| 1 | 1 | | REFERENCE TITLE: child care; subsidies; tax credits State of Arizona House of Representatives Fifty-seventh Legislature First Regular Session 2025 HB 2939 Introduced by Representative Livingston An Act amending section 20-224, Arizona Revised Statutes; amending title 20, chapter 2, article 1, Arizona Revised Statutes, by adding section 20-224.08; repealing section 20-224.08, Arizona Revised Statutes; amending title 41, chapter 14, article 1, Arizona Revised Statutes, by adding section 41-1970; repealing section 41-1970, Arizona Revised Statutes; amending section 43-222, Arizona Revised Statutes; amending title 43, CHAPTER 10, article 5, Arizona Revised Statutes, by adding section 43-1080; repealing section 43-1080, Arizona Revised Statutes; amending title 43, chapter 11, article 6, Arizona Revised Statutes, by adding section 43-1166; repealing section 43-1166, Arizona Revised Statutes; appropriating monies; relating to child care. (TEXT OF BILL BEGINS ON NEXT PAGE) |
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| 9 | 9 | | REFERENCE TITLE: child care; subsidies; tax credits |
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| 10 | 10 | | State of Arizona House of Representatives Fifty-seventh Legislature First Regular Session 2025 |
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| 11 | 11 | | HB 2939 |
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| 12 | 12 | | Introduced by Representative Livingston |
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| 14 | 14 | | REFERENCE TITLE: child care; subsidies; tax credits |
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| 24 | 24 | | State of Arizona |
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| 28 | 28 | | Fifty-seventh Legislature |
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| 30 | 30 | | First Regular Session |
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| 40 | 40 | | HB 2939 |
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| 44 | 44 | | Introduced by |
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| 46 | 46 | | Representative Livingston |
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| 64 | 64 | | An Act |
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| 68 | 68 | | amending section 20-224, Arizona Revised Statutes; amending title 20, chapter 2, article 1, Arizona Revised Statutes, by adding section 20-224.08; repealing section 20-224.08, Arizona Revised Statutes; amending title 41, chapter 14, article 1, Arizona Revised Statutes, by adding section 41-1970; repealing section 41-1970, Arizona Revised Statutes; amending section 43-222, Arizona Revised Statutes; amending title 43, CHAPTER 10, article 5, Arizona Revised Statutes, by adding section 43-1080; repealing section 43-1080, Arizona Revised Statutes; amending title 43, chapter 11, article 6, Arizona Revised Statutes, by adding section 43-1166; repealing section 43-1166, Arizona Revised Statutes; appropriating monies; relating to child care. |
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| 74 | 74 | | (TEXT OF BILL BEGINS ON NEXT PAGE) |
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| 78 | 78 | | Be it enacted by the Legislature of the State of Arizona: Section 1. Section 20-224, Arizona Revised Statutes, is amended to read: START_STATUTE20-224. Premium tax; reports A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20-206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No A deduction shall not be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. B. Coincident with the filing of the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, a tax on such net premiums at the following rates: 1. For fire insurance: (a) On property located in a city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company, .66 percent. (b) On all other property, 2.2 percent. 2. For disability insurance, 2.0 percent. 3. For health care service plans, the rates prescribed under sections 20-837, 20-1010 and 20-1060. 4. For other insurance: (a) For premiums received in calendar year 2016, 1.95 percent. (b) For premiums received in calendar year 2017, 1.90 percent. (c) For premiums received in calendar year 2018, 1.85 percent. (d) For premiums received in calendar year 2019, 1.80 percent. (e) For premiums received in calendar year 2020, 1.75 percent. (f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent. C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. No An insurer shall be is not liable to the this state or to any other person, or shall be and is not subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the office of the state fire marshal's certification. D. Eighty-five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9-951, 9-952 and 9-972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full-time paid firefighters and volunteer firefighters or pension obligations to full-time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full-time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of the reallocation shall be forwarded to the municipality or fire district and its local boards. E. This section does not apply to title insurance. Title insurers shall be taxed as provided in section 20-1566. F. Any insurer that paid or is required to pay a tax of $50,000 or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35-146 and 35-147. G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.03, 20-224.04, 20-224.06, or 20-224.07 or 20-224.08. H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds monies for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount. I. On or before September 30 of each year, the director of the department of insurance and financial institutions shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20-224.03, 20-224.04, 20-224.05, 20-224.06, and 20-224.07 and 20-224.08 that were used during the previous fiscal year. J. For the purposes of: 1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty-five percent of homeowners' multiple peril lines, twenty-five percent of farm owners' multiple peril lines and twenty percent of allied lines. 2. Section 20-416, fire insurance is eighty-five percent of fire and allied lines. K. From and after December 31, 2017, The director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third-party services through which an insurer must submit reports and payments. END_STATUTE Sec. 2. Title 20, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 20-224.08, to read: START_STATUTE20-224.08. Premium credit for employer provided child care; definition A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for qualified child care EXPENDITURES incurred by the taxpayer during the tax year. B. The amount of the credit is twenty-five percent of the taxpayer's qualified child care expenditures or $100,000 whichever is less. C. An insurer shall submit an application pursuant to section 43-1166 to receive the credit under this section. D. An insurer that receives a credit under this section is subject to the repayment and reporting requirements prescribed by section 43-1166. E. If the amount of the credit under this section exceeds the taxpayer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward for not more than five consecutive taxable years' premium tax liability. F. A taxpayer that CLAIMS a credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a result of claiming that tax credit. G. The DEPARTMENT of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures that are necessary to administer this section. H. For the purposes of THIS section, "qualified child care expenditures" has the same meaning prescribed in section 43-1166. END_STATUTE Sec. 3. Delayed repeal Section 20-224.08, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. Sec. 4. Title 41, chapter 14, article 1, Arizona Revised Statutes, is amended by adding section 41-1970, to read: START_STATUTE41-1970. Out-of-school time grant program; fund; report; definition A. The out-of-school time grant program is established within the Department of Economic Security to expand out-of-school time child care for children who are five to twelve years of age and who require child care either when the children are out of school or during periods of time when school instruction is not being conducted. B. The grant program shall: 1. Increase the number of eligible pupils with access to child care before school, after school or during periods of time when school instruction is not being conducted. 2. Increase access to and affordability of child care for children and their families. 3. Enable employers to attract and retain a talented workforce. C. The Department shall do all of the following: 1. Develop an annual grant application process for participating in the grant program. 2. Provide grants to assist with costs of child care to eligible grantees who participate in the grant program. 3. Monitor eligible grantees to ensure grant program and fiscal compliance. 4. Develop metrics to measure the success of the grant program. D. THe out-of-school time grant program fund is established consisting of legislative appropriations. The DEPARTMENT shall administer the fund. Monies in the fund are continuously appropriated and are exempt from the provisions of section 35-190 relating to lapsing of appropriations. E. The department shall submit an annual report to the Governor, the president of the Senate and the Speaker of the House of representatives and shall provide a copy of this report to the secretary of state. The report shall include all of the following: 1. The total number of children who are served by the out-of-school time grant program, categorized by age of the child and the county where the child is served. 2. The locations of programs, categorized by county. F. The department may develop policies and procedures that are necessary to implement this section. G. For the purposes of this section, "Eligible grantee" means a nonprofit organization, school district and public or private child care provider that has demonstrated experience providing child care for pupils from working class families who are five to twelve years of age. END_STATUTE Sec. 5. Delayed repeal Section 41-1970, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. Sec. 6. Section 43-222, Arizona Revised Statutes, is amended to read: START_STATUTE43-222. Income tax credit review schedule The joint legislative income tax credit review committee shall review the following income tax credits: 1. For years ending in 0 and 5, sections 43-1079.01, 43-1080, 43-1088, 43-1089.04, 43-1166, 43-1167.01 and 43-1175. 2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 43-1075, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183. 3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164 43-1165, and 43-1181. 4. For years ending in 3 and 8, sections 43-1074.01, 43-1168, 43-1170 and 43-1178. 