SB280INTRODUCED
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SB280
PMK4GER-1
By Senators Gudger, Bell, Shelnutt, Roberts, Waggoner,
Chesteen, Weaver, Stutts, Givhan, Melson, Figures,
Coleman-Madison, Stewart, Smitherman, Elliott, Hovey,
Kitchens, Price, Livingston, Reed, Butler, Allen, Carnley,
Williams, Coleman, Singleton, Sessions, Hatcher, Kelley
RFD: Finance and Taxation Education
First Read: 04-Apr-24
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9 PMK4GER-1 04/03/2024 TEW (F)TEW 2024-1394
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First Read: 04-Apr-24
SYNOPSIS:
This 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.
A BILL
TO BE ENTITLED
AN ACT
Relating to childcare and workforce development; to
establish the employer tax credit, childcare provider tax
credit, and nonprofit childcare provider grant; and to make
legislative findings.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. The Legislature hereby makes the following
findings of fact and declares its intent to be as follows:
Alabama is currently attracting and creating jobs and business
investments at a record-setting pace. Despite historically low
unemployment rates, Alabama's workforce participation rate
ranked among the lowest in the country. One possible barrier
to entering the workforce for some Alabamians is a lack of
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to entering the workforce for some Alabamians is a lack of
available, affordable, high-quality childcare. Furthermore,
the grant, and any appropriations by the Legislature in
furtherance thereof, serves a public purpose by conferring a
direct public benefit of a reasonably general character
through the promotion of public health, safety, morals,
security, prosperity, contentment, and the general welfare of
the community. The grant achieves this public purpose by
increasing the quality of childcare to the general public,
which has the effect of encouraging high-quality care and
education for children and facilitating greater workforce
participation throughout the state. It is the intent of the
Legislature, by the passage of this legislation, to encourage
more Alabamians to enter the workforce and gain employment by
improving the quality and availability of childcare options
for working parents. Accordingly, future efforts to extend or
reauthorize this act should be preceded by consideration of
the effectiveness of this legislation in achieving these
policy goals. To this end, once this legislation has had a
sufficient opportunity to be implemented and its effects
measured, but before extending or reauthorizing this act, the
Legislature should request and examine reports from: (1) the
Alabama Department of Revenue, to determine the usage of the
tax credits; and (2) from the Alabama Department of Labor and
the Alabama Department of Commerce, to determine the impact of
the tax credits on workforce participation.
Section 2. For the purposes of this article, the
following terms have the following meanings:
(1) APPLICABLE TAXES. An employer's, taxpayer's, or
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(1) APPLICABLE TAXES. An employer's, taxpayer's, or
childcare provider's, or in the case of a pass-through entity
that is an employer, taxpayer, or childcare provider, such
employer's, taxpayer's, or childcare provider's owners' taxes
as follows:
a. Taxes levied in Chapter 18 of Title 40, Code of
Alabama 1975.
b. The state portion of taxes levied in Chapter 16 of
Title 40, Code of Alabama 1975.
c. Taxes levied in Section 27-4A-3(a), Code of Alabama
1975.
d. Taxes levied in Article 2 of Chapter 21 of Title 40,
Code of Alabama 1975, not to include the freight line and
equipment tax levied in Section 40-21-52, Code of Alabama
1975.
(2) CHILD or CHILDREN. Individuals who are five years
of age or less.
(3) CHILDCARE FACILITY. A facility meeting the
definition found in Section 38-7-2(7), Code of Alabama 1975,
that is licensed by the Department of Human Resources and is
participating in the quality rating and improvement system.
(4) CHILDCARE PROVIDER. An Alabama taxpayer that owns a
childcare facility or a nonprofit entity that owns and
operates a childcare facility in Alabama.
(5) ELIGIBLE CHILD or ELIGIBLE CHILDREN. Children who
participate in the Child Care Subsidy Program administered by
the Department of Human Resources and who attend a childcare
facility operated by a childcare provider.
(6) ELIGIBLE EXPENSES. Expenses incurred by an employer
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(6) ELIGIBLE EXPENSES. Expenses incurred by an employer
for:
a. The construction, renovation, expansion, or repair
of a childcare facility, or for the purchase of equipment for
such facility, or for the maintenance and operation thereof.
b. Payments made to childcare facilities or employees
for the provision of childcare at childcare facilities for
children of employees.
c. Payments made to childcare facilities to reserve
services for children of employees.
