House File 661 - Introduced HOUSE FILE 661 BY EHLERT , KONFRST , B. MEYER , JUDGE , LEVIN , JAMES , WILBURN , WICHTENDAHL , KURTH , GOSA , SRINIVAS , AMOS JR. , R. JOHNSON , JACOBY , CROKEN , MADISON , BAGNIEWSKI , KRESSIG , MATSON , BAETH , SCHEETZ , TUREK , GJERDE , OLSON , ZABNER , SCHOLTEN , WESSEL-KROESCHELL , COOLING , and NIELSEN A BILL FOR An Act relating to child care, including the child and 1 dependent care tax credit, a child care workforce matching 2 grant program, a small business child care tax credit, and 3 state child care assistance, and including applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2875YH (6) 91 dg/ko
H.F. 661 DIVISION I 1 CHILD AND DEPENDENT CARE TAX CREDIT 2 Section 1. Section 422.12C, subsection 1, Code 2025, is 3 amended by striking the subsection and inserting in lieu 4 thereof the following: 5 1. The taxes imposed under this subchapter, less the amounts 6 of nonrefundable credits allowed under this subchapter, shall 7 be reduced by a child and dependent care credit equal to the 8 amount of the federal child and dependent care credit provided 9 in section 21 of the Internal Revenue Code, without regard to 10 whether or not the federal credit was limited by the taxpayers 11 federal tax liability. 12 Sec. 2. RETROACTIVE APPLICABILITY. This division of this 13 Act applies retroactively to January 1, 2025, for tax years 14 beginning on or after that date. 15 DIVISION II 16 CHILD CARE WORKFORCE MATCHING GRANT PROGRAM 17 Sec. 3. NEW SECTION . 237A.15 Child care workforce matching 18 grant program. 19 1. For purposes of this section, program means the child 20 care workforce matching grant program established in this 21 section. 22 2. There is established a child care workforce matching 23 grant program. Moneys appropriated by the general assembly to 24 the department for the program shall be used for the following 25 purposes: 26 a. To raise wages for persons employed by a child care 27 facility. 28 b. To provide health insurance, paid leave, and retirement 29 benefits for persons employed by a child care facility. 30 c. To raise the quality of the work environment at each 31 child care facility. 32 d. To collect data to assess the needs of persons employed 33 by a child care facility. 34 e. To assist persons employed by a child care facility to 35 -1- LSB 2875YH (6) 91 dg/ko 1/ 10
H.F. 661 identify sources and apply for benefits for which a person may 1 qualify. 2 3. The department shall adopt rules pursuant to chapter 17A 3 to administer the program. 4 DIVISION III 5 SMALL BUSINESS CHILD CARE TAX CREDIT 6 Sec. 4. NEW SECTION . 237A.32 Small business child care tax 7 credit. 8 1. As used in this section, small business means any 9 enterprise which is located in this state, which is operated 10 for profit and under a single management, and which has either 11 fewer than twenty employees or an annual gross income of less 12 than four million dollars computed as the average of the three 13 preceding fiscal years. This definition does not apply to any 14 program or activity for which a definition for small business 15 is provided for the program or activity by federal law or 16 regulation or other state law. 17 2. A small business may receive a child care tax credit 18 for providing child care employee benefits to employees of the 19 business. The credit may be applied against income tax imposed 20 under chapter 422, subchapter II or III, the franchise tax 21 imposed under chapter 422, subchapter V, the gross premiums 22 tax imposed under chapter 432, or the moneys and credits tax 23 imposed in section 533.329. The amount of the credit equals 24 the costs to provide the benefit up to three thousand dollars 25 per employee per year. 26 3. The aggregate amount of tax credits authorized pursuant 27 to this section shall not exceed a total of two million 28 dollars per fiscal year, and shall be awarded on a first-come, 29 first-served basis. 30 4. To be eligible for a small business child care tax 31 credit, the small business must provide child care employee 32 benefits to employees of the business through any of the 33 following: 34 a. Build a new structure or rehabilitate an existing 35 -2- LSB 2875YH (6) 91 dg/ko 2/ 10
