Committee hears plan for tax credit to support prison industries workforce development

The Senate Industry and Business Committee heard testimony in support of Senate Bill 2261, a proposal that would create a limited tax credit intended to encourage private manufacturers to subcontract certain components or work to Roughrider Industries (the state prison industries program) and to study how prison industries can coordinate with private sector manufacturers without unfair competition.

Andrea Finney of the Greater North Dakota Chamber said manufacturers employ roughly 27,000 North Dakotans and face workforce shortages; she and other supporters described SB2261 as a way to expand workforce training and on-the-job exposure for incarcerated individuals while limiting direct competition with private manufacturers. The bill includes a study component to identify where subcontracting or complementary production could be aligned and whether statutory or administrative clarifications are needed.

Roughrider Industries Director Rick Gardiner described current operations and customers, saying the program employs roughly 170 participants across facilities and that biennial gross revenues through the current biennium are approximately $10.1 million. Gardiner said the program already works with private companies under the federal Prison Industry Enhancement Certification Program (PIECP) where prevailing-wage and other federal rules allow subcontracting to private businesses; he also described common product lines (dumpsters, metal fabrication, furniture components) and noted local companies such as DuraTech, Bismarck Canvas, Olympic Sales and Waste Co. as existing partners.

Tax department staff advised the committee on administration: because the bill proposes a statewide cap on credits (the draft set a $45,000 per calendar-year cap per applicant and $90,000 across a two-year period), the department would need an application and year-end reconciliation process similar to other capped credits (for example, the state’s automation tax credit) to determine final approved credit amounts if demand exceeds the cap. The commissioner’s office recommended calendar-year accounting and an upfront application process to ensure taxpayers know the amount of credit they may claim when they file returns.

Committee members asked that staff and sponsors add language to the study or drafting instructions to address predictable implementation issues: whether the cap should be annual and how the application process would be administered; how the program can expand capacity; and whether statutory clarification or an Attorney General opinion is needed about private-sector subcontracting. Sponsors and staff said they would work with the Tax Commissioner and committee counsel to refine application and cap language before returning to the committee.

Why it matters

Supporters emphasized job training and recidivism reduction. Gardiner provided a three-year recidivism figure for Roughrider participants of 8.6% compared with a department-wide recidivism rate cited at 37.2%; using the department estimate of roughly $54,000 to house an incarcerated person, Gardiner calculated notable fiscal savings tied to reduced returns to prison.

Next steps

Sponsors will work with the Tax Commissioner to draft application and cap-administration language and to incorporate study parameters that address coordination with private manufacturers and potential statutory clarifications. The committee did not vote on SB2261 in this hearing.