WAGES Act of 2026
- Sponsor
- Rep. Moran, Nathaniel [R-TX-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- Apr 30, 2026
Bottom line
The WAGES Act incentivizes employers to invest in registered apprenticeship programs by offering a refundable payroll tax credit and provides tax benefits for apprentices receiving achievement awards.
What it actually does
This bill establishes a new refundable payroll tax credit for eligible employers who maintain or participate in registered apprenticeship programs. The credit covers 50% of qualified apprentice wages (up to $5,000 per quarter per apprentice) and registered apprenticeship program expenses (up to $50,000 per quarter, with specific sub-limits). Additionally, it modifies the tax treatment of apprenticeship achievement awards, allowing them to be excluded from an apprentice's gross income and increasing the deductible limits for employers.
Proponents argue
Supporters argue that this bill will strengthen the American economy by addressing persistent workforce shortages in high-demand industries, enhance U.S. economic competitiveness, and promote upward economic mobility for individuals without a four-year college degree. They contend that registered apprenticeship programs are a proven model for workforce development, and this credit will encourage broader employer participation by offsetting associated costs.
Opponents contend
Critics may argue that while the goal of promoting apprenticeships is laudable, a refundable payroll tax credit could lead to significant federal revenue loss and potential for fraud or administrative complexity. They might also contend that the credit may not effectively target the most critical workforce needs or that its complexity could deter smaller businesses from utilizing it, limiting its overall impact.
The bill is relatively short but contains technical tax code language and numerous definitions, requiring careful reading to understand its full scope and implications.
Section 3, adding new Section 3135 to the Internal Revenue Code
Establishment of a Refundable Payroll Tax Credit for Apprenticeship Programs
This provision creates a new tax credit for eligible employers equal to 50% of qualified wages paid to apprentices and registered apprenticeship program expenses. The credit is capped at $5,000 per qualified apprentice per calendar quarter for wages and up to $50,000 per calendar quarter for program expenses. Crucially, the credit is refundable, meaning employers can receive a payment even if their payroll tax liability is less than the credit amount.
Supporters argue
Proponents argue this credit directly addresses the findings in Section 2 by providing a strong financial incentive for employers to invest in apprenticeships, thereby strengthening the economy, addressing workforce shortages, and creating pathways to well-paying careers.
Critics contend
Opponents might argue that the credit's refundability could lead to significant federal revenue loss, and its administrative complexity might deter smaller businesses, limiting its intended broad impact on workforce development.
Tradeoffs
The provision balances the desire to provide a robust financial incentive for employers to engage in apprenticeships with the need to manage the fiscal cost to the federal budget and ensure the credit is utilized effectively.
Section 3, new Section 3135(b) and (c) of the IRC
Detailed Definitions and Financial Limitations for the Apprenticeship Credit
This section meticulously defines key terms such as 'qualified wages,' 'registered apprenticeship program expenses' (including related instruction, on-the-job learning, and mentor wages), 'eligible employer,' and 'qualified apprentice.' It also sets specific dollar limits for the credit components, such as a maximum of $5,000 per apprentice for wages and a cap on program expenses that varies based on the number of apprentices, up to $50,000 per quarter.
Section 3, new Section 3135(d)(3) and (4) of the IRC
Prevention of Duplicate Federal Benefits
This provision establishes rules to prevent 'double-dipping' by employers. It states that wages or expenses used to claim this apprenticeship credit cannot be used to claim other federal tax credits or deductions (with a specific rule for wage deductions). Furthermore, employers cannot claim this credit if they have already received other federal payments, such as those under the Workforce Innovation and Opportunity Act (WIOA), for the same qualified wages or program expenses.
Section 4, amending Section 274(j) of the IRC
Favorable Tax Treatment for Apprenticeship Achievement Awards
This section amends the tax code to treat certain apprenticeship awards as 'employee achievement awards,' which can be excluded from an apprentice's gross income and are deductible for the employer. It specifically includes awards given to apprentices for training and curriculum achievements, provided they are not received during the first 90 days of participation. The provision also increases the maximum value of such awards that can receive this favorable tax treatment, raising the general limit from $400 to $1,500 and the qualified plan award limit from $1,600 to $5,000.
This provision extends the statute of limitations for the IRS to assess any amount attributable to a credit claimed under this section to 6 years (from the standard 3 years). It also extends the period for credit or refund of any deduction for improperly claimed apprenticeship wages and expenses to align with this 6-year assessment period.
Section 3, new Section 3135(d)(7) of the IRC
Why it matters:While an extended statute of limitations is standard practice for complex tax credits to ensure program integrity, its placement in a general administrative section means its significance for employer compliance might be missed.
Case for: Proponents argue that this extended period is necessary to allow the IRS sufficient time to audit and recover improperly claimed credits, ensuring the program's integrity and deterring fraud, especially given the complexity of tracking apprenticeship programs and expenses.
Case against: Critics might argue that a 6-year assessment period creates undue uncertainty and administrative burden for employers, particularly small businesses, who must retain detailed records for a longer duration and could face audits years after the fact.
Estimated impact: Enhances the IRS's ability to recover potentially millions in improperly claimed credits over time, while increasing compliance risk and record-keeping requirements for employers.
This provision clarifies that the credit applies to third-party payors (such as Professional Employer Organizations or PEOs) but explicitly states that the customer (the employer) remains responsible for the accounting of the credit and any liability for improperly claimed credits. It also mandates that the Secretary issue regulations allowing such payors to submit necessary documentation while ensuring customer responsibility.
Section 3, new Section 3135(d)(6) and (f)(1) of the IRC
Why it matters:This is standard practice for tax credits involving third-party payroll providers to clarify liability, but the specific allocation of responsibility is crucial for employers and PEOs and could be overlooked by a casual reader.
Case for: Proponents argue this clarifies roles and responsibilities, allowing PEOs to facilitate the credit while ensuring the ultimate employer remains accountable, which is essential for preventing potential loopholes or shifting of liability.
Case against: Critics might argue that placing full liability on the customer, even when a PEO handles payroll and reporting, could deter some businesses from using PEOs to manage the credit, or could create disputes between employers and their payroll providers regarding data accuracy.
Estimated impact: Affects the operational procedures and risk management for employers using third-party payroll services and the PEO industry, clarifying who bears the ultimate financial risk for credit accuracy.