Alabama 2023 Regular Session

Alabama Senate Bill SB273 Compare Versions

Only one version of the bill is available at this time.

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1	1	SB273INTRODUCED
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3	3	E01X92-1
4	4	By Senator Gudger
5	5	RFD: Finance and Taxation Education
6	6	First Read: 02-May-23
7	7	2023 Regular Session
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13	13	6 E01X92-1 04/18/2023 TEW (F)TEW 2023-1637
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15	15	SYNOPSIS:
16	16	This bill creates the employer tax credit and
17	17	child care facility tax credit to incentivize employers
18	18	to fund child care for their employees and provide for
19	19	more readily available, affordable, high quality child
20	20	care.
21	21	A BILL
22	22	TO BE ENTITLED
23	23	AN ACT
24	24	Relating to child care and workforce development; to
25	25	establish the employer tax credit and child care provider tax
26	26	credit; to make legislative findings.
27	27	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
28	28	Section 1.Legislative findings and declaration of
29	29	intent. The Legislature hereby makes the following findings of
30	30	fact and declares its intent to be as follows: Alabama is
31	31	currently attracting and creating jobs and business
32	32	investments at a record-setting pace. Despite historically low
33	33	unemployment rates, Alabama's workforce participation rate
34	34	ranked among the lowest in the country. One possible barrier
35	35	to entering the workforce for some Alabamians is a lack of
36	36	available, affordable, high-quality child care. It is the
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66	66	intent of the Legislature, by the passage of this legislation,
67	67	to encourage more Alabamians to enter the workforce and gain
68	68	employment by improving the quality and availability of child
69	69	care options for working parents. Accordingly, future efforts
70	70	to extend or reauthorize this act should be preceded by
71	71	consideration of the effectiveness of this legislation in
72	72	achieving these policy goals. To this end, once this
73	73	legislation has had a sufficient opportunity to be implemented
74	74	and its effects measured, but before extending or
75	75	reauthorizing this act, the Legislature should request and
76	76	examine reports from the Alabama Department of Revenue, to
77	77	determine the usage of the tax credits, and the Alabama
78	78	Department of Labor and the Alabama Department of Commerce, to
79	79	determine the impact of the tax credits on workforce
80	80	participation.
81	81	Section 2. For the purposes of this article, the
82	82	following terms have the following meanings:
83	83	(a) APPLICABLE TAXES. An employer or child care
84	84	provider’s or, in the case of a pass-through entity that is an
85	85	employer or child care provider, such employer or child care
86	86	provider’s owners’, taxes as follows:
87	87	(1) Taxes levied in Chapter 18 of Title 40.
88	88	(2) The state portion of the taxes levied in Chapter 16
89	89	of Title 40.
90	90	(3) Taxes levied in subsection (a) of Section 27-4A-3.
91	91	(4) Taxes levied in Article 2 of Chapter 21 of Title
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93	93	(b) CHILD or CHILDREN. Individuals who are five years
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123	123	of age or less.
124	124	(c) CHILD CARE FACILITY. A facility meeting the
125	125	definition found in Section 38-7-2(7), Code of Alabama 1975,
126	126	which is licensed by the Department of Human Resources and is
127	127	participating in the quality rating and improvement system.
128	128	(d) CHILD CARE PROVIDER. A taxpayer that owns a child
129	129	care facility.
130	130	(e) ELIGIBLE CHILD or ELIGIBLE CHILDREN. Children who
131	131	participate in the Child Care Subsidy Program administered by
132	132	the Department of Human Resources and who attend a child care
133	133	facility operated by a child care provider.
134	134	(f) ELIGIBLE EXPENSES. Expenses incurred by an employer
135	135	for:
136	136	(1) The construction, renovation, expansion, or repair
137	137	of a child care facility, or for the purchase of equipment for
138	138	such facility, or for the maintenance and operation thereof.
139	139	(2) Payments made to child care facilities or employees
140	140	for the provision of child care at child care facilities for
141	141	children of employees.
142	142	(3) Payments made to child care facilities to reserve
143	143	services for children of employees.
144	144	(g) EMPLOYEE. A resident of this state who works on a
145	145	full-time or part-time basis for an employer including, but
146	146	not limited to independent contractors engaged by an employer
147	147	and the member or members of a limited liability company that
148	148	work for an employer.
149	149	(h) EMPLOYER. A business with an employee or employees.
150	150	(i) EMPLOYER TAX CREDIT. A refundable tax credit to be
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180	180	applied against applicable taxes for the year in which such
181	181	eligible expenses are incurred by an employer, equal to the
182	182	total eligible expenses incurred by such employer, up to one
183	183	million dollars ($1,000,000) per year for each employer.