For purposes of this definition, "childcare facility"
or "childcare facilities" shall also include a facility
meeting the definition found in Section 38-7-2(7), Code of
Alabama 1975, that is operated, directly or indirectly, by an
organization defined in Section 16-5-1(1), Code of Alabama
1975.
(7) EMPLOYEE. A resident of this state who works on a
full-time or part-time basis for an employer. An employee
shall include independent contractors engaged by an employer
and the owners of an employer that also work for such employer
on a full-time or part-time basis.
(8) EMPLOYER. A for profit business lawfully operating
in this state.
(9) EMPLOYER TAX CREDIT. A tax credit to be applied
against applicable taxes for the year in which the eligible
expenses are incurred by an employer, equal to the total
eligible expenses incurred by the employer, up to one million
dollars ($1,000,000) per year for each employer.
(10) FACILITY TAX CREDIT. A tax credit to be applied
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(10) FACILITY TAX CREDIT. A tax credit to be applied
against applicable taxes, calculated in accordance with
Section 4(a), but not exceeding twenty-five thousand dollars
($25,000) per year for each childcare facility.
(11) GRANT. A grant awarded by the Department of Human
Resources to nonprofit childcare providers for the purpose of
funding expenses related to the construction, expansion,
improvement, repair, or operation of a childcare facility or
childcare facilities, so long as such expenses are made in
furtherance of the childcare services offered at such
childcare facility and result in increased quality of care or
increased capacity for children at each applicable childcare
facility.
(12) OWNER. A shareholder, partner, or member of a
pass-through entity.
(13) PASS-THROUGH ENTITY. An Alabama S corporation or a
subchapter K entity.
(14) QUALITY RATING. The rating applicable to a
childcare facility under the quality rating and improvement
system.
(15) QUALITY RATING AND IMPROVEMENT SYSTEM. A system of
the Department of Human Resources known as the Alabama Quality
STARS program that measures the quality of childcare
facilities on a scale of one to five stars, with five stars
denoting the highest level of quality.
(16) RURAL AREA. Any Alabama county that meets the
definition of "targeted county" found in Section
40-18-376.1(a)(2), Code of Alabama 1975.
(17) SMALL BUSINESS. An employer that has fewer than 25
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(17) SMALL BUSINESS. An employer that has fewer than 25
employees.
(18) STATE. The State of Alabama.
Section 3. (a) Effective for tax years beginning on or
after January 1, 2025, and ending December 31, 2029, unless
extended by an act of the Legislature, an employer may apply
to the Department of Revenue for an employer tax credit to be
applied against applicable taxes.
(b) For the calendar year ending December 31, 2025, the
employer tax credit is limited to an aggregate amount for all
employers of fifteen million dollars ($15,000,000), which
amount shall increase to twenty million dollars ($20,000,000)
for the calendar year ending December 31, 2026; twenty-five
million dollars ($25,000,000) for the calendar year ending
December 31, 2027; thirty million dollars ($30,000,000) for
the calendar year ending December 31, 2028; and thirty-five
million dollars ($35,000,000) for the calendar year ending
December 31, 2029.
(c) The Department of Revenue shall:
(1) Provide a standardized format for, and require
completion of, a certificate to be signed by the employer
applying for the employer tax credit, certifying that the
expenses incurred by the employer were eligible expenses
incurred to support the provision of childcare at childcare
facilities for the children of employees.
(2) Require the employer to provide documentation to
substantiate to the satisfaction of the Department of Revenue
the amount of the employer tax credit applied for pursuant to
this section and that the expenses incurred by the employer
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this section and that the expenses incurred by the employer
were eligible expenses incurred to support the provision of
childcare at childcare facilities for the children of
employees.
(3) If the employer is a pass-through entity, require
that the employer identify the identity and pro rata
percentage ownership of its owners.
(d) The Department of Revenue shall award the tax
credit to the employer after the employer provides the
documentation required in subdivision (c). Failure to provide
the documentation required in subdivision (c) shall result in
the automatic denial of the employer tax credit.
