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Virtual Apprenticeship Tax Credit Act Of 1019: The Contemporary Tax Journal



Virtual Apprenticeship Tax Credit Act Of 1019: The Contemporary Tax Journal

Tax Policy Analysis
H.R. 4286 (116th Congress) – Virtual Apprenticeship Tax Credit Act of 2019

Representative Ted Budd recently introduced the Virtual Apprenticeship Tax Credit Act of 2019 in September 11, 2019. This proposal would add IRC section 45T to provide taxpayers a credit
for 30 percent of the qualified virtual training expenses paid or incurred during the tax year, up to $2,500 tax credit per year.

What is a Virtual Apprenticeship?

Students who may not live close to college or be able to physically attend classes can enroll in the virtual apprenticeship program to develop skills that align with the continually changing
workforce. The virtual apprenticeship program provides an engaging experience in a virtual environment for job training and professional development. The qualified virtual training expenses related to the virtual apprenticeship program can generate a 30 percent credit. H.R. 4286 defines these expenses as “related to developing or expanding an industry-recognized
virtual apprenticeship program for elementary and secondary school students.”

What is the Purpose of H.R. 4286?

There are millions of Americans who are unemployed even though there are many jobs that remain unfilled. Many employers struggle to find employees with the necessary skills. Most students obtain a four-year degree, but they still graduate without the skills that employers want. There are not many alternative options for post-high school graduates except earning an associate’s or bachelor’s degree. To resolve this issue, Rep. Budd proposed the Virtual Apprenticeship Tax Credit Act of 2019 to encourage employers to provide virtual apprenticeship programs to students while in grades K to 12:

I introduced this bill with the hope of incentivizing businesses to invest in the recruitment and training of a stronger and more competent workforce for future generations. By offering a tax credit to employers who invest in the funding of virtual apprenticeship programs, more diverse learning options will be available to students from all backgrounds.2

How Does This Bill Work?

Under H.R.4286, any business that develops or expands an industry-recognized virtual apprenticeship program for elementary or secondary school students can get a virtual apprenticeship tax credit. This general business credit is equal to 30 percent of the qualified virtual training expenses paid or incurred during the taxable year, limited to a credit of $2,500 per year. There is no double benefit allowed so these expenses cannot generate any other deduction or credit, up to the virtual training credit claimed.

Application of Principles of Good Tax Policy

The following section applies the twelve principles of good tax policy to Virtual Apprenticeship Tax Credit Act of 2019 by MST students. These principles were laid out in the AICPA’s Tax Policy Concept Statement No.1-Guiding Principles of Good Tax Policy: A Framework for Evaluation of Tax Proposal.3

Principals of Good Tax Policy

PRINCIPLES OF GOOD TAX POLICY 1

PRINCIPLES OF GOOD TAX POLICY 1

PRINCIPLES OF GOOD TAX POLICY 2

PRINCIPLES OF GOOD TAX POLICY 2

PRINCIPLES OF GOOD TAX POLICY 3

PRINCIPLES OF GOOD TAX POLICY 3

PRINCIPLES OF GOOD TAX POLICY 3

PRINCIPLES OF GOOD TAX POLICY 3

Summary

H.R. 4286 only satisfies five out of the twelve principles of good tax policy. The virtual apprenticeship program might help students save on education-related costs and provide more educational opportunities. The proposal might increase the productive capacity of the economy by better ensuring a ready workforce for the future. When thousands of people have jobs, the
consumption ability will increase. Government can collect more taxable income because of higher economic growth.

Some changes can be made to meet more principles. For example, all terms should be defined in the new rule to reduce uncertainty.

Also, most people do not know what a virtual apprenticeship is and the benefit of providing them to K to 12 students and why a tax credit is a good technique for creating these programs relative to other approaches. Presenting data on these matters can help the proposal meet the accountability to taxpayers’ principle. In addition, to better meet the equity principle, more
taxpayers should be eligible for the credit.

VIEW ORIGINAL ARTICLE, CHARTS AND FOOTNOTES

By: San Jose University MST Students in BUS 223A Tax Research Class for Fall 2019, Under Direction Of Professor Annette Nellen

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Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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