5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184. END_STATUTE Sec. 7. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1080, to read: START_STATUTE43-1080. Credit for small business employer provided child care; report; definitions A. For taxable years beginning from and after December 31, 2025 through December 31, 2030, a credit is allowed against the taxes imposed by this title for qualified child care expenditures incurred by a taxpayer that is a small business during the taxable year. B. The amount of the credit is fifty percent of the taxpayer's qualified child care facility expenditures plus twenty percent of the taxpayer's qualified child care resource and referral expenditures or $100,000, whichever is less. C. The department: 1. Shall preapprove tax credits pursuant to subsection D of this section for credits allowed under this section. 2. May not allow credits under this section that exceed in the aggregate a combined total of $1,000,000 in fiscal year 2025-2026 and each fiscal year thereafter. 3. May not allow credits under this section and section 20-244.08 or 43-1166 for the same taxpayer. D. The taxpayer shall apply to the department, on a form prescribed by the department, for preapproval of the credit allowed under this section on or before October 31 of each year for qualified child care expenditures that the taxpayer wishes to claim as a credit under this section for the following taxable year. The application shall include: 1. If the taxpayer is claiming a credit for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility, the NUMBER of new child care slots the taxpayer's qualified child care expenditure will create. 2. IF the taxpayer is claiming a credit for the operating costs of the taxpayer's qualified child care facility or the costs of contracting with a qualified child care facility to provide care, the number of children the expenditure is currently supporting or will support. 3. The total number of children the taxpayer's qualified child care expenditures and qualified child care resource and referral expenditures will support. E. The department shall preapprove or deny the taxpayer's request by December 1 each year. If the total credits requested for the following taxable year do not exceed the amount prescribed by subsection C, paragraph 2 of this section, the department shall approve all applications that include the required information. If the total amount of credits requested exceeds the amount prescribed in subsection C, paragraph 2 of this section, the department shall give priority to credits that will support the highest number of children per dollar of tax credit awarded. If there is no difference in children served per dollar of tax credit awarded, credits shall be awarded on a first-come, first-served basis. F. The department shall issue an approval notice to each taxpayer awarded a credit for the following taxable year. The taxpayer shall submit a report on a form and in the manner prescribed by the department on or before OCtober 31 each year for five years. G. In order to receive a credit under this section, the taxpayer shall make the qualified child care expenditures or enter into agreements to make the qualified child care EXPENDITURES before September 30 of the taxable year for which the credit is claimed. The preapproval notice shall specify the documentation required by the department to comply with this section. If the department does not receive the required documentation by december 31 of the taxable year, the credit is not allowed. H. If a credit is claimed for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility and the taxpayer ceases to operate the facility as a qualified child care facility by closing the facility or disposing of the taxpayer's interest in the facility, the taxpayer must repay the credit on a ratable basis, by an increase in the taxes due under this title in a subsequent taxable year or an adjustment of allowable carryforward, or both. The repayment amount is as follows: 1. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within three years after the first taxable year for which the credit is claimed, one hundred percent of the credit claimed. 2. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within four years after the first taxable year for which the credit is claimed, fifty percent of the credit claimed. 3. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within five years after the first taxable year for which the credit is claimed, twenty-five percent of the credit claimed. 4. for a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within six years or more after the first taxable year for which the credit is claimed, zero dollars. I. repayment under subsection H of this section is not required if a person acquiring a taxpayer's interest in a qualified child care facility agrees in writing to assume the repayment liability of the taxpayer. Repayment liability shall be computed as if no change in ownership occurred. J. A taxpayer may not claim both a credit under this section and the income tax subtraction under section 43-1130. K. If the amount of the credit under this section exceeds the taxes otherwise due under this article on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry forward for not more than five consecutive taxable years' income tax liability. L. Co-owners of a business, including partners in a partnership, members of a limited liability COMPANY and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. M. The department may adopt rules and publish and prescribe forms and procedures as necessary to administer this section. N. From and after June 30, 2026 and each year thereafter, the department shall report the total number of new qualified child care facilities created, new child care slots created or maintained, total number of children served and employee retention rates to the governor, the speaker of the house of representatives and the president of the senate and shall provide a copy of this report to the secretary of state. O. For the purposes of this section: 1. "Child care provider" means a child care provider that is licensed or certified pursuant to title 36, chapter 7.1 or title 46, chapter 7 and that is rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or an out-of-school time program provider. 2. "Child care resource and referral services" means providing information to employees about child care providers through one or more of the following means: (a) Maintaining a uniform database of all child care providers in the community, including occupancy and vacancy data. (b) Providing individualized consumer education to families seeking child care. (c) Providing timely referrals of available child care providers to families seeking child care. (d) Recruiting child care providers. (e) Developing, conducting and disseminating training for child care professionals and providing technical assistance to current and potential child care providers, employers and the community. (f) collecting and analyzing data on the supply of and demand for child care in the community. (g) Providing technical assistance regarding local, state and federally funded child care and early childhood education programs. (h) Stimulating employer involvement in making child care more affordable, available, safer and of higher quality for employees and the community. (i) Providing child care tuition at a qualified child care facility in the name and benefit of an employee. (j) Providing written educational materials to caretaker parents and informational resources to child care providers. (k) Coordinating services among child care resource and referral service organizations to assist in developing and maintaining a statewide system of child care resource and referral services. (l) Cooperating with county agencies that provide job and family services to encourage establishing parent cooperative child care centers and parent cooperative family child care homes. 3. "out-of-school time program provider" means a provider that meets all of the following requirements: (a) Operates primarily during after school, before school or in the summer or at times when school is not normally in session. (b) Serves only school-age children. (c) Is organized to promote expanded childhood learning, enrichment, child and youth development or educational, recreational or character-building activities. 4. "qualified child care expenditure" means any amount that is paid or incurred for the following: (a) Acquiring, constructing, rehabilitating or expanding property in this state that is: (i) To be used as part of a qualified child care facility for the taxpayer. (ii) Is eligible for amortization pursuant to section 43-1130. (iii) Is not part of the principal residence of the taxpayer or any employee of the taxpayer. (b) Operating costs of a qualified child care facility of the taxpayer, including costs related to employee training, scholarship programs and increasing compensation for employees with higher levels of child care training. 5. "qualified child care facility" means a facility that is located in this state and to which all of the following apply: (a) The facility is used primarily to provide child care assistance, unless the facility is the principal place of residence of the operator of the facility. (b) The facility is licensed pursuant to title 36, chapter 7.1. (c) The child care provider is Rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or receives a rating as a quality program or becomes nationally accredited within two years after the first year the credit is claimed. (d) Enrollment is open to the taxpayer's employees during the taxable year. (e) If the facility is the principal trade or business of the taxpayer, at least THIRTY percent of the enrollees of the facility must be dependents of the taxpayer's employees. (f) The use of the facility or eligibility to use the facility does not discriminate in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. 6. "qualified child care resource and referral expenditure": (a) Means any amount that is paid or incurred under a contract to provide child care RESOURCE and referral services to the taxpayer's employee or any amount that is paid or incurred under a contract with a qualified child care facility to provide child care services to the taxpayer's employee. (b) Does not include services that are limited to or where eligibility is in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. 7. "small business" means a concern, including its affiliates, that employs fewer than one hundred employees. END_STATUTE Sec. 8. Delayed repeal Section 43-1080, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. Sec. 9. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1166, to read: START_STATUTE43-1166. Credit for employer provided child care; report; definitions A. For taxable years beginning from and after December 31, 2025 through December 31, 2030, a credit is allowed against the taxes imposed by this title for qualified child care expenditures incurred by the taxpayer during the taxable year. B. The amount of the credit is twenty-five percent of the taxpayer's qualified child care facility expenditures plus ten percent of the taxpayer's qualified child care resource and referral expenditures or $100,000, whichever is less. C. The department: 1. Shall preapprove tax credits pursuant to subsection D of this section for credits allowed under this section and section 20-244.08. 2. May not allow credits under this section and section 20-244.08 that exceed in the aggregate a combined total of $1,000,000 in fiscal year 2025-2026 and each fiscal year thereafter. D. The taxpayer shall apply to the department, on a form prescribed by the department, for preapproval of the credit allowed under this section on or before October 31 of each year for qualified child care expenditures that the taxpayer wishes to claim as a credit under this section for the following taxable year. The application shall include: 1. If the taxpayer is claiming a credit for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility, the NUMBER of new child care slots the taxpayer's qualified child care expenditure will create. 2. IF the taxpayer is claiming a credit for the operating costs of the taxpayer's qualified child care facility or the costs of contracting with a qualified child care facility to provide care, the number of children the expenditure is currently supporting or will support. 3. The total number of children the taxpayer's qualified child care expenditures and qualified child care resource and referral expenditures will support. E. The department shall preapprove or deny the taxpayer's request by December 1 each year. If the total credits requested for the following taxable year do not exceed the amount prescribed by subsection C, paragraph 2 of this section, the department shall approve all applications that include the required information. If the total amount of credits requested exceeds the amount prescribed in subsection C, paragraph 2 of this section, the department shall give priority to credits that will support the highest number of children per dollar of tax credit awarded. If there is no difference in children served per dollar of tax credit awarded, credits shall be awarded on a first-come, first-served basis. F. The department shall issue an approval notice to each taxpayer awarded a credit for the following taxable year. The taxpayer shall submit a report on a form and in the manner prescribed by the department on or before OCtober 31 each year for five years. G. In order to receive a credit under this section, the taxpayer shall make the qualified child care expenditures or enter into agreements to make the qualified child care EXPENDITURES before September 30 of the taxable year for which the credit is claimed. The preapproval notice shall specify the documentation required by the department to comply with this section. If the department does not receive the required documentation by december 31 of the taxable year, the credit is not allowed. H. If a credit is claimed for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility and the taxpayer ceases to operate the facility as a qualified child care facility by closing the facility or disposing of the taxpayer's interest in the facility, the taxpayer must repay the credit on a ratable basis, by an increase in the taxes due under this title in a subsequent taxable year or an adjustment of allowable carryforward, or both. The repayment amount is as follows: 1. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within three years after the first taxable year for which the credit is claimed, one hundred percent of the credit claimed. 2. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within four years after the first taxable year for which the credit is claimed, fifty percent of the credit claimed. 3. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within five years after the first taxable year for which the credit is claimed, twenty-five percent of the credit claimed. 4. for a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within six years or more after the first taxable year for which the credit is claimed, zero dollars. I. repayment under subsection H of this section is not required if a person acquiring a taxpayer's interest in a qualified child care facility agrees in writing to assume the repayment liability of the taxpayer. Repayment liability shall be computed as if no change in ownership occurred. J. A taxpayer may not claim both a credit under this section and the income tax subtraction under section 43-1130. K. If the amount of the credit under this section exceeds the taxes otherwise due under this article on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry forward for not more than five consecutive taxable years' income tax liability. L. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. M. The department may adopt rules and publish and prescribe forms and procedures as necessary to administer this section. N. From and after June 30, 2026 and each year thereafter, the department shall report the total number of new qualified child care facilities created, new child care slots created or maintained, total number of children served and employee retention rates to the governor, the speaker of the house of representatives and the president of the senate and shall provide a copy of this report to the secretary of state. O. For the purposes of this section: 1. "Child care provider" means a child care provider that is licensed or certified pursuant to title 36, chapter 7.1 or title 46, chapter 7 and that is rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or an out-of-school time program provider. 2. "Child care resource and referral services" means providing information to employees about child care providers through one or more of the following means: (a) Maintaining a uniform database of all child care providers in the community, including occupancy and vacancy data. (b) Providing individualized consumer education to families seeking child care. (c) Providing timely referrals of available child care providers to families seeking child care. (d) Recruiting child care providers. (e) Developing, conducting and disseminating training for child care professionals and providing technical assistance to current and potential child care providers, employers and the community. (f) collecting and analyzing data on the supply of and demand for child care in the community. (g) Providing technical assistance regarding local, state and federally funded child care and early childhood education programs. (h) Stimulating employer involvement in making child care more affordable, available, safer and of higher quality for employees and the community. (i) Providing child care tuition at a qualified child care facility in the name and benefit of an employee. (j) Providing written educational materials to caretaker parents and informational resources to child care providers. (k) Coordinating services among child care resource and referral service organizations to assist in developing and maintaining a statewide system of child care resource and referral services. (l) Cooperating with county agencies that provide job and family services to encourage establishing parent cooperative child care centers and parent cooperative family child care homes. 3. "Out-of-school time program provider" means a provider that meets all of the following requirements: (a) Operates primarily during after school, before school or in the summer or at times when school is not normally in session. (b) Serves only school-age children. (c) Is organized to promote expanded childhood learning, enrichment, child and youth development or educational, recreational or character-building activities. 4. "qualified child care expenditure" means any amount that is paid or incurred for the following: (a) Acquiring, constructing, rehabilitating or expanding property in this state that is: (i) To be used as part of a qualified child care facility for the taxpayer. (ii) Is eligible for amortization pursuant to section 43-1130. (iii) Is not part of the principal residence of the taxpayer or any employee of the taxpayer. (b) Operating costs of a qualified child care facility of the taxpayer, including costs related to employee training, scholarship programs and increasing compensation for employees with higher levels of child care training. 5. "qualified child care facility" means a facility that is located in this state and to which all of the following apply: (a) The facility is used primarily to provide child care assistance, unless the facility is the principal place of residence of the operator of the facility. (b) The facility is licensed pursuant to title 36, chapter 7.1. (c) The child care provider is Rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or receives a rating as a quality program or becomes nationally accredited within two years after the first year the credit is claimed. (d) Enrollment is open to the taxpayer's employees during the taxable year. (e) If the facility is the principal trade or business of the taxpayer, at least THIRTY percent of the enrollees of the facility must be dependents of the taxpayer's employees. (f) The use of the facility or eligibility to use the facility does not discriminate in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. 6. "qualified child care resource and referral expenditure": (a) Means any amount that is paid or incurred under a contract to provide child care RESOURCE and referral services to the taxpayer's employee or any amount that is paid or incurred under a contract with a qualified child care facility to provide child care services to the taxpayer's employee. (b) Does not include services that are limited to or where eligibility is in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. END_STATUTE Sec. 10. Delayed repeal Section 43-1166, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. Sec. 11. Purpose Pursuant to section 43-223, Arizona Revised Statutes, the legislature enacts sections 43-1080 and 43-1166, Arizona Revised Statutes, as added by this act, to support working families by providing better access to child care. Sec. 12. Appropriation; out-of-school time grant program fund The sum of $3,000,000 is appropriated from the state general fund in each of fiscal years 2025-2026, 2026-2027, 2027-2028, 2028-2029 and 2029-2030 to the out-of-school time grant program fund established by section 41-1970, Arizona Revised Statutes, as added by this act. Sec. 13. Short title This act may be cited as the "Working Families Child Care Act". |
