Stricken language would be deleted from and underlined language would be added to present law.
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State of Arkansas 1
95th General Assembly A Bill 2
Regular Session, 2025 HOUSE BILL 1019 3
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By: Representative A. Collins 5
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For An Act To Be Entitled 8
AN ACT TO CREATE THE AFFORDABLE CHILDCARE ACT OF 9
2025; TO CREATE AN INCOME TAX CREDIT FOR EMPLOYERS 10
WHO ASSIST EMPLOYEES WITH CHILDCARE COSTS; TO REPLACE 11
THE EXISTING INCOME TAX CREDIT FOR EMPLOYER -OPERATED 12
CHILDCARE FACILITIES; AND FOR OTHER PURPOSES. 13
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Subtitle 16
TO CREATE THE AFFORDABLE CHILDCARE ACT 17
OF 2025; TO CREATE AN INCOME TAX CREDIT 18
FOR EMPLOYERS WHO ASSIST EMPLOYEES WITH 19
CHILDCARE COSTS; AND TO REPLACE THE 20
EXISTING INCOME TAX CREDIT FOR EMPLOYER -21
OPERATED CHILDCARE FACILITIES. 22
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 24
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SECTION 1. Arkansas Code Title 26, Chapter 51, Subchapter 5, is 26
amended to add an additional section to read as follows: 27
26-51-518. Affordable Childcare Act of 2025 — Employer childcare 28
assistance tax credit. 29
(a) This section shall be known and may be cited as the "Affordable 30
Childcare Act of 2025". 31
(b)(1) There is allowed an income tax credit against the income tax 32
imposed by this chapter in the amount determined under subsection (c) of this 33
section for a business that pays for or provides childcare for the dependent 34
children of its employees. 35
(2) To qualify for the income tax credit allowed under this 36 HB1019
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section, the childcare must be provided by a childcare facility that is 1
licensed under the Childcare Facility Licensing Act, § 20 -78-201 et seq. 2
(c) The income tax credit allowed under this section is allowed in 3
amounts equal to the following: 4
(1) Thirty percent (30%) of the total amount expended by a 5
business for childcare services purchased to provide care for the dependent 6
children of its employees or for the provision of the service of locating 7
childcare services for the dependent children of its employees; 8
(2)(A) In the tax year in which a facility providing childcare 9
services for use primarily by the dependent children of employees is 10
established by a business independently or in conjunction with one or more 11
other businesses, fifty percent (50%) of the total amount expended by a 12
business in the establishment and operation of the facility. 13
(B) In tax years other than the tax year in which a 14
childcare facility is established under subdivision (c)(2)(A) of this 15
section, the income tax credit allowed under this section is equal to thirty 16
percent (30%) of the total amount expended by a business for the operation of 17
a childcare facility less the amount of moneys received by the business for 18
use of the facility for childcare services; and 19
(3) Fifty percent (50%) of the total amount expended by a 20
business as payments to an organization providing access to available 21
childcare services for the business’s employees. 22
(d)(1) The credit allowed by subdivisions (c)(1) and (c)(2)(B) of this 23
section shall not exceed thirty thousand dollars ($30,000) for any business 24
during any tax year. 25
(2) The credit allowed by subdivisions (c)(2)(A) and (c)(3) of 26
this section shall not exceed forty -five thousand dollars ($45,000) for any 27
business during any tax year. 28
(e) If the amount of the income tax credit allowed under this section 29
exceeds the business's income tax liability, the excess shall be refunded to 30
the business. 31
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SECTION 2. Arkansas Code §§ 26 -51-507 and 26-51-508 are repealed. 33
26-51-507. Employer-provided child care — As qualified under former § 34
26-52-401 — Definition. 35
(a) A business which qualifies for the exemption from the gross 36 HB1019
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receipts tax under former § 26 -52-401(29) shall be allowed an income tax 1
credit of three and nine -tenths percent (3.9%) of the annual salary of 2
employees employed exclusively in providing childcare services. 3
(b) If two (2) or more businesses participate in a childcare program 4
for their employees as provided by former § 26 -52-401(29), then each business 5
will be allowed an income tax credit of three and nine -tenths percent (3.9%) 6
of the annual salary of only those employees who are on the respective 7
business' payroll and are employed exclusively for providing childcare 8
services. 9
(c)(1) To qualify for the income tax credit, the revenue to the 10
business or businesses from the childcare facility cannot exceed the direct 11
operating costs of the facility. If, on an annual basis, the childcare 12
facility receives revenue which exceeds the direct operating costs of the 13
facility, the business or businesses will not be entitled to the income tax 14
credit. 15
(2) As used in this section, “direct operating costs” means: 16
(A) The cost of food and beverages provided to the 17
children; 18
(B) The cost of labor for personnel whose services are 19
performed exclusively on the premises of the childcare facility for the care 20
of the children and all related employment taxes paid by the employer; and 21
(C) All materials and supplies necessary to operate the 22
childcare facility. 23
(d) The income tax credit created by subsection (a) of this section 24
shall first be available in the taxable year following the year the business 25
makes payment of wages to childcare workers. To the extent that the credit is 26
not fully utilized in this first year, it may be carried forward for an 27
additional two (2) years. Any credit remaining thereafter shall expire. 28
(e) The income tax provisions of this section shall be in full force 29
and effect for all income tax years beginning on and after January 1, 1993. 30
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26-51-508. Employer-provided child care — As qualified under § 26 -52-32
516 or § 26-53-132 — Definition. 33
(a) A business which qualifies for the refund of the gross receipts 34
tax or compensating use tax under § 26 -52-516 or § 26-53-132 shall be allowed 35
an income tax credit of three and nine -tenths percent (3.9%) of the annual 36 HB1019
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salary of its employees employed exclusively in providing childcare service, 1
or a five-thousand-dollar income tax credit for the first tax year the 2
business provides its employees with a childcare facility. 3
(b) If two (2) or more businesses participate in a childcare program 4
for their employees as provided by § 26 -52-516 or § 26-53-132, then each 5
business will be allowed an income tax credit of three and nine -tenths 6
percent (3.9%) of the annual salary of only those employees who are on the 7
respective business' payroll and are employed exclusively for providing 8
childcare services. The first year's five -thousand-dollar credit will be 9
prorated among the businesses based upon the percentage of the cost paid by 10
each business for the initial construction and equipping of the childcare 11
facility. 12
(c)(1)(A) To qualify for the income tax credit, the revenue to the 13
business or businesses from the childcare facility cannot exceed the direct 14
operating costs of the facility. 15
(B) If, on an annual basis, the business receives revenues 16
from the operation of the childcare facility which exceed the direct 17
operating costs of the facility, the businesses will not be entitled to the 18
income tax credit. 19
(2) As used in this subsection, “direct operating costs” means: 20
(A) The cost of food and beverages provided to the 21
children; 22
(B) The cost of labor for personnel whose services are 23
performed exclusively on the premises of the childcare facility for the care 24
of the children and all related employment taxes paid by the employer; and 25
(C) All materials and supplies necessary to operate the 26
childcare facility. 27
(d) The income tax credit created by subsection (a) of this section 28
shall first be available in the taxable year following the year the business 29
makes payment of wages to childcare workers. To the extent that the credit is 30
not fully utilized in this first year, it may be carried forward for an 31
additional two (2) years. Any credit remaining thereafter shall expire. 32
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SECTION 3. EFFECTIVE DATE. Sections 1 and 2 of this act are effective 34
for tax years beginning on or after January 1, 2025. 35
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