Should the government provide a targeted tax credit to small-business owners who
conduct two- to four-year training programs in highly skilled trades?
Why it's important
All authoritative bodies including the U.S. Department of Labor agree
that a severe labor shortage will affect the service industries indefinitely unless
action is taken. NRCA is attempting to solve this problem in several ways. For example,
NRCA recently launched a pilot program with a federal Job Corps training facility
in New York. With more than 100 Job Corps facilities across the country, NRCA hopes
to expand the program. Congress also must support initiatives to ensure that an
adequate pool of skilled workers is available. The Skilled Workforce Enhancement
Act (SWEA) (HR 877) is a proposal that would update the outdated tax deduction (Internal
Revenue Code (IRC) Section 162) for training programs with a simplified tax credit
that addresses the current worker shortage.
HR 877 was introduced by Rep. Mark Foley (R-Fla.), a member of the House Ways and
Means Committee, with 46 bipartisan co-sponsors. The bill will allow a targeted
tax credit to small-business owners who provide long-term training to apprentices
in highly skilled trades, including the roofing industry. The credit will amount
to $15,000 per employee per year for up to four years for qualified programs. To
qualify, a program must be two years to four years long. The training must total
at least 1,500 hours per year and include classroom instruction. SWEA defines a
small-business owner as one who employs 250 people or fewer per year.
NRCA supports SWEA because it will help relieve the acute shortage of skilled workers
in the roofing industry; it will benefit roofing contractors; and it is a logical
extension of federal tax policy, IRC Section 162. For decades, IRC Section 162 has
given preferential treatment to union and open-shop employer training program costs.
Employee-training expenses are deductible from corporate income if they qualify
as ordinary and necessary business expenses as opposed to capital expenses, which
are not deductible. SWEA will update federal tax policy for training skilled workers
and will be available to union and open-shop employers, similar to IRC Section162.
The other side
The AFL-CIO's Building and Construction Trades Department (BCTD) is opposed to SWEA
because union training programs do not receive preferential tax treatment. However,
under a 1958 Revenue Ruling (58-238) under IRC Section 162, "contributions made
by the employer to the joint apprenticeship and training fund, pursuant to a collective
bargaining agreement, constitute business expenses deductible from income." Opponents
of SWEA also believe only training programs registered with the Bureau of Apprenticeship
and Training or State Apprenticeship Councils should qualify for SWEA's tax credit.