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| 79 | 79 | | |
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| 80 | 80 | | Be it enacted by the Legislature of the State of Arizona: |
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| 81 | 81 | | |
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| 82 | 82 | | Section 1. Section 20-224, Arizona Revised Statutes, is amended to read: |
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| 83 | 83 | | |
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| 84 | 84 | | START_STATUTE20-224. Premium tax; reports |
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| 85 | 85 | | |
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| 86 | 86 | | A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20-206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No A deduction shall not be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. |
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| 87 | 87 | | |
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| 88 | 88 | | B. Coincident with the filing of the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, a tax on such net premiums at the following rates: |
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| 89 | 89 | | |
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| 90 | 90 | | 1. For fire insurance: |
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| 91 | 91 | | |
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| 92 | 92 | | (a) On property located in a city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company, .66 percent. |
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| 93 | 93 | | |
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| 94 | 94 | | (b) On all other property, 2.2 percent. |
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| 95 | 95 | | |
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| 96 | 96 | | 2. For disability insurance, 2.0 percent. |
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| 97 | 97 | | |
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| 98 | 98 | | 3. For health care service plans, the rates prescribed under sections 20-837, 20-1010 and 20-1060. |
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| 99 | 99 | | |
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| 100 | 100 | | 4. For other insurance: |
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| 101 | 101 | | |
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| 102 | 102 | | (a) For premiums received in calendar year 2016, 1.95 percent. |
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| 103 | 103 | | |
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| 104 | 104 | | (b) For premiums received in calendar year 2017, 1.90 percent. |
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| 105 | 105 | | |
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| 106 | 106 | | (c) For premiums received in calendar year 2018, 1.85 percent. |
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| 107 | 107 | | |
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| 108 | 108 | | (d) For premiums received in calendar year 2019, 1.80 percent. |
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| 109 | 109 | | |
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| 110 | 110 | | (e) For premiums received in calendar year 2020, 1.75 percent. |
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| 111 | 111 | | |
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| 112 | 112 | | (f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent. |
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| 113 | 113 | | |
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| 114 | 114 | | C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. No An insurer shall be is not liable to the this state or to any other person, or shall be and is not subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the office of the state fire marshal's certification. |
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| 115 | 115 | | |
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| 116 | 116 | | D. Eighty-five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9-951, 9-952 and 9-972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full-time paid firefighters and volunteer firefighters or pension obligations to full-time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full-time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of the reallocation shall be forwarded to the municipality or fire district and its local boards. |
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| 117 | 117 | | |
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| 118 | 118 | | E. This section does not apply to title insurance. Title insurers shall be taxed as provided in section 20-1566. |
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| 119 | 119 | | |
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| 120 | 120 | | F. Any insurer that paid or is required to pay a tax of $50,000 or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35-146 and 35-147. |
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| 121 | 121 | | |
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| 122 | 122 | | G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.03, 20-224.04, 20-224.06, or 20-224.07 or 20-224.08. |
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| 123 | 123 | | |
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| 124 | 124 | | H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds monies for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount. |
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| 125 | 125 | | |
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| 126 | 126 | | I. On or before September 30 of each year, the director of the department of insurance and financial institutions shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20-224.03, 20-224.04, 20-224.05, 20-224.06, and 20-224.07 and 20-224.08 that were used during the previous fiscal year. |
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| 127 | 127 | | |
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| 128 | 128 | | J. For the purposes of: |
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| 129 | 129 | | |
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| 130 | 130 | | 1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty-five percent of homeowners' multiple peril lines, twenty-five percent of farm owners' multiple peril lines and twenty percent of allied lines. |
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| 131 | 131 | | |
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| 132 | 132 | | 2. Section 20-416, fire insurance is eighty-five percent of fire and allied lines. |
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| 133 | 133 | | |
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| 134 | 134 | | K. From and after December 31, 2017, The director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third-party services through which an insurer must submit reports and payments. END_STATUTE |
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| 135 | 135 | | |
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| 136 | 136 | | Sec. 2. Title 20, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 20-224.08, to read: |
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| 137 | 137 | | |
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| 138 | 138 | | START_STATUTE20-224.08. Premium credit for employer provided child care; definition |
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| 139 | 139 | | |
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| 140 | 140 | | A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for qualified child care EXPENDITURES incurred by the taxpayer during the tax year. |
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| 141 | 141 | | |
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| 142 | 142 | | B. The amount of the credit is twenty-five percent of the taxpayer's qualified child care expenditures or $100,000 whichever is less. |
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| 143 | 143 | | |
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| 144 | 144 | | C. An insurer shall submit an application pursuant to section 43-1166 to receive the credit under this section. |
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| 145 | 145 | | |
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| 146 | 146 | | D. An insurer that receives a credit under this section is subject to the repayment and reporting requirements prescribed by section 43-1166. |
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| 147 | 147 | | |
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| 148 | 148 | | E. If the amount of the credit under this section exceeds the taxpayer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward for not more than five consecutive taxable years' premium tax liability. |
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| 149 | 149 | | |
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| 150 | 150 | | F. A taxpayer that CLAIMS a credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a result of claiming that tax credit. |
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| 151 | 151 | | |
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| 152 | 152 | | G. The DEPARTMENT of insurance and financial institutions, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures that are necessary to administer this section. |
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| 153 | 153 | | |
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| 154 | 154 | | H. For the purposes of THIS section, "qualified child care expenditures" has the same meaning prescribed in section 43-1166. END_STATUTE |
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| 155 | 155 | | |
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| 156 | 156 | | Sec. 3. Delayed repeal |
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| 157 | 157 | | |
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| 158 | 158 | | Section 20-224.08, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. |
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| 159 | 159 | | |
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| 160 | 160 | | Sec. 4. Title 41, chapter 14, article 1, Arizona Revised Statutes, is amended by adding section 41-1970, to read: |
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| 161 | 161 | | |
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| 162 | 162 | | START_STATUTE41-1970. Out-of-school time grant program; fund; report; definition |
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| 163 | 163 | | |
