In early May, Gov. Kay Ivey signed the “Working for Alabama” legislative package, which includes HB358, the child care tax credit bill that legislators say will help increase the state’s low labor force participation rate.
Here are five things to know about the bill:
1. The bill creates the employer tax credit, childcare facility tax credit, and nonprofit childcare provider grant program to incentivize employers to fund childcare for their employees and to enable childcare providers to offer more readily available, affordable, high-quality childcare.
2. The employer tax credit allows employers to receive a tax credit equal to 75% of eligible expenses incurred for childcare, up to $600,000 per year for each employer. Small businesses are eligible for a tax credit equal to 100% of eligible expenses.
3. The childcare facility tax credit allows childcare providers to receive a tax credit based on the quality rating of their facility and the number of eligible children attending. The tax credit ranges from $1,000 to $2,000 per eligible child.
4. Nonprofit childcare providers can apply for grants from the Department of Human Resources for expenses related to the construction, expansion, improvement, repair, or operation of a childcare facility. The maximum grant amount is $50,000 per year.
5. The Department of Revenue and the Department of Human Resources will establish rules and guidelines for the implementation and administration of the tax credits and grants. These rules will ensure that a portion of the funding is reserved for small businesses, employers in rural areas, and nonprofit childcare providers operating in rural areas.