Section 4. (a) Effective for tax years beginning on or
after January 1, 2025, and ending December 31, 2029, unless
extended by an act of the Legislature, a childcare provider
may apply to the Department of Revenue for a facility tax
credit to be applied against applicable taxes, in an amount
equal to the average monthly number of eligible children,
multiplied by a dollar amount which shall be based upon the
quality rating of the childcare facility as follows:
(1) Five star quality rating - two thousand dollars
($2,000) per eligible child.
(2) Four star quality rating - one thousand seven
hundred fifty dollars ($1,750) per eligible child.
(3) Three star quality rating - one thousand five
hundred dollars ($1,500) per eligible child.
(4) Two star quality rating - one thousand two hundred
fifty dollars ($1,250) per eligible child.
(5) One star quality rating - one thousand dollars
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(5) One star quality rating - one thousand dollars
($1,000) per eligible child.
(b) The facility tax credit is limited to an aggregate
amount for all childcare providers of five million dollars
($5,000,000) in a calendar year.
(c) The Department of Revenue shall:
(1) Provide a standardized format for, and require
completion of, a certificate to be completed and signed by the
childcare provider applying for the facility tax credit,
certifying each childcare provider's ownership of applicable
childcare facilities, the quality rating of each facility, and
the average number of eligible children attending each
facility monthly.
(2) Require the childcare provider to provide
documentation to substantiate to the satisfaction of the
Department of Revenue the amount of the facility tax credit
applied for pursuant to this section, the quality rating of
each applicable childcare facility, and the average number of
eligible children attending each facility monthly.
(3) If the childcare provider is a pass-through entity,
require that the childcare provider identify the identity and
pro rata percentage ownership of its owners.
(d) The Department of Revenue shall award the facility
tax credit to a childcare provider after the childcare
provider provides the documentation required in subdivision
(c). Failure to provide the documentation required in
subdivision (c) shall result in the automatic denial of the
childcare facility tax credit.
(e) The Department of Human Resources and the
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(e) The Department of Human Resources and the
Department of Revenue shall enter into a Memorandum of
Understanding as to the information necessary to permit the
Department of Revenue to effectively administer this section.
Section 5. (a) The Department of Human Resources may
make grants to nonprofit childcare providers as provided in
this section.
(b) The Department of Human Resources may establish
priorities, guidelines, standards, and processes by which
grants may be awarded.
(c) The Department of Human Resources shall require
interested nonprofit childcare providers to complete
applications on forms issued by the Department of Human
Resources which shall include at least the following:
(1) Childcare Provider ID.
(2) Licensee's name.
(3) License number.
(4) Verification of nonprofit status.
(5) A certification from the applicant nonprofit
childcare provider that will comply with any rules adopted by
the Department of Human Resources related to the grant.
(d) Failure to provide the information required by the
Department of Human Resources may result in the automatic
denial of the grant.
(e) No nonprofit childcare provider shall be eligible
to receive more than fifty thousand dollars ($50,000) under
this section during a single calendar year.
(f) The aggregate amount of funding approved pursuant
to this section shall not exceed five million dollars
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to this section shall not exceed five million dollars
($5,000,000) in a calendar year.
(g) The amount and all terms and conditions of each
grant shall be memorialized in a grant agreement between the
Department of Human Resources and the nonprofit childcare
provider, which agreement shall include at least the following
terms and conditions:
(1) The amount of the grant.
(2) The nonprofit childcare provider will use the grant
solely in accordance with this act.
(3) The nonprofit childcare provider will comply with
any rules adopted by the Department of Human Resources related
to the grant.
(4) The requirement that the default of the nonprofit
childcare provider, under any provision of the grant
agreement, shall result in the repayment of any grant monies
paid to the nonprofit childcare provider by the Department of
Human Resources.