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| 164 | 164 | | A. The out-of-school time grant program is established within the Department of Economic Security to expand out-of-school time child care for children who are five to twelve years of age and who require child care either when the children are out of school or during periods of time when school instruction is not being conducted. |
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| 165 | 165 | | |
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| 166 | 166 | | B. The grant program shall: |
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| 167 | 167 | | |
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| 168 | 168 | | 1. Increase the number of eligible pupils with access to child care before school, after school or during periods of time when school instruction is not being conducted. |
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| 169 | 169 | | |
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| 170 | 170 | | 2. Increase access to and affordability of child care for children and their families. |
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| 171 | 171 | | |
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| 172 | 172 | | 3. Enable employers to attract and retain a talented workforce. |
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| 173 | 173 | | |
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| 174 | 174 | | C. The Department shall do all of the following: |
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| 175 | 175 | | |
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| 176 | 176 | | 1. Develop an annual grant application process for participating in the grant program. |
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| 177 | 177 | | |
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| 178 | 178 | | 2. Provide grants to assist with costs of child care to eligible grantees who participate in the grant program. |
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| 179 | 179 | | |
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| 180 | 180 | | 3. Monitor eligible grantees to ensure grant program and fiscal compliance. |
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| 181 | 181 | | |
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| 182 | 182 | | 4. Develop metrics to measure the success of the grant program. |
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| 183 | 183 | | |
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| 184 | 184 | | D. THe out-of-school time grant program fund is established consisting of legislative appropriations. The DEPARTMENT shall administer the fund. Monies in the fund are continuously appropriated and are exempt from the provisions of section 35-190 relating to lapsing of appropriations. |
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| 185 | 185 | | |
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| 186 | 186 | | E. The department shall submit an annual report to the Governor, the president of the Senate and the Speaker of the House of representatives and shall provide a copy of this report to the secretary of state. The report shall include all of the following: |
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| 187 | 187 | | |
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| 188 | 188 | | 1. The total number of children who are served by the out-of-school time grant program, categorized by age of the child and the county where the child is served. |
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| 189 | 189 | | |
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| 190 | 190 | | 2. The locations of programs, categorized by county. |
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| 191 | 191 | | |
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| 192 | 192 | | F. The department may develop policies and procedures that are necessary to implement this section. |
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| 193 | 193 | | |
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| 194 | 194 | | G. For the purposes of this section, "Eligible grantee" means a nonprofit organization, school district and public or private child care provider that has demonstrated experience providing child care for pupils from working class families who are five to twelve years of age. END_STATUTE |
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| 195 | 195 | | |
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| 196 | 196 | | Sec. 5. Delayed repeal |
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| 197 | 197 | | |
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| 198 | 198 | | Section 41-1970, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. |
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| 199 | 199 | | |
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| 200 | 200 | | Sec. 6. Section 43-222, Arizona Revised Statutes, is amended to read: |
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| 201 | 201 | | |
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| 202 | 202 | | START_STATUTE43-222. Income tax credit review schedule |
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| 203 | 203 | | |
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| 204 | 204 | | The joint legislative income tax credit review committee shall review the following income tax credits: |
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| 205 | 205 | | |
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| 206 | 206 | | 1. For years ending in 0 and 5, sections 43-1079.01, 43-1080, 43-1088, 43-1089.04, 43-1166, 43-1167.01 and 43-1175. |
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| 207 | 207 | | |
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| 208 | 208 | | 2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 43-1075, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183. |
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| 209 | 209 | | |
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| 210 | 210 | | 3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164 43-1165, and 43-1181. |
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| 211 | 211 | | |
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| 212 | 212 | | 4. For years ending in 3 and 8, sections 43-1074.01, 43-1168, 43-1170 and 43-1178. |
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| 213 | 213 | | |
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| 214 | 214 | | 5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184. END_STATUTE |
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| 215 | 215 | | |
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| 216 | 216 | | Sec. 7. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1080, to read: |
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| 217 | 217 | | |
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| 218 | 218 | | START_STATUTE43-1080. Credit for small business employer provided child care; report; definitions |
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| 219 | 219 | | |
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| 220 | 220 | | A. For taxable years beginning from and after December 31, 2025 through December 31, 2030, a credit is allowed against the taxes imposed by this title for qualified child care expenditures incurred by a taxpayer that is a small business during the taxable year. |
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| 221 | 221 | | |
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| 222 | 222 | | B. The amount of the credit is fifty percent of the taxpayer's qualified child care facility expenditures plus twenty percent of the taxpayer's qualified child care resource and referral expenditures or $100,000, whichever is less. |
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| 223 | 223 | | |
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| 224 | 224 | | C. The department: |
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| 225 | 225 | | |
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| 226 | 226 | | 1. Shall preapprove tax credits pursuant to subsection D of this section for credits allowed under this section. |
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| 227 | 227 | | |
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| 228 | 228 | | 2. May not allow credits under this section that exceed in the aggregate a combined total of $1,000,000 in fiscal year 2025-2026 and each fiscal year thereafter. |
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| 229 | 229 | | |
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| 230 | 230 | | 3. May not allow credits under this section and section 20-244.08 or 43-1166 for the same taxpayer. |
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| 231 | 231 | | |
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| 232 | 232 | | D. The taxpayer shall apply to the department, on a form prescribed by the department, for preapproval of the credit allowed under this section on or before October 31 of each year for qualified child care expenditures that the taxpayer wishes to claim as a credit under this section for the following taxable year. The application shall include: |
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| 233 | 233 | | |
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| 234 | 234 | | 1. If the taxpayer is claiming a credit for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility, the NUMBER of new child care slots the taxpayer's qualified child care expenditure will create. |
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| 235 | 235 | | |
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| 236 | 236 | | 2. IF the taxpayer is claiming a credit for the operating costs of the taxpayer's qualified child care facility or the costs of contracting with a qualified child care facility to provide care, the number of children the expenditure is currently supporting or will support. |
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| 237 | 237 | | |
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| 238 | 238 | | 3. The total number of children the taxpayer's qualified child care expenditures and qualified child care resource and referral expenditures will support. |
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| 239 | 239 | | |
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| 240 | 240 | | E. The department shall preapprove or deny the taxpayer's request by December 1 each year. If the total credits requested for the following taxable year do not exceed the amount prescribed by subsection C, paragraph 2 of this section, the department shall approve all applications that include the required information. If the total amount of credits requested exceeds the amount prescribed in subsection C, paragraph 2 of this section, the department shall give priority to credits that will support the highest number of children per dollar of tax credit awarded. If there is no difference in children served per dollar of tax credit awarded, credits shall be awarded on a first-come, first-served basis. |