184	184	(j) FACILITY TAX CREDIT. A refundable tax credit to be
185	185	applied against applicable taxes, calculated in accordance
186	186	with subsection (a) of Section 4 of this article, but not
187	187	exceeding twenty-five thousand dollars ($25,000) per year for
188	188	each child care facility.
189	189	(k) OWNER. A shareholder, partner, or member of a
190	190	pass-through entity.
191	191	(l) PASS-THROUGH ENTITY. An Alabama S corporation or a
192	192	subchapter K entity.
193	193	(m) QUALITY RATING. The rating applicable to a child
194	194	care facility under the quality rating and improvement system.
195	195	(n) QUALITY RATING AND IMPROVEMENT SYSTEM. A system of
196	196	the Department of Human Resources which is known as the
197	197	Alabama Quality STARS program and which measures the quality
198	198	of child care facilities on a scale of one to five stars, with
199	199	five stars denoting the highest level of quality.
200	200	(n) QUALITY RATING. The rating applicable to a child
201	201	care facility under the quality rating and improvement system.
202	202	(o) RURAL AREA. Any area within this state not included
203	203	within the boundaries of any incorporated city or town having
204	204	a population in excess of 25,000 inhabitants, according to the
205	205	last federal census.
206	206	(p) STATE. The State of Alabama.
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235	235	Section 3. (a) Effective for tax years beginning on or
236	236	after January 1, 2024, and ending December 31, 2028, unless
237	237	extended by an act of the Legislature, an employer may apply
238	238	to the Department of Revenue for an employer tax credit to be
239	239	applied against applicable taxes.
240	240	(b) The employer tax credit is limited to an aggregate
241	241	amount for all employers of fifteen million dollars
242	242	($15,000,000) annually.
243	243	(c) The Department of Revenue shall:
244	244	(1) Provide a standardized format for, and require
245	245	completion of, a certificate to be completed and signed by the
246	246	employer applying for the employer tax credit, certifying that
247	247	the expenses incurred by the employer were eligible expenses
248	248	incurred to support the provision of child care at child care
249	249	facilities for the children of employees.
250	250	(2) Require the employer to provide documentation to
251	251	substantiate to the satisfaction of the Department of Revenue
252	252	the amount of the employer tax credit applied for pursuant to
253	253	this section and that the expenses incurred by the employer
254	254	were eligible expenses incurred to support the provision of
255	255	child care at child care facilities for the children of
256	256	employees.
257	257	(3) If the employer is a pass-through entity, require
258	258	that the employer identify the identity and pro rata
259	259	percentage ownership of its owners.
260	260	(d) The Department of Revenue shall award the employer
261	261	tax credit to the employer after the employer provides the
262	262	documentation required in subsection (c) of this section.
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292	292	Failure to provide the documentation required by subsection
293	293	(c) shall result in the automatic denial of the employer tax
294	294	credit.
295	295	Section 4. (a) Effective for tax years beginning on or
296	296	after on January 1, 2024, and ending December 31, 2028, unless
297	297	extended by an act of the Legislature, a child care provider
298	298	may apply to the Department of Revenue for a facility tax
299	299	credit to be applied against applicable taxes, in an amount
300	300	equal to the average monthly number of eligible children,
301	301	multiplied by a dollar amount which shall be based upon the
302	302	quality rating of such child care facility as follows:
303	303	(1) Five star quality rating - $2,000 per eligible
304	304	child.
305	305	(2) Four star quality rating - $1,750 per eligible
306	306	child.
307	307	(3) Three star quality rating - $1,500 per eligible
308	308	child.
309	309	(4) Two star quality rating - $1,250 per eligible
310	310	child.
311	311	(5) One star quality rating - $1,000 per eligible
312	312	child.
313	313	(b) The facility tax credit is limited to an aggregate
314	314	amount for all child care providers of five million dollars
315	315	($5,000,000) annually.
316	316	(c) The Department of Revenue shall:
317	317	(1) Provide a standardized format for, and require
318	318	completion of, a certificate to be completed and signed by the
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349	349	certifying each child care provider’s ownership of applicable
350	350	child care facilities, the quality rating of each such
351	351	facility, and the average number of eligible children
352	352	attending each such facility monthly.
353	353	(2) Require the child care provider to provide
354	354	documentation to substantiate to the satisfaction of the
355	355	Department of Revenue the amount of the facility tax credit
356	356	applied for pursuant to this section, the quality rating of
357	357	each applicable child care facility, and the average number of
358	358	eligible children attending each such facility monthly.
359	359	(3) If the child care provider is a pass-through
360	360	entity, require that the child care provider identify the
361	361	identity and pro rata percentage ownership of its owners.
362	362	(d) The Department of Revenue shall award the facility
363	363	tax credit to a child care provider after the child care
364	364	provider provides the documentation required in subsection
365	365	(c). Failure to provide the documentation required by
366	366	subsection (c) shall result in the automatic denial of the
367	367	child care facility tax credit.
