welcome a new baby, or recover from an illness. Providing a tax credit for employers that offer paid family and medical leave benefits to their employees will not only help caregivers but supports working families, improves workers retention and builds a competitive economy.
NATURE AND SOURCES OF OPPOSITION:
Gian-Carl Casa, President & CEO, The Alliance: The Alliance feels that nonprofits that contract with the State to provide essential services can only afford benefits to the extent that the state pays them for the costs. Failure to do that will mean fewer programs and fewer people receiving services that the nonprofits provide. Mr. Casa goes onto explain that this legislation aims at creating a tax credit for for-profit businesses, which nonprofits would not quality for since they are tax-exempt 501(c)(3) charitable organizations. Since the tax incentive does not apply to nonprofits (which employ 14% of the state's workforce) and many are already not able to afford to provide the benefit, they would be at a competitive disadvantage to for-profit employers that are incentivized to provide the benefit in this proposal. Nonprofit employees may seek employment at for-profit organizations offering the benefit, resulting in increased turnover which could destabilize service delivery.
Ellen Shemitz, Connecticut Voices for Children: Ms. Shemitz offered testimony on behalf of CT Voices For Children in opposition to the proposed bill. While appreciating the bill's intent to incentivize businesses to offer paid family and medical leave, Voices is concerned that this approach would incentivize this benefit only for full-time employees who receive benefits, not for hourly workers or those who work multiple part-time jobs.
Madeline Granato, Policy Manager, CWEALF: Ms. Granato offered testimony in opposition to HB 5584 noting that it will not provide sufficient coverage to Connecticut workers who need a paid leave program that is accessible, comprehensive and affordable. CWEALF seeks support for paid leave but are committed to a program that is affordable, adequate, and accessible to all workers.
Lindsay Farrell, Director, CT Working Families Party: Ms. Farrell feels that a tax credit for paid leave is worse than unhelpful. Not only does it not expand paid leave to families that need it, it also hurts the state budget. This means that employers will be paying less income tax and that will have to be offset by either a reduction in government services or an increase in taxes somewhere else.
Lori J. Pelletier, President, Connecticut AFL-CIO: While AFL-CIO believes all working men and women deserve the security of paid leave to deal with serious personal and family health issues, they don't think an employer-based tax credit guarantees that all workers have access to paid leave. Tax credits will subsidize companies that have already made investments in paid family leave. There is no evidence that additional companies will offer new paid leave benefits.
Reported by: Dawn Marzik