Bill Would Encourage Businesses to Provide Paid Internships
TRENTON – A bill sponsored by Senators Joseph F. Vitale and Jim Whelan which would allow companies which provide paid internships to qualified interns to claim a tax credit was approved by the Senate Budget and Appropriations Committee today 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 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.”
“While unpaid internships can still hold value in terms of training a student for the practical application of their degree, these programs fail to recognize the challenges that many working class college students face,” said Senator Whelan, D-Atlantic. “With the high cost of college tuition in New Jersey, and the fact that families throughout the State are struggling to afford the basic cost of living, many students depend on part-time work in order to pay for school. By offering tax credits to employers which provide paid internships, we’re allowing hard-working college students a chance to earn a part-time salary, while at the same time allowing them to develop the skills and experience they will need to put their schooling to good use in the job market.”
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.
“Recent studies have found that 50 percent of graduating college students have held internships, with between a quarter to a half of those student interns receiving no pay for their work,” said Senator Whelan. “Internships are important for both employers and employees, because statistics also show that those who have performed internships are more likely to be hired after graduation. According to the National Association of Colleges and Employers, employers indicated that while 31 percent of their new employees came from their own internship programs, 62 percent had internship experience of some kind.”
“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 Senator 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.