Arkansas 2025 Regular Session

Arkansas House Bill HB1435 Compare Versions

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

Old	New	Differences
1	1	Stricken language would be deleted from and underlined language would be added to present law.
2	2	JLL149 02/07/2025 10:49:26 AM JLL149
3	3	State of Arkansas 1
4	4	95th General Assembly A Bill 2
5	5	Regular Session, 2025 HOUSE BILL 1435 3
6	6	4
7	7	By: Representative Achor 5
8	8	By: Senators J. English, Irvin 6
9	9	7
10	10	For An Act To Be Entitled 8
11	11	AN ACT TO AMEND THE LAW CONCERNING INCOME TAX CREDITS 9
12	12	RELATED TO CHILD CARE; TO AMEND THE INCOME TAX CREDIT 10
13	13	FOR EMPLOYER-PROVIDED CHILD CARE; TO PROVIDE AN 11
14	14	INCOME TAX CREDIT FOR LICENSED CHILDCARE PROVIDERS; 12
15	15	TO DECLARE AN EMERGENCY; AND FOR OTHER PURPOSES. 13
16	16	14
17	17	15
18	18	Subtitle 16
19	19	TO AMEND THE LAW CONCERNING INCOME TAX 17
20	20	CREDITS FOR CHILD CARE; TO AMEND THE 18
21	21	INCOME TAX CREDIT FOR EMPLOYER -PROVIDED 19
22	22	CHILD CARE; TO PROVIDE AN INCOME TAX 20
23	23	CREDIT FOR LICENSED CHILDCARE PROVIDERS; 21
24	24	AND TO DECLARE AN EMERGENCY. 22
25	25	23
26	26	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 24
27	27	25
28	28	SECTION 1. Arkansas Code § 6 -45-109(b), concerning certification of 26
29	29	childcare facilities by the Division of Child Care and Early Childhood 27
30	30	Education, is amended to read as follows: 28
31	31	(b) Upon certification of the childcare facilities, the division shall 29
32	32	provide a listing of all certified facilities and their certification numbers 30
33	33	to the Secretary of the Department of Finance and Administration for the 31
34	34	purpose of the income tax credit or refund provided for in § § 26-51-502 and 32
35	35	26-51-507. 33
36	36	34
37	37	SECTION 2. Arkansas Code § 20 -78-205(d)(1)(I), concerning the 35
38	38	information the Division of Child Care and Early Childhood Education shall 36 HB1435
39	39
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41	41	make available on the website of the Department of Human Services, is amended 1
42	42	to read as follows: 2
43	43	(I) Availability of a federal or state tax credit or other 3
44	44	federal or state tax benefit, including without limitation the employer -4
45	45	provided child care credit that is available to taxpayers under § § 26-51-507 5
46	46	and 26-51-508. 6
47	47	7
48	48	SECTION 3. Arkansas Code § 26 -51-507 is repealed. 8
49	49	26-51-507. Employer-provided child care — As qualified under former § 9
50	50	26-52-401 — Definition. 10
51	51	(a) A business which qualifies for the exemption from the gross 11
52	52	receipts tax under former § 26 -52-401(29) shall be allowed an income tax 12
53	53	credit of three and nine -tenths percent (3.9%) of the annual salary of 13
54	54	employees employed exclusively in providing childcare services. 14
55	55	(b) If two (2) or more businesses participate in a childcare program 15
56	56	for their employees as provided by former § 26 -52-401(29), then each business 16
57	57	will be allowed an income tax credit of three and nine -tenths percent (3.9%) 17
58	58	of the annual salary of only those employees who are on the respective 18
59	59	business' payroll and are employed exclusively for providing childcare 19
60	60	services. 20
61	61	(c)(1) To qualify for the income tax credit, the revenue to the 21
62	62	business or businesses from the childcare facility cannot exceed the direct 22
63	63	operating costs of the facility. If, on an annual basis, the childcare 23
64	64	facility receives revenue which exceeds the direct operating costs of the 24
65	65	facility, the business or businesses will not be entitled to the income tax 25
66	66	credit. 26
67	67	(2) As used in this section, “direct operating costs” means: 27
68	68	(A) The cost of food and beverages provided to the 28
69	69	children; 29
70	70	(B) The cost of labor for personnel whose services are 30
71	71	performed exclusively on the premises of the childcare facility for the care 31
72	72	of the children and all related employment taxes paid by the employer; and 32
73	73	(C) All materials and supplies necessary to operate the 33
74	74	childcare facility. 34
75	75	(d) The income tax credit created by subsection (a) of this section 35
76	76	shall first be available in the taxable year following the year the business 36 HB1435
77	77
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79	79	makes payment of wages to childcare workers. To the extent that the credit is 1
80	80	not fully utilized in this first year, it may be carried forward for an 2
81	81	additional two (2) years. Any credit remaining thereafter shall expire. 3
82	82	(e) The income tax provisions of this section shall be in full force 4
83	83	and effect for all income tax years beginning on and after January 1, 1993. 5
84	84	6