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| 241 | 241 | | |
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| 242 | 242 | | F. The department shall issue an approval notice to each taxpayer awarded a credit for the following taxable year. The taxpayer shall submit a report on a form and in the manner prescribed by the department on or before OCtober 31 each year for five years. |
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| 243 | 243 | | |
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| 244 | 244 | | G. In order to receive a credit under this section, the taxpayer shall make the qualified child care expenditures or enter into agreements to make the qualified child care EXPENDITURES before September 30 of the taxable year for which the credit is claimed. The preapproval notice shall specify the documentation required by the department to comply with this section. If the department does not receive the required documentation by december 31 of the taxable year, the credit is not allowed. |
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| 245 | 245 | | |
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| 246 | 246 | | H. If a credit is claimed for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility and the taxpayer ceases to operate the facility as a qualified child care facility by closing the facility or disposing of the taxpayer's interest in the facility, the taxpayer must repay the credit on a ratable basis, by an increase in the taxes due under this title in a subsequent taxable year or an adjustment of allowable carryforward, or both. The repayment amount is as follows: |
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| 247 | 247 | | |
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| 248 | 248 | | 1. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within three years after the first taxable year for which the credit is claimed, one hundred percent of the credit claimed. |
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| 249 | 249 | | |
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| 250 | 250 | | 2. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within four years after the first taxable year for which the credit is claimed, fifty percent of the credit claimed. |
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| 251 | 251 | | |
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| 252 | 252 | | 3. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within five years after the first taxable year for which the credit is claimed, twenty-five percent of the credit claimed. |
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| 253 | 253 | | |
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| 254 | 254 | | 4. for a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within six years or more after the first taxable year for which the credit is claimed, zero dollars. |
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| 255 | 255 | | |
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| 256 | 256 | | I. repayment under subsection H of this section is not required if a person acquiring a taxpayer's interest in a qualified child care facility agrees in writing to assume the repayment liability of the taxpayer. Repayment liability shall be computed as if no change in ownership occurred. |
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| 257 | 257 | | |
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| 258 | 258 | | J. A taxpayer may not claim both a credit under this section and the income tax subtraction under section 43-1130. |
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| 259 | 259 | | |
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| 260 | 260 | | K. If the amount of the credit under this section exceeds the taxes otherwise due under this article on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry forward for not more than five consecutive taxable years' income tax liability. |
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| 261 | 261 | | |
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| 262 | 262 | | L. Co-owners of a business, including partners in a partnership, members of a limited liability COMPANY and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. |
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| 263 | 263 | | |
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| 264 | 264 | | M. The department may adopt rules and publish and prescribe forms and procedures as necessary to administer this section. |
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| 265 | 265 | | |
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| 266 | 266 | | N. From and after June 30, 2026 and each year thereafter, the department shall report the total number of new qualified child care facilities created, new child care slots created or maintained, total number of children served and employee retention rates to the governor, the speaker of the house of representatives and the president of the senate and shall provide a copy of this report to the secretary of state. |
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| 267 | 267 | | |
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| 268 | 268 | | O. For the purposes of this section: |
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| 269 | 269 | | |
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| 270 | 270 | | 1. "Child care provider" means a child care provider that is licensed or certified pursuant to title 36, chapter 7.1 or title 46, chapter 7 and that is rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or an out-of-school time program provider. |
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| 271 | 271 | | |
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| 272 | 272 | | 2. "Child care resource and referral services" means providing information to employees about child care providers through one or more of the following means: |
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| 273 | 273 | | |
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| 274 | 274 | | (a) Maintaining a uniform database of all child care providers in the community, including occupancy and vacancy data. |
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| 275 | 275 | | |
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| 276 | 276 | | (b) Providing individualized consumer education to families seeking child care. |
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| 277 | 277 | | |
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| 278 | 278 | | (c) Providing timely referrals of available child care providers to families seeking child care. |
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| 279 | 279 | | |
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| 280 | 280 | | (d) Recruiting child care providers. |
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| 281 | 281 | | |
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| 282 | 282 | | (e) Developing, conducting and disseminating training for child care professionals and providing technical assistance to current and potential child care providers, employers and the community. |
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| 283 | 283 | | |
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| 284 | 284 | | (f) collecting and analyzing data on the supply of and demand for child care in the community. |
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| 285 | 285 | | |
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| 286 | 286 | | (g) Providing technical assistance regarding local, state and federally funded child care and early childhood education programs. |
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| 287 | 287 | | |
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| 288 | 288 | | (h) Stimulating employer involvement in making child care more affordable, available, safer and of higher quality for employees and the community. |
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| 289 | 289 | | |
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| 290 | 290 | | (i) Providing child care tuition at a qualified child care facility in the name and benefit of an employee. |
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| 291 | 291 | | |
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| 292 | 292 | | (j) Providing written educational materials to caretaker parents and informational resources to child care providers. |
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| 293 | 293 | | |
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| 294 | 294 | | (k) Coordinating services among child care resource and referral service organizations to assist in developing and maintaining a statewide system of child care resource and referral services. |
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| 295 | 295 | | |
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| 296 | 296 | | (l) Cooperating with county agencies that provide job and family services to encourage establishing parent cooperative child care centers and parent cooperative family child care homes. |
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| 297 | 297 | | |
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| 298 | 298 | | 3. "out-of-school time program provider" means a provider that meets all of the following requirements: |
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| 299 | 299 | | |
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| 300 | 300 | | (a) Operates primarily during after school, before school or in the summer or at times when school is not normally in session. |
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| 301 | 301 | | |
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| 302 | 302 | | (b) Serves only school-age children. |
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| 303 | 303 | | |
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| 304 | 304 | | (c) Is organized to promote expanded childhood learning, enrichment, child and youth development or educational, recreational or character-building activities. |
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| 305 | 305 | | |
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| 306 | 306 | | 4. "qualified child care expenditure" means any amount that is paid or incurred for the following: |
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| 307 | 307 | | |
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| 308 | 308 | | (a) Acquiring, constructing, rehabilitating or expanding property in this state that is: |
