Senate Committee Clears Tax Credit For Businesses That Provide Paid Internships

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TRENTON – A bill, which would allow companies that provide paid internships to qualified interns to claim a tax credit, was approved by the Senate Budget and Appropriations Committee Tuesday by a vote of 9-2.

“Internship programs are invaluable, not only for providing students with real-world experience in their chosen field, but also in connecting employers with potential new hires,” said Senator Joseph Vitale, D-Middlesex. “However, as a result of the global economic crisis and increased job market competition, many businesses are relying more and more on unpaid intern positions, which put middle class students and people who have to support themselves through school at a disadvantage. Through this legislation, we’re creating a tax incentive to encourage businesses to establish internship programs which benefit the greatest number of students possible.”

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The bill, S-2373, would allow a company to claim a corporate business tax (CBT) credit or gross income tax (GIT) credit for certain wages paid to qualified interns in tax year 2012 and 2013. Under the bill, a qualified intern would be defined as an individual enrolled and in good standing at a New Jersey four-year institution of higher education, a New Jersey county college, or a New Jersey accredited post secondary business, technical, trade or vocational school, who is employed and supervised in a position that provides training and experience in their chose field of study. To be eligible for tax credits, businesses must pay qualified interns at least $8.00 an hour, and the term of internship must last at least 12 weeks and include a minimum of 14 hours of service per week.

The bill would provide that businesses could claim a credit of 40 percent of the compensation paid to qualified interns, or $600 of that compensation per year, whichever is less. Under the bill, a corporate taxpayer which employees three or more qualified interns in a tax year would receive a $75 bonus per intern. The bill would limit the combined credits under both the CBT and GIT to 5,250 qualified interns or 700 participating businesses annually, whichever threshold is triggered first.

The bill is modeled after a recently enacted program known as the Philadelphia Internship Tax Credit Program, and is intended to incentivize businesses in New Jersey to establish paid internship programs, rather than unpaid internships. If the program is maxed out, it would cost the state, at most, a little more than $3.5 million a year.

“This bill would allow New Jersey’s future workforce to receive the training and skills it needs to be competitive, without opening up students to exploitation by employers who are only looking for free labor,” said Vitale. “Paid internships give students an opportunity to earn a paycheck and important professional experience, and allow employers to supplement their workforce and groom potential new hires. These programs can be immensely valuable to both sides, and hopefully, by providing tax incentives to employers, we can encourage more paid internships in the Garden State.”

The bill now heads to the full Senate for consideration.


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