85	85	SECTION 4. Arkansas Code § 26 -51-508 is amended to read as follows: 7
86	86	26-51-508. Employer-provided child care — As qualified under § 26 -52-8
87	87	516 or § 26-53-132 — Definition Definitions. 9
88	88	(a) A business which qualifies for the refund of the gross receipts 10
89	89	tax or compensating use tax under § 26 -52-516 or § 26-53-132 shall be allowed 11
90	90	an income tax credit of three and nine -tenths percent (3.9%) of the annual 12
91	91	salary of its employees employed exclusively in providing childcare service, 13
92	92	or a five-thousand-dollar income tax credit for the first tax year the 14
93	93	business provides its employees with a childcare facility. 15
94	94	(b) If two (2) or more businesses participate in a childcare program 16
95	95	for their employees as provided by § 26 -52-516 or § 26-53-132, then each 17
96	96	business will be allowed an income tax credit of three and nine -tenths 18
97	97	percent (3.9%) of the annual salary of only those employees who are on the 19
98	98	respective business' payroll and are employed exclusively for providing 20
99	99	childcare services. The first year's five -thousand-dollar credit will be 21
100	100	prorated among the businesses based upon the percentage of the cost paid by 22
101	101	each business for the initial construction and equipping of the childcare 23
102	102	facility. 24
103	103	(c)(1)(A) To qualify for the income tax credit, the revenue to the 25
104	104	business or businesses from the childcare facility cannot exceed the direct 26
105	105	operating costs of the facility. 27
106	106	(B) If, on an annual basis, the business receives revenues 28
107	107	from the operation of the childcare facility which exceed the direct 29
108	108	operating costs of the facility, the businesses will not be entitled to the 30
109	109	income tax credit. 31
110	110	(2) As used in this subsection, “direct operating costs” means: 32
111	111	(A) The cost of food and beverages provided to the 33
112	112	children; 34
113	113	(B) The cost of labor for personnel whose services are 35
114	114	performed exclusively on the premises of the childcare facility for the care 36 HB1435
115	115
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117	117	of the children and all related employment taxes paid by the employer; and 1
118	118	(C) All materials and supplies necessary to operate the 2
119	119	childcare facility. 3
120	120	(d) The income tax credit created by subsection (a) of this section 4
121	121	shall first be available in the taxable year following the year the business 5
122	122	makes payment of wages to childcare workers. To the extent that the credit is 6
123	123	not fully utilized in this first year, it may be carried forward for an 7
124	124	additional two (2) years. Any credit remaining thereafter shall expire. 8
125	125	(a) As used in this section: 9
126	126	(1) "Eligible expense" means: 10
127	127	(A) The cost of construction, renovation, expansion, or 11
128	128	repair of a childcare facility by a taxpayer to provide childcare services 12
129	129	for the employees of the taxpayer; 13
130	130	(B) A payment to a childcare facility licensed by the 14
131	131	Department of Human Services for the provision of childcare services for one 15
132	132	(1) or more employees of the taxpayer; 16
133	133	(C) A payment to a childcare facility licensed by the 17
134	134	Department of Human Services to reserve childcare services for one (1) or 18
135	135	more employees of the taxpayer; and 19
136	136	(D)(i) Fifty percent (50%) of the amount contributed by an 20
137	137	employer for dependent care assistance provided to an employee of the 21
138	138	employer under a dependent care assistance program as described in 26 U.S.C. 22
139	139	§ 129, as it existed on January 1, 2025. 23
140	140	(ii) The total amount of eligible expenses allowed 24
141	141	under subdivision (a)(1)(D)(i) of this section shall not exceed two thousand 25
142	142	five hundred dollars ($2,500) per employee of the employer that benefits from 26
143	143	a dependent care assistance program during the tax year; 27
144	144	(2) "Rural area" means an area in the state that is not within 28
145	145	the boundaries of an incorporated town or a city that has a population of 29
146	146	more than twenty-five thousand (25,000) according to the most recent federal 30
147	147	decennial census; and 31
148	148	(3) "Small business" means a business that has: 32
149	149	(A) Fewer than two hundred fifty (250) employees; and 33
150	150	(B) Less than five million dollars ($5,000,000) in yearly 34
151	151	revenue. 35
152	152	(b)(1)(A) There is allowed an income tax credit against the income 36 HB1435
153	153
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155	155	tax imposed by this chapter in the amount equal to the eligible expenses 1