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| 309 | 309 | | |
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| 310 | 310 | | (i) To be used as part of a qualified child care facility for the taxpayer. |
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| 311 | 311 | | |
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| 312 | 312 | | (ii) Is eligible for amortization pursuant to section 43-1130. |
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| 313 | 313 | | |
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| 314 | 314 | | (iii) Is not part of the principal residence of the taxpayer or any employee of the taxpayer. |
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| 315 | 315 | | |
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| 316 | 316 | | (b) Operating costs of a qualified child care facility of the taxpayer, including costs related to employee training, scholarship programs and increasing compensation for employees with higher levels of child care training. |
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| 317 | 317 | | |
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| 318 | 318 | | 5. "qualified child care facility" means a facility that is located in this state and to which all of the following apply: |
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| 319 | 319 | | |
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| 320 | 320 | | (a) The facility is used primarily to provide child care assistance, unless the facility is the principal place of residence of the operator of the facility. |
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| 321 | 321 | | |
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| 322 | 322 | | (b) The facility is licensed pursuant to title 36, chapter 7.1. |
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| 323 | 323 | | |
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| 324 | 324 | | (c) The child care provider is Rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or receives a rating as a quality program or becomes nationally accredited within two years after the first year the credit is claimed. |
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| 325 | 325 | | |
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| 326 | 326 | | (d) Enrollment is open to the taxpayer's employees during the taxable year. |
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| 327 | 327 | | |
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| 328 | 328 | | (e) If the facility is the principal trade or business of the taxpayer, at least THIRTY percent of the enrollees of the facility must be dependents of the taxpayer's employees. |
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| 329 | 329 | | |
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| 330 | 330 | | (f) The use of the facility or eligibility to use the facility does not discriminate in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. |
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| 331 | 331 | | |
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| 332 | 332 | | 6. "qualified child care resource and referral expenditure": |
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| 333 | 333 | | |
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| 334 | 334 | | (a) Means any amount that is paid or incurred under a contract to provide child care RESOURCE and referral services to the taxpayer's employee or any amount that is paid or incurred under a contract with a qualified child care facility to provide child care services to the taxpayer's employee. |
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| 335 | 335 | | |
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| 336 | 336 | | (b) Does not include services that are limited to or where eligibility is in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. |
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| 337 | 337 | | |
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| 338 | 338 | | 7. "small business" means a concern, including its affiliates, that employs fewer than one hundred employees. END_STATUTE |
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| 339 | 339 | | |
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| 340 | 340 | | Sec. 8. Delayed repeal |
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| 341 | 341 | | |
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| 342 | 342 | | Section 43-1080, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. |
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| 343 | 343 | | |
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| 344 | 344 | | Sec. 9. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1166, to read: |
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| 345 | 345 | | |
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| 346 | 346 | | START_STATUTE43-1166. Credit for employer provided child care; report; definitions |
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| 347 | 347 | | |
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| 348 | 348 | | A. For taxable years beginning from and after December 31, 2025 through December 31, 2030, a credit is allowed against the taxes imposed by this title for qualified child care expenditures incurred by the taxpayer during the taxable year. |
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| 349 | 349 | | |
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| 350 | 350 | | B. The amount of the credit is twenty-five percent of the taxpayer's qualified child care facility expenditures plus ten percent of the taxpayer's qualified child care resource and referral expenditures or $100,000, whichever is less. |
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| 351 | 351 | | |
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| 352 | 352 | | C. The department: |
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| 353 | 353 | | |
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| 354 | 354 | | 1. Shall preapprove tax credits pursuant to subsection D of this section for credits allowed under this section and section 20-244.08. |
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| 355 | 355 | | |
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| 356 | 356 | | 2. May not allow credits under this section and section 20-244.08 that exceed in the aggregate a combined total of $1,000,000 in fiscal year 2025-2026 and each fiscal year thereafter. |
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| 357 | 357 | | |
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| 358 | 358 | | D. The taxpayer shall apply to the department, on a form prescribed by the department, for preapproval of the credit allowed under this section on or before October 31 of each year for qualified child care expenditures that the taxpayer wishes to claim as a credit under this section for the following taxable year. The application shall include: |
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| 359 | 359 | | |
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| 360 | 360 | | 1. If the taxpayer is claiming a credit for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility, the NUMBER of new child care slots the taxpayer's qualified child care expenditure will create. |
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| 361 | 361 | | |
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| 362 | 362 | | 2. IF the taxpayer is claiming a credit for the operating costs of the taxpayer's qualified child care facility or the costs of contracting with a qualified child care facility to provide care, the number of children the expenditure is currently supporting or will support. |
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| 363 | 363 | | |
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| 364 | 364 | | 3. The total number of children the taxpayer's qualified child care expenditures and qualified child care resource and referral expenditures will support. |
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| 365 | 365 | | |
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| 366 | 366 | | E. The department shall preapprove or deny the taxpayer's request by December 1 each year. If the total credits requested for the following taxable year do not exceed the amount prescribed by subsection C, paragraph 2 of this section, the department shall approve all applications that include the required information. If the total amount of credits requested exceeds the amount prescribed in subsection C, paragraph 2 of this section, the department shall give priority to credits that will support the highest number of children per dollar of tax credit awarded. If there is no difference in children served per dollar of tax credit awarded, credits shall be awarded on a first-come, first-served basis. |
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| 367 | 367 | | |
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| 368 | 368 | | F. The department shall issue an approval notice to each taxpayer awarded a credit for the following taxable year. The taxpayer shall submit a report on a form and in the manner prescribed by the department on or before OCtober 31 each year for five years. |
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| 369 | 369 | | |
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| 370 | 370 | | G. In order to receive a credit under this section, the taxpayer shall make the qualified child care expenditures or enter into agreements to make the qualified child care EXPENDITURES before September 30 of the taxable year for which the credit is claimed. The preapproval notice shall specify the documentation required by the department to comply with this section. If the department does not receive the required documentation by december 31 of the taxable year, the credit is not allowed. |
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| 371 | 371 | | |
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| 372 | 372 | | H. If a credit is claimed for the costs of acquiring, constructing, rehabilitating or expanding a qualified child care facility and the taxpayer ceases to operate the facility as a qualified child care facility by closing the facility or disposing of the taxpayer's interest in the facility, the taxpayer must repay the credit on a ratable basis, by an increase in the taxes due under this title in a subsequent taxable year or an adjustment of allowable carryforward, or both. The repayment amount is as follows: |
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| 373 | 373 | | |
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| 374 | 374 | | 1. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within three years after the first taxable year for which the credit is claimed, one hundred percent of the credit claimed. |
