Ohio Senate Bill 166, as enacted March 23, 2022, and amended September 23, 2022, by the 134th General Assembly, established the Tax Credit Certificate Program for Work-Based Learning Experiences (“Tax Credit Incentive Program”).
WHAT IS THE TAX CREDIT INCENTIVE PROGRAM?
The Tax Credit Incentive Program is a program designed to incentivize businesses to provide work-based learning experiences, including but not limited to internships and apprenticeships, to students in approved career-technical programs by providing a tax credit to eligible businesses that employ eligible career-technical students.
WHAT IS THE TAX INCENTIVE?
Under the Tax Credit Incentive Program, businesses that obtain a “Tax Credit Certificate” issued under Section 5747.057 of the Ohio Revised Code are eligible to receive a nonrefundable tax credit against their aggregate tax liability. The available tax credit will be the lesser of $5,000 per eligible student/employee, or 15% of the eligible compensation paid to all eligible students/employees during the calendar year, not to exceed $5,000,000 in any fiscal biennium. The first biennial period expires on June 30, 2023, and the next biennial period will run from July 1, 2023, to June 30, 2025.
WHO QUALIFIES TO PARTICIPATE IN THE TAX CREDIT INCENTIVE PROGRAM?
Any employer who is a taxpayer or a pass-through entity, such as a limited liability company, and who is subject to Ohio’s income tax and employs an “eligible employee,” is eligible to apply to the Ohio Department of Education for a Tax Credit Certificate. An “eligible employee” is an employee who is nineteen years of age or younger and enrolled in an approved career-technical program. To learn more about how to partner with students in approved career-technical pathways, contact local schools in your community or the Ohio Department of Education.
HOW DO YOU OBTAIN A TAX CREDIT CERTIFICATE?
Eligible employers can initiate the process to obtain a Tax Credit Certificate by following the application process set forth by the Ohio Department of Education. More information regarding the application and the application process can be found here. The application must be made on or after the first day of January and on or before the first day of February of each year and the information requested in the application must be for the calendar year preceding the year in which the application is made.
When completing the application, in addition to setting forth required information such as personal identifiers for the employee/student and the name, address, and contact information of the proposed employer, employers must also provide a description of the employee/student’s duties as part of the work-based learning experience. The Ohio Department of Education has identified six types of work-based experiences for employers to offer. Any one or more of the following qualifies:
- Job Site Placement and Internship – The student may be a paid employee or a non-paid intern. The student is provided with the opportunity to develop the skills necessary for the operation of the business. The work occurs off-site and can take place during school hours or when school is not in session;
- Apprenticeship and Pre-Apprenticeship – Apprentices must be at least 16 years of age, except when a higher minimum age is fixed by law, and they must be participating in an approved registered apprenticeship program to learn a skilled occupation, pursuant to a registered apprenticeship agreement;
- Remote or Virtual Placement – The work is completed outside of the business setting as a paid employee or non-paid intern. The student is provided with the opportunity to develop the skills necessary for the operation of the business;
- Entrepreneurship – The student operates individual businesses or services that align with the career field in which he or she is concentrating;
- School-Based Enterprise – The student operates individual businesses or services that align with the career field in which he or she is concentrating. The school can structure the experience as a student partnership or cooperative. The experience can occur during school hours or when school is not in session; and/or
- Simulated Work Environment – The simulated work environment gives the student the opportunity to build on more complex activities that can prepare the student for the workplace, postsecondary education, or both. Simulated work environments can occur during school hours or when school is not in session.
A more detailed explanation of the possible work-based experiences can be found here. Once the application is submitted to the Ohio Department of Education, if approved, a Tax Credit Certificate will be issued within 60 days of submission of the application. To receive the tax credit, the eligible employer must submit its tax credit certificate when filing its annual Ohio income tax return.
EMPLOYMENT LAW CONSIDERATIONS
Under Ohio law, students participating in a career-technical or STEM program approved by the Ohio Department of Education may be exempt from certain Ohio minor labor laws. The rules relating to these exemptions are very detailed and employers should apply for the exemptions only after consulting with legal counsel, as federal minor labor laws must also be considered.
If you are interested in participating in the Tax Credit Certificate Program, the attorneys at Critchfield, Critchfield & Johnston practice in the areas of business and employment law and can help ensure that you not only have the appropriate legal agreements in place but also that your proposed work-based learning experience plan is in compliance with the relevant state and federal minor labor laws.