156	156	incurred by an employer during the tax year. 2
157	157	(B) The income tax credit allowed under this section shall 3
158	158	not exceed five hundred thousand dollars ($500,000) for an employer in a tax 4
159	159	year. 5
160	160	(2)(A) The total aggregate amount of income tax credits allowed 6
161	161	under this section for all employers shall not exceed fifteen million dollars 7
162	162	($15,000,000) in a calendar year. 8
163	163	(B)(i) Three million seven hundred fifty thousand dollars 9
164	164	($3,750,000) of the total aggregate amount of income tax credits that may be 10
165	165	allowed under subdivision (b)(2)(A) of this section shall be reserved for the 11
166	166	award of income tax credits to small businesses and employers that have their 12
167	167	primary place of business located in a rural area. 13
168	168	(ii) The remaining amount of income tax credits that 14
169	169	may be allowed under subdivision (b)(2)(A) of this section shall be awarded 15
170	170	to employers without regard to their location or size. 16
171	171	(c) The amount of the income tax credit under this section that may be 17
172	172	claimed by an employer in a tax year shall not exceed the amount of income 18
173	173	tax due by the employer. 19
174	174	(d)(1) To claim an income tax credit under this section, an employer 20
175	175	shall submit an application for the tax year to the Department of Finance and 21
176	176	Administration using the form required under subdivision (d)(2)(A) of this 22
177	177	section. 23
178	178	(2) The Department of Finance and Administration shall: 24
179	179	(A) Prepare and provide a standardized form for an 25
180	180	employer to use to apply for the income tax credit allowed under this 26
181	181	section; 27
182	182	(B) Require an employer submitting an application under 28
183	183	this section to: 29
184	184	(i) Certify that the expenses for which the employer 30
185	185	is claiming a credit under this section are eligible expenses; and 31
186	186	(ii) Provide documentation to substantiate the 32
187	187	amount of eligible expenses for which the employer is claiming a credit under 33
188	188	this section; and 34
189	189	(C)(i) Subject to the limitations stated in this section, 35
190	190	award an income tax credit under this section to an employer that submits a 36 HB1435
191	191
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193	193	completed application on the required form and provides the certification and 1
194	194	documentation required under this section. 2
195	195	(ii) If an applicant for an income tax credit under 3
196	196	this section fails to submit a completed application on the required form or 4
197	197	fails to provide the certification or documentation, or both, required under 5
198	198	this section, the Department of Finance and Administration shall 6
199	199	automatically deny the application. 7
200	200	(e) An employer that is exempt from taxation under 26 U.S.C. § 8
201	201	501(c)(3), as it existed on January 1, 2025, may transfer or sell an income 9
202	202	tax credit allowed under this section. 10
203	203	(f) The Department of Finance and Administration may adopt rules to 11
204	204	administer this section. 12
205	205	13
206	206	SECTION 5. Arkansas Code Title 26, Chapter 51, Subchapter 5, is 14
207	207	amended to add an additional section to read as follows: 15
208	208	26-51-518. Licensed childcare provider. 16
209	209	(a) As used in this section: 17
210	210	(1) "Eligible children" means individuals who are twelve (12) 18
211	211	years of age or younger; 19
212	212	(2) "Licensed childcare provider" means a person or facility 20
213	213	that owns or operates a childcare facility licensed by the Department of 21
214	214	Human Services; and 22
215	215	(3) "Rural area" means an area in the state that is not within 23
216	216	the boundaries of an incorporated town or a city that has a population of 24
217	217	more than twenty-five thousand (25,000) according to the most recent federal 25
218	218	decennial census. 26
219	219	(b)(1) There is allowed an income tax credit against the income tax 27
220	220	imposed by this chapter in the amount determined under subdivision (b)(2) of 28
221	221	this section for a licensed childcare provider. 29
222	222	(2)(A) Subject to the limitations stated this section, the 30
223	223	amount of the income tax credit allowed under this section shall be 31
224	224	calculated by multiplying the average monthly number of eligible children 32
225	225	enrolled with the licensed childcare provider claiming the income tax credit 33
226	226	during the tax year by one thousand five hundred dollars ($1,500). 34
227	227	(B) The income tax credit allowed under this section shall 35
228	228	not exceed twenty-five thousand dollars ($25,000) for a licensed childcare 36 HB1435
229	229