368	368	Section 5. (a) The Department of Revenue shall adopt
369	369	rules on or before January 1, 2024, for the implementation and
370	370	administration of this bill. Such rules shall ensure that the
371	371	employer tax credit and facility tax credit would not, in any
372	372	case, reduce the distribution for the Alabama Special Mental
373	373	Health Trust Fund by using any unencumbered funds; that at
374	374	least 25 percent of the amounts specified in subsection (b) of
375	375	Section 3 are reserved for some period for awards to employers
376	376	headquartered in rural areas and at least 25 percent of the
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406	406	amounts specified in subsection (b) of Section 4 are reserved
407	407	for some period for awards to child care providers operating
408	408	child care facilities exclusively in rural areas; and that
409	409	employer tax credits and facility tax credits shall be awarded
410	410	based on the order in which they are requested by employers
411	411	and child care providers, respectively.
412	412	(b) Employer tax credits and facility tax credits may
413	413	only be claimed by an employer or child care provider,
414	414	respectively, or a taxpayer who is an owner of a pass-through
415	415	entity that is an employer or child care provider,
416	416	respectively, but may not be otherwise assigned or transferred
417	417	to any other taxpayer. A taxpayer who is an owner of a
418	418	pass-through entity that is an employer or child care provider
419	419	may only claim the pro rata share of the employer tax credit
420	420	or facility tax credit, respectively, equal to their
421	421	percentage ownership of the employer or child care provider.
422	422	(c) Where the applicable taxes owed by the employer or
423	423	child care provider are less than the employer tax credit or
424	424	facility tax credit received by such entities, the employer or
425	425	child care provider shall be entitled to claim a refund for
426	426	the difference, but may not carry the employer tax credit or
427	427	facility tax credit forward for additional tax years. In the
428	428	case of owners of pass-through entities, where the taxes owed
429	429	by the persons are less than their pro rata share of the
430	430	employer tax credit or facility tax credit received by such
431	431	persons, such persons shall be entitled to claim a refund for
432	432	only the pro rata share of the employer tax credit or facility
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461	461	tax credit they receive in the tax year for which the employer
462	462	tax credits or facility tax credits are awarded.
463	463	(d) The Department of Revenue shall also prescribe the
464	464	various methods by which employer tax credits or facility tax
465	465	credits are to be issued to employers and child care
466	466	providers. Refunds under Section 5(c) of employer tax credits
467	467	and facility tax credits that are awarded against the taxes
468	468	referenced in Section 2(a)(1) of this article shall be paid
469	469	out of sales tax collections made to the Education Trust Fund
470	470	and set aside by the State Comptroller in the Child Care Tax
471	471	Credit Account created in subsection (e), in the same manner
472	472	as refunds of such taxes otherwise provided by law, and there
473	473	is hereby appropriated therefrom, for such purpose, so much as
474	474	may be necessary to annually pay for such tax credits as
475	475	provided by this article.
476	476	(e) There is created within the Education Trust Fund a
477	477	separate account named the Child Care Tax Credit Account for
478	478	the payment of any refunds under Section 5(c) of employer tax
479	479	credits or facility tax credits awarded against the taxes
480	480	referenced in Section 2(a)(1) of this article. The
481	481	Commissioner of Revenue shall certify to the State Comptroller
482	482	the amount of such tax credit refunds due to employers and
483	483	child care providers under this section and the State
484	484	Comptroller shall transfer into the Child Care Tax Credit
485	485	Account only the amount from sales tax revenues within the
486	486	Education Trust Fund that is sufficient for the Department of
487	487	Revenue to use to cover the refunds for the applicable tax
488	488	year. The Commissioner of Revenue shall distribute the funds
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518	518	in the Child Care Tax Credit Account to employers and child
519	519	care providers pursuant to this article.
520	520	Section 6.(a) All filings and applications made with
521	521	the Department of Revenue in relation to the employer tax
522	522	credit and the child care tax credit shall be made using forms
523	523	adopted by the Department of Revenue. Such applications and
524	524	filings shall be treated as tax returns, subject to penalties
525	525	imposed by the Department of Revenue.
526	526	(b) Nothing in this article shall be construed to
527	527	constitute a guarantee or assumption by the state of any debt
528	528	of any company nor to authorize the credit of the state to be
529	529	given, pledged, or loaned to any company.
530	530	(c) Nothing in this article shall be construed to make
531	531	available to any taxpayer any right to the benefits conferred
532	532	by this article absent strict compliance with this article.
533	533	Section 7. This act shall become effective on the first
534	534	day of the third month following its passage and approval by
535	535	the Governor, or its otherwise becoming law.
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