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Minnesota businesses could get a tax credit for sending workers back to school

In these days of “the Big Quit,” when workers are leaving their jobs in record numbers, what can a business do to find qualified employees to fill open positions?

Perhaps they are currently on the company’s staff. But the key word is “qualified,” and those workers may need more education to move into a particular position. And that costs money.

A tax credit might make that more palatable to a business. Such as the one proposed by Rep. Kristin Robbins (R-Maple Grove) in HF3564.

It would establish a tax credit against the individual income tax and corporate franchise tax equal to 50% of training costs paid by an employer. It would be limited to $750 per employee, and be capped at $100,000 per qualified employer.

On Thursday, the House Taxes Committee laid the bill over for possible omnibus bill inclusion after it was amended to include language that would limit eligibility to employees earning $92,231 or less per year. Its Senate companion, SF3334, sponsored by Sen. Carla Nelson (R-Rochester), awaits action by the Senate Taxes Committee.

“This bill focuses on Minnesota’s most important asset, our workers,” Robbins said. “It will improve profitability and competitiveness for Minnesota’s businesses. As we’ve all heard from our state demographer, we are in a significant 15-year period with flat growth in population.

“The lack of long-term growth predicted over the next 10 years is tied to structural issues like low birth rates and low migration rates. We need to focus on human capital development to drive increasing economic performance. It’s less about job creation and more about improving talent and the productivity of our workforce.”

Eligible training expenses would include tuition and fees, instructor salaries, training materials and supplies, and textbooks. Training could be provided directly by the employer, a contracted third party, or educational institution.

The Department of Revenue estimates that the tax credit would result in a reduction in the General Fund of $120.1 million during fiscal year 2023, increasing to $121.8 million in fiscal year 2024.

“This will help small businesses train employees,” said John Reynolds, state director of the National Federation of Independent Businesses. “Shortages exist across the board. Almost half of small employers said they had positions they couldn’t fill. Many are taking chances on younger workers and those returning to the workforce. A tax credit is a simple way for them to recoup some of the cost.”

The bill would require eligible training expenses claimed as a federal deduction and used to claim the credit to be added back into taxable income for the purposes of calculating tax liability.

“Slow population and labor force growth will continue for the next decade or so,” added Beth Kadoun, vice president of tax and fiscal policy for the Minnesota Chamber of Commerce. “As we won’t be growing the workforce, the best thing we can do is invest in the skills of the workers we have.”

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