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231	231	provider in a tax year. 1
232	232	(3)(A) The total aggregate amount of income tax credits allowed 2
233	233	under this section for all licensed childcare providers shall not exceed five 3
234	234	million dollars ($5,000,000) in a calendar year. 4
235	235	(B)(i) One million one hundred twenty -five thousand 5
236	236	dollars ($1,125,000) of the total aggregate amount of income tax credits that 6
237	237	may be allowed under subdivision (b)(3)(A) of this section shall be reserved 7
238	238	for the award of income tax credits to licensed childcare providers located 8
239	239	in a rural area. 9
240	240	(ii) The remaining amount of income tax credits that 10
241	241	may be allowed under subdivision (b)(3)(A) of this section shall be awarded 11
242	242	to licensed childcare providers without regard to the location of the 12
243	243	licensed childcare provider. 13
244	244	(c) The amount of the income tax credit under this section that may be 14
245	245	claimed by a licensed childcare provider in a tax year shall not exceed the 15
246	246	amount of income tax due by the licensed childcare provider. 16
247	247	(d)(1) To claim an income tax credit under this section, a licensed 17
248	248	childcare provider shall submit an application for the tax year to the 18
249	249	Department of Finance and Administration using the form required under 19
250	250	subdivision (d)(2)(A) of this section. 20
251	251	(2) The Department of Finance and Administration shall: 21
252	252	(A)(i) Prepare and provide a standardized form for a 22
253	253	licensed childcare provider to use to apply for the income tax credit allowed 23
254	254	under this section. 24
255	255	(ii) The form required under subdivision 25
256	256	(d)(2)(A)(i) of this section shall require at least the following 26
257	257	information: 27
258	258	(a) Documentation evidencing the applicant's 28
259	259	ownership of a childcare facility licensed by the Department of Human 29
260	260	Services; 30
261	261	(b) The amount of income tax credit for which 31
262	262	the licensed childcare provider is submitting an application under this 32
263	263	section; and 33
264	264	(c) The average number of eligible children 34
265	265	enrolled with the licensed childcare provider submitting the application 35
266	266	during the tax year; and 36 HB1435
267	267
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269	269	(B)(i) Subject to the limitations stated in this section, 1
270	270	award an income tax credit under this section to a licensed childcare 2
271	271	provider that submits a completed application on the required forms and 3
272	272	provides the information required under this section. 4
273	273	(ii) If an applicant for an income tax credit under 5
274	274	this section fails to submit a completed application on the required form or 6
275	275	fails to provide the information required under this section, the Department 7
276	276	of Finance and Administration shall automatically deny the application. 8
277	277	(e) A licensed childcare provider that is exempt from taxation under 9
278	278	26 U.S.C. § 501(c)(3), as it existed on January 1, 2025, may transfer or sell 10
279	279	an income tax credit allowed under this section. 11
280	280	(f) The Department of Finance and Administration may adopt rules to 12
281	281	administer this section. 13
282	282	14
283	283	SECTION 6. EFFECTIVE DATE. Sections 1 -5 of this act are effective for 15
284	284	tax years beginning on or after January 1, 2026. 16
285	285	17
286	286	SECTION 7. EMERGENCY CLAUSE. It is found and determined by the 18
287	287	General Assembly of the State of Arkansas that this act would create 19
288	288	significant changes to the state's tax laws; that taxpayers and employers 20
289	289	plan to meet their obligations on a calendar -year basis; and that this act is 21
290	290	immediately necessary to ensure the financial stability of the state, to 22
291	291	allow taxpayers and employers time to plan for and implement the changes in 23
292	292	law created by this act, and to ensure that the Department of Finance and 24
293	293	Administration has sufficient time to update its forms and software and train 25
294	294	its personnel in accordance with this act. Therefore, an emergency is 26
295	295	declared to exist, and this act being immediately necessary for the 27
296	296	preservation of the public peace, health, and safety shall become effective 28
297	297	on: 29
298	298	(1) The date of its approval by the Governor; 30
299	299	(2) If the bill is neither approved nor vetoed by the Governor, 31
300	300	the expiration of the period of time during which the Governor may veto the 32
301	301	bill; or 33
302	302	(3) If the bill is vetoed by the Governor and the veto is 34
303	303	overridden, the date the last house overrides the veto. 35
304	304	36