Section 6. (a) The Department of Human Resources and
the Department of Revenue shall adopt rules as necessary, on
or before January 1, 2025, for the implementation and
administration of this article. Such rules shall ensure: (i)
that at least 25 percent of the amounts specified in Section
3(b) are reserved for awards to small businesses or employers
that are headquartered in rural areas and at least 25 percent
of the amounts specified in Section 4(b) are reserved for
awards to childcare providers operating childcare facilities
exclusively in rural areas; and that at least 25 percent of
the amounts specified in Section 5(f) are reserved for awards
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the amounts specified in Section 5(f) are reserved for awards
to nonprofit childcare providers operating the applicable
childcare facility in a rural area; (ii) that in the event the
Department of Revenue or the Department of Human Resources
does not receive applications for and thereby does not
allocate the reserved tax credits and grants by the close of
the second quarter of the calendar year, the funds may revert
for allocations to other applications; (iii) that employer tax
credits and facility tax credits shall be awarded based on the
order in which they are requested by employers and childcare
providers, respectively; and (iv) that the employer tax
credits shall not be awarded to employers who cannot
demonstrate that they prioritize the payment of eligible
expenses for the benefit of employees that are eligible for
earned income tax credit under the Internal Revenue Code of
1986 as amended, if any.
(b) Employer tax credits and facility tax credits may
only be claimed by an employer or childcare provider, or a
taxpayer who is an owner of a pass-through entity that is an
employer or childcare provider, but may not be otherwise
assigned or transferred to any other taxpayer. A taxpayer who
is an owner of a pass-through entity that is an employer or
childcare provider may only claim the pro rata share of the
employer tax credit or facility tax credit, respectively,
equal to their percentage ownership of the employer or
childcare provider.
(c) Where the applicable taxes owed by the employer or
childcare provider are less than the employer tax credit or
facility tax credit received by such entities, the employer or
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facility tax credit received by such entities, the employer or
childcare provider shall be entitled to claim a refund for the
difference but may not carry the employer tax credit or
facility tax credit forward for additional tax years. In the
case of owners of pass-through entities where the taxes owed
by such persons are less than their pro rata share of the
employer tax credit or facility tax credit received, such
persons shall be entitled to claim a refund for only the pro
rata share of the employer tax credit or facility tax credit
such persons receive in the tax year for which the employer
tax credits or facility tax credits are awarded.
(d) The Department of Revenue shall also prescribe the
various methods by which employer tax credits or facility tax
credits are to be issued to employers and childcare providers.
Refunds under subsection(c) of employer tax credits and
facility tax credits that are awarded against the taxes
referenced in Section 2(1) of this article shall be paid out
of sales tax collections made to the Education Trust Fund and
set aside by the Comptroller in the Childcare Tax Credit
Account created in subsection (e), in the same manner as
refunds of such taxes otherwise provided by law, and there is
hereby appropriated therefrom, for such purpose, so much as
may be necessary to annually pay for such tax credits as
provided by this article.
(e) There is created within the Education Trust Fund a
separate account named the Childcare Tax Credit Account for
the payment of any refunds under subsection(c) of employer tax
credits or facility tax credits awarded against the taxes
referenced in Section 2(1) of this article. The Commissioner
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referenced in Section 2(1) of this article. The Commissioner
of Revenue shall certify to the Comptroller the amount of such
tax credit refunds due to employers and childcare providers
under this section and the Comptroller shall transfer into the
Childcare Tax Credit Account only the amount from sales tax
revenues within the Education Trust Fund that is sufficient
for the Department of Revenue to use to cover the refunds for
the applicable tax year. The Commissioner of Revenue shall
distribute the funds in the Childcare Tax Credit Account to
employers and childcare providers pursuant to this article.
(f) The Alabama Department of Finance shall adopt rules
to ensure that the employer tax credit and the facility tax
credit, in any case, would not reduce the distribution for the
Alabama Special Mental Health Trust Fund by using any
unencumbered funds to ensure that the employer tax credit and
the facility tax credit shall not be limited, prevented, or
reduced.
Section 7. a) All filings and applications made with
the Department of Revenue in relation to the employer tax
credit or the facility tax credit shall be made using forms
adopted by the Department of Revenue. Such applications and
filings shall be treated as tax returns, subject to penalties
imposed by the Department of Revenue.
(b) All filings and applications made with the
Department of Human Resources in relation to the nonprofit
provider grant program shall be made using forms adopted by
the Department of Human Resources.
(c) Nothing in this article shall be construed to
constitute a guarantee or assumption by the state of any debt
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constitute a guarantee or assumption by the state of any debt
of any company nor to authorize the credit of the state to be
given, pledged, or loaned to any company.
(d) Nothing in this article shall be construed to make
available to any taxpayer any right to the benefits conferred
by this article absent strict compliance with this article.
Section 8. This act shall become effective on January
1, 2025.
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