WAGES Act of 2026

Overview

• Bill: S.4463 (WAGES Act of 2026)
• Purpose: Amend the Internal Revenue Code to provide a payroll tax credit for employer wages and other eligible expenses paid or incurred for apprenticeship programs.
• Introduced: April 30, 2026 by Senator Todd Young (co-sponsor: US Senate)
• Status: Referred to the Senate Committee on Finance

Main goal and intent

• Expand employer participation in registered apprenticeship programs by offering a refundable or partially refundable credit against applicable employment taxes.
• Lower the net cost of developing and maintaining apprenticeship programs for employers, thereby addressing persistent skills gaps in high-demand sectors.

Key provisions

1) Apprenticeship Credit (new Sec. 3135)

• Eligible Employers: Any employer with a registered apprenticeship program or that enters into a written agreement to adhere to apprenticeship standards, and that employs a qualified apprentice.
• Credit amount: 50% of the sum of:
  • Qualified wages paid to each qualified apprentice in the calendar quarter
  • Registered apprenticeship program expenses paid or incurred in the calendar quarter
• Qualified wages:
  • Wages paid for services by a qualified apprentice while participating in the registered program
  • Excludes wages after two years from a apprentice starting participation
  • Includes certain health plan expense allowances allocated to employees
• Registered apprenticeship program expenses (non-wage costs):
  • Related instruction (training courses, etc.)
  • On-the-job learning expenses
  • Mentor wages (subject to limits)
  • Development, registration, and maintenance costs of the program
  • Contributions to a sponsor under collective bargaining agreements to support the program
• Limits and interaction with other credits:
  • Wages for a qualified apprentice per calendar quarter: capped at $5,000
  • Expenses taken into account per calendar quarter: capped at the greater of $5,000 or the lesser of:
  • $2,500 per qualified apprentice employed that quarter, or
  • $50,000
  • Credit cannot exceed the employer’s applicable employment taxes (as reduced by other credits)
  • Excess credit in a quarter is refundable as an overpayment per tax refund rules
• Eligible employment taxes defined
  • Includes the taxes under section 3111(b) and a portion of section 3221(a) tied to the 3111(b) rate
• Definitions:
  • Qualified apprentice: employee of an eligible employer participating in a registered apprenticeship program, with specific entry and certification requirements within the first 90 days of probationary employment
  • Registered apprenticeship program: federally registered program meeting standards of parts 29 and 30 of title 29 CFR
  • Eligible employer: meets program participation criteria and employs a qualified apprentice
  • Qualified wages: wages paid for the apprentice’s service in the program, limited by the 2-year participation rule; includes health plan allowances allocated pro rata
  • Registered apprenticeship program expenses: non-wage program costs including mentor wages, instruction, on-the-job-learning costs, development/maintenance costs, and sponsor payments under certain agreements
  • Mentor wages: wages paid to journeyworkers for mentoring/supervising apprentices, limited by a cap of $10,000 per quarter per employee providing mentorship
• Third-party payors: Credits may be utilized by third-party payors (e.g., PEOs) and treated as credits under existing mechanisms; documentation requirements to substantiate program expenses
• Coordination and anti-avoidance:
  • No double benefit with other federal credits or deductions
  • Rules to prevent improper deduction or avoidance of the apprenticeship credit
• Special rules:
  • Aggregation: Treat related entities as a single taxpayer for credit purposes
  • Governmental employers: Excludes federal/state governments, with certain carve-outs for specific nonprofits or higher-education/health institutions
  • Extension of assessment period: Credit-related assessments may extend up to 6 years after the filing date of the return related to the calendar quarter
  • Deposits: Secretary may waive penalties for deposits if failure was due to reasonable anticipation of the credit
• Effective date: Applies to wages paid and program expenses paid or incurred for calendar quarters beginning after enactment

2) Apprenticeship Awards (Sec. 4)

• Apprenticeship awards treated as employee achievement awards if given in connection with registered program
• Revisions to employer award tax treatment:
  • Adjusts conditions for what qualifies as non-wage “achievement awards” related to apprenticeships
  • Increases the cap on certain employee achievement awards (from existing limits to higher thresholds: $1,500 for typical plan awards and $5,000 for qualified plan awards)
• Effective date: Applies to awards transferred after enactment

3) Administrative and Miscellaneous Provisions

• Notice provisions: Labor Department to coordinate with Treasury to inform employers about the availability of the apprenticeship credit
• Clerical amendments: Adds a new Sec. 3135 to the subchapter D table of sections
• Regulatory guidance: Secretary to issue regulations and forms, coordinating with the Department of Labor, including rules for third-party payors and preventing avoidance

Who would be affected

• Primary: Private-sector employers that operate or enter into registered apprenticeship programs and hire qualified apprentices
• Affected groups include: employers in construction, manufacturing, health care, IT, logistics, energy, agriculture, hospitality, and other sectors with skilled labor needs
• Third-party payors (e.g., PEOs and related entities) facilitating apprenticeship arrangements
• Apprentices themselves (through potential increased training opportunities and wage support)

Procedural and timeline notes

• Effective for calendar quarters beginning after enactment date
• The credit availability depends on quarterly calculations and limits; excess credits refundable
• The act involves coordination between the Treasury/IRS and the Department of Labor for implementation and enforcement
• Potential interaction with existing federal workforce programs (credit not allowed if funding received from WIOA or other federal sources)

Summary

The WAGES Act of 2026 creates a new federal payroll tax credit (Section 3135) for employers that invest in registered apprenticeship programs. The credit covers 50% of qualified apprentice wages and eligible apprenticeship program expenses, subject to quarterly caps and overall tax-credit limitations tied to employment taxes. It aims to reduce barriers to implementing apprenticeships by subsidizing wages, instructional costs, mentoring, and related program expenses, while ensuring alignment with National Apprenticeship Act standards and preventing double benefits. The bill also expands the tax treatment of apprenticeship awards, increasing limits for certain employee achievement awards related to apprenticeship participation. Overall, the act seeks to incentivize employer-sponsored training pathways, promoting workforce development across high-demand sectors.