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| 375 | 375 | | |
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| 376 | 376 | | 2. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within four years after the first taxable year for which the credit is claimed, fifty percent of the credit claimed. |
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| 377 | 377 | | |
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| 378 | 378 | | 3. For a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within five years after the first taxable year for which the credit is claimed, twenty-five percent of the credit claimed. |
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| 379 | 379 | | |
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| 380 | 380 | | 4. for a taxpayer that closes or disposes of the taxpayer's interest in the qualified child care facility within six years or more after the first taxable year for which the credit is claimed, zero dollars. |
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| 381 | 381 | | |
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| 382 | 382 | | I. repayment under subsection H of this section is not required if a person acquiring a taxpayer's interest in a qualified child care facility agrees in writing to assume the repayment liability of the taxpayer. Repayment liability shall be computed as if no change in ownership occurred. |
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| 383 | 383 | | |
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| 384 | 384 | | J. A taxpayer may not claim both a credit under this section and the income tax subtraction under section 43-1130. |
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| 385 | 385 | | |
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| 386 | 386 | | K. If the amount of the credit under this section exceeds the taxes otherwise due under this article on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry forward for not more than five consecutive taxable years' income tax liability. |
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| 387 | 387 | | |
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| 388 | 388 | | L. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. |
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| 389 | 389 | | |
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| 390 | 390 | | M. The department may adopt rules and publish and prescribe forms and procedures as necessary to administer this section. |
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| 391 | 391 | | |
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| 392 | 392 | | N. From and after June 30, 2026 and each year thereafter, the department shall report the total number of new qualified child care facilities created, new child care slots created or maintained, total number of children served and employee retention rates to the governor, the speaker of the house of representatives and the president of the senate and shall provide a copy of this report to the secretary of state. |
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| 393 | 393 | | |
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| 394 | 394 | | O. For the purposes of this section: |
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| 395 | 395 | | |
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| 396 | 396 | | 1. "Child care provider" means a child care provider that is licensed or certified pursuant to title 36, chapter 7.1 or title 46, chapter 7 and that is rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or an out-of-school time program provider. |
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| 397 | 397 | | |
|---|
| 398 | 398 | | 2. "Child care resource and referral services" means providing information to employees about child care providers through one or more of the following means: |
|---|
| 399 | 399 | | |
|---|
| 400 | 400 | | (a) Maintaining a uniform database of all child care providers in the community, including occupancy and vacancy data. |
|---|
| 401 | 401 | | |
|---|
| 402 | 402 | | (b) Providing individualized consumer education to families seeking child care. |
|---|
| 403 | 403 | | |
|---|
| 404 | 404 | | (c) Providing timely referrals of available child care providers to families seeking child care. |
|---|
| 405 | 405 | | |
|---|
| 406 | 406 | | (d) Recruiting child care providers. |
|---|
| 407 | 407 | | |
|---|
| 408 | 408 | | (e) Developing, conducting and disseminating training for child care professionals and providing technical assistance to current and potential child care providers, employers and the community. |
|---|
| 409 | 409 | | |
|---|
| 410 | 410 | | (f) collecting and analyzing data on the supply of and demand for child care in the community. |
|---|
| 411 | 411 | | |
|---|
| 412 | 412 | | (g) Providing technical assistance regarding local, state and federally funded child care and early childhood education programs. |
|---|
| 413 | 413 | | |
|---|
| 414 | 414 | | (h) Stimulating employer involvement in making child care more affordable, available, safer and of higher quality for employees and the community. |
|---|
| 415 | 415 | | |
|---|
| 416 | 416 | | (i) Providing child care tuition at a qualified child care facility in the name and benefit of an employee. |
|---|
| 417 | 417 | | |
|---|
| 418 | 418 | | (j) Providing written educational materials to caretaker parents and informational resources to child care providers. |
|---|
| 419 | 419 | | |
|---|
| 420 | 420 | | (k) Coordinating services among child care resource and referral service organizations to assist in developing and maintaining a statewide system of child care resource and referral services. |
|---|
| 421 | 421 | | |
|---|
| 422 | 422 | | (l) Cooperating with county agencies that provide job and family services to encourage establishing parent cooperative child care centers and parent cooperative family child care homes. |
|---|
| 423 | 423 | | |
|---|
| 424 | 424 | | 3. "Out-of-school time program provider" means a provider that meets all of the following requirements: |
|---|
| 425 | 425 | | |
|---|
| 426 | 426 | | (a) Operates primarily during after school, before school or in the summer or at times when school is not normally in session. |
|---|
| 427 | 427 | | |
|---|
| 428 | 428 | | (b) Serves only school-age children. |
|---|
| 429 | 429 | | |
|---|
| 430 | 430 | | (c) Is organized to promote expanded childhood learning, enrichment, child and youth development or educational, recreational or character-building activities. |
|---|
| 431 | 431 | | |
|---|
| 432 | 432 | | 4. "qualified child care expenditure" means any amount that is paid or incurred for the following: |
|---|
| 433 | 433 | | |
|---|
| 434 | 434 | | (a) Acquiring, constructing, rehabilitating or expanding property in this state that is: |
|---|
| 435 | 435 | | |
|---|
| 436 | 436 | | (i) To be used as part of a qualified child care facility for the taxpayer. |
|---|
| 437 | 437 | | |
|---|
| 438 | 438 | | (ii) Is eligible for amortization pursuant to section 43-1130. |
|---|
| 439 | 439 | | |
|---|
| 440 | 440 | | (iii) Is not part of the principal residence of the taxpayer or any employee of the taxpayer. |
|---|
| 441 | 441 | | |
|---|
| 442 | 442 | | (b) Operating costs of a qualified child care facility of the taxpayer, including costs related to employee training, scholarship programs and increasing compensation for employees with higher levels of child care training. |
|---|
| 443 | 443 | | |
|---|
| 444 | 444 | | 5. "qualified child care facility" means a facility that is located in this state and to which all of the following apply: |
|---|
| 445 | 445 | | |
|---|
| 446 | 446 | | (a) The facility is used primarily to provide child care assistance, unless the facility is the principal place of residence of the operator of the facility. |
|---|
| 447 | 447 | | |
|---|
| 448 | 448 | | (b) The facility is licensed pursuant to title 36, chapter 7.1. |
|---|
| 449 | 449 | | |
|---|
| 450 | 450 | | (c) The child care provider is Rated as a quality program pursuant to this state's quality improvement and rating system or is nationally accredited or receives a rating as a quality program or becomes nationally accredited within two years after the first year the credit is claimed. |
|---|
| 451 | 451 | | |
|---|
| 452 | 452 | | (d) Enrollment is open to the taxpayer's employees during the taxable year. |
|---|
| 453 | 453 | | |
|---|
| 454 | 454 | | (e) If the facility is the principal trade or business of the taxpayer, at least THIRTY percent of the enrollees of the facility must be dependents of the taxpayer's employees. |
|---|
| 455 | 455 | | |
|---|
| 456 | 456 | | (f) The use of the facility or eligibility to use the facility does not discriminate in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. |
|---|
| 457 | 457 | | |
|---|
| 458 | 458 | | 6. "qualified child care resource and referral expenditure": |
|---|
| 459 | 459 | | |
|---|
| 460 | 460 | | (a) Means any amount that is paid or incurred under a contract to provide child care RESOURCE and referral services to the taxpayer's employee or any amount that is paid or incurred under a contract with a qualified child care facility to provide child care services to the taxpayer's employee. |
|---|
| 461 | 461 | | |
|---|
| 462 | 462 | | (b) Does not include services that are limited to or where eligibility is in favor of an employee who is a highly compensated employee as defined in section 414(q) of the internal revenue code. END_STATUTE |
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| 463 | 463 | | |
|---|
| 464 | 464 | | Sec. 10. Delayed repeal |
|---|
| 465 | 465 | | |
|---|
| 466 | 466 | | Section 43-1166, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2030. |
|---|
| 467 | 467 | | |
|---|
| 468 | 468 | | Sec. 11. Purpose |
|---|
| 469 | 469 | | |
|---|
| 470 | 470 | | Pursuant to section 43-223, Arizona Revised Statutes, the legislature enacts sections 43-1080 and 43-1166, Arizona Revised Statutes, as added by this act, to support working families by providing better access to child care. |
|---|
| 471 | 471 | | |
|---|
| 472 | 472 | | Sec. 12. Appropriation; out-of-school time grant program fund |
|---|
| 473 | 473 | | |
|---|
| 474 | 474 | | The sum of $3,000,000 is appropriated from the state general fund in each of fiscal years 2025-2026, 2026-2027, 2027-2028, 2028-2029 and 2029-2030 to the out-of-school time grant program fund established by section 41-1970, Arizona Revised Statutes, as added by this act. |
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| 475 | 475 | | |
|---|
| 476 | 476 | | Sec. 13. Short title |
|---|
| 477 | 477 | | |
|---|
| 478 | 478 | | This act may be cited as the "Working Families Child Care Act". |
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