H.F. 661 structure to be used as a child care center at or near the small 1 business where the children of the employees of the business 2 are provided child care. A small business may construct or 3 rehabilitate the structure in conjunction with another business 4 but only the actual cost of the business shall be considered in 5 determining the credit. 6 b. Operate or lease a child care center at or near the small 7 business where the children of the employees of the business 8 are provided child care. 9 5. A taxpayer who elects to claim the small business child 10 care tax credit shall not claim the employer child care tax 11 credit under section 237A.31. 12 6. Any credit in excess of the tax liability is not 13 refundable but the excess for the tax year may be credited 14 to the tax liability for the following five years or until 15 depleted, whichever is earlier. 16 7. The director of revenue shall adopt rules to implement 17 this section. 18 Sec. 5. NEW SECTION . 422.12Q Small business child care tax 19 credit. 20 1. The taxes imposed under this subchapter, less the credits 21 allowed under section 422.12, shall be reduced by a small 22 business child care tax credit received pursuant to section 23 237A.32. 24 2. An individual may claim the tax credit allowed a 25 partnership, S corporation, limited liability company, estate, 26 or trust electing to have the income taxed directly to the 27 individual. The amount claimed by the individual shall be 28 based upon the pro rata share of the individuals earnings of a 29 partnership, S corporation, limited liability company, estate, 30 or trust. 31 Sec. 6. Section 422.33, Code 2025, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 33. The taxes imposed under this subchapter 34 shall be reduced by a small business child care tax credit 35 -3- LSB 2875YH (6) 91 dg/ko 3/ 10
H.F. 661 received pursuant to section 237A.32. 1 Sec. 7. Section 422.60, Code 2025, is amended by adding the 2 following new subsection: 3 NEW SUBSECTION . 16. The taxes imposed under this subchapter 4 shall be reduced by a small business child care tax credit 5 received pursuant to section 237A.32. 6 Sec. 8. NEW SECTION . 432.12P Small business child care tax 7 credit. 8 The taxes imposed under this chapter shall be reduced by 9 a small business child care tax credit received pursuant to 10 section 237A.32. 11 Sec. 9. Section 533.329, subsection 2, Code 2025, is amended 12 by adding the following new paragraph: 13 NEW PARAGRAPH . n. The moneys and credits tax imposed under 14 this section shall be reduced by a small business child care 15 tax credit received pursuant to section 237A.32. 16 Sec. 10. RETROACTIVE APPLICABILITY. This division of this 17 Act applies retroactively to January 1, 2025, for tax years 18 beginning on or after that date. 19 DIVISION IV 20 STATE CHILD CARE ASSISTANCE 21 Sec. 11. Section 237A.13, subsection 1, paragraph c, Code 22 2025, is amended to read as follows: 23 c. The childs parent, guardian, or custodian is employed 24 a minimum of thirty-two hours per week or an average of 25 thirty-two hours per week during the month if the child 26 requires basic care, or twenty-eight hours per week or an 27 average of twenty-eight hours per week during the month if the 28 child is a special needs child . 29 Sec. 12. Section 237A.13, subsection 2, paragraph a, Code 30 2025, is amended to read as follows: 31 a. (1) One Two hundred sixty fifty percent of the federal 32 poverty level applicable to the family size for children 33 needing basic care. 34 (2) Two hundred ninety percent of the federal poverty level 35 -4- LSB 2875YH (6) 91 dg/ko 4/ 10
H.F. 661 applicable to the family size for children needing special 1 needs care. 2 Sec. 13. Section 237A.13, subsection 4, paragraph a, Code 3 2025, is amended by striking the paragraph and inserting in 4 lieu thereof the following: 5 a. The department shall reimburse a provider at a rate equal 6 to the rate the provider charges a private-pay family for child 7 care. 8 Sec. 14. Section 237A.13, subsection 5, Code 2025, is 9 amended to read as follows: 10 5. The departments billing and payment provisions for 11 the program shall allow providers to elect either biweekly or 12 monthly billing and payment for child care provided under based 13 on the number of hours of child care scheduled for a child 14 enrolled in the program. The department shall remit payment 15 to a provider within ten business days of receiving a bill 16 or claim for services provided . However, if the department 17 determines that a bill has an error or omission, the department 18 shall notify the provider of the error or omission and identify 19 any correction needed before issuance of payment to the 20 provider. The department shall provide the notice within five 21 business days of receiving the billing from the provider and 22 shall remit payment to the provider within ten business days of 23 receiving the corrected billing. 24 Sec. 15. Section 237A.13, subsection 6, Code 2025, is 25 amended by striking the subsection. 26 Sec. 16. Section 237A.13, subsection 8, Code 2025, is 27 amended by adding the following new paragraph: 28 NEW PARAGRAPH . e. Persons deemed to be eligible for 29 benefits under the state child care assistance program in 30 accordance with section 237A.13A. 31 Sec. 17. NEW SECTION . 237A.13A State child care assistance 32 child care personnel. 33 1. Notwithstanding section 237A.13, subsections 1 and 2, 34 a child shall be eligible for the state child care assistance 35 -5- LSB 2875YH (6) 91 dg/ko 5/ 10
