Colorado Governor Jared Polis enacted into legislation a new apprenticeship tax credit aimed at bolstering apprenticeship programs and alleviating the skilled labor shortage, particularly within small businesses.
House Bill 24-1439 introduces the Apprenticeship Tax Credit, offering significant financial incentives to qualifying Colorado employers. Under this new law, eligible businesses stand to benefit from a refundable Colorado income tax credit of up to $126,000 annually, applicable for tax years beginning on January 1, 2025, but before January 1, 2035.
Who Qualifies for the Tax Credit?
To qualify for the apprenticeship tax credit, businesses must meet the following criteria:
- Have an established registered apprenticeship program in good standing with the Colorado State of Apprenticeship Agency (SAA) or be an employer-partner of a registered apprenticeship program
- Employ fewer than 50 employees
Building and construction trades don’t qualify for the tax credit. Building and construction trade occupations are defined in Colorado Revised Statute (C.R.S) § 8-15.7-105(4):
Occupations are in the building and construction trades if either: (a) workers in the occupation perform construction, reconstruction, renovation, alteration, demolition, painting, repair, or maintenance work for roads, highways, buildings, structures, industrial facilities, or energy production, energy transmission, or energy distributions, or improvements of any type; or (b) apprentices in the apprenticeship program will be employed by licensed contractors.
Credit Amount and Limitations
The tax credit is calculated based on the duration of employment of apprentices during the income tax year. Qualifying taxpayers may claim a credit for each apprentice that’s employed for at least six months during the income tax year. The amount of credit is up to $6,300 per apprentice for the first six months of employment, and an additional $1,050 for every month thereafter, up to a maximum of $12,600 per apprentice per income tax year.
Certain limitations apply, including:
- The credit can only be claimed for a maximum of 10 apprentices per tax year
- The same apprentice cannot be claimed for more than two years
- The credit is allowable only during the months the apprentice received wages
How to Apply for the Tax Credit
Starting from tax years beginning January 1, 2025, but before January 1, 2035, businesses seeking the tax credit must submit an annual application to the SAA for credit reservation. The SAA will determine eligibility, reserve the appropriate credit amount, and issue a tax credit certificate. The agency may reserve credits for the current or future years based on the anticipated employment dates of an apprentice indicated in the application.
The aggregate amount of credit for qualified taxpayers is limited annually. If the SAA reserves the total amount of tax credits available in one year, the pending applications that didn’t receive the tax credit shall remain pending in the order received for up to two years in the event additional credits become available.
Next Steps
Employers should proactively gather documentation of their apprenticeship status with the SAA and confirm their apprenticeship program on the Colorado Registered Apprenticeship Program Directory. Qualifying taxpayers must submit documentation of each employed apprentice and dates of employment to calculate the allowable credit.
We’re Here to Help
If you have inquiries about whether your business qualifies for the Colorado apprenticeship tax credit or have questions about the tax credit and application process, contact your Moss Adams professional.
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