Train employees? You may qualify for a corporate income tax credit

If you spend money on employee training — and what company doesn’t these days? — CBIA’s tax expert, Santa Mendoza, offers this reminder: Besides deducting the training costs as a business expense, you may be able to claim a credit against Connecticut’s corporate income tax. 

For income year 1999, the state’s Human Capital Investment Credit is 4% of eligible expenses. (The credit will rise to 5% next year.)

To qualify, the job-training expenses must have been incurred in Connecticut for people employed in this state. Some eligible expenses are:
• the cost of hiring a training instructor (only costs directly related to the training qualify; indirect costs such as the trainer’s overhead do not qualify);
• the cost of training materials used as part of the employee’s training;
• the cost of the training facility (not including depreciation expenses);
• training course registration fees;
• tuition reimbursement paid to a Connecticut institution of higher learning; and
• travel costs within Connecticut.

The employee’s salary while in training does not qualify, nor do payroll taxes or fringe benefits costs.

Credit covers more than training 

Besides covering in-state job training expenses, the Human Capital Investment Credit may be applied for these other types of expenditures:
• wages for hiring public high-school students enrolled in state-approved work-education programs;
• donations or capital contributions to institutions of higher education in Connecticut that are clearly and specifically earmarked for the advancement of technology research or technology-related curriculum programs;
• child-care subsidies paid to employees in Connecticut; and
• planning, construction or renovation of a day-care facility in Connecticut.

Other corporate tax credits to note

CBIA’s Mendoza points out three other corporate tax credits a small business might want to take advantage of:
• Companies with 250 or fewer employees in Connecticut can take a 10% credit for increased investment in machinery and equipment.
• Companies with less than $5 million in gross receipts can take a 100% credit for SBA loan guarantee fees paid.
• Any company (not just a small business) can take a credit equal to 100% of property taxes paid on electronic data processing hardware, peripheral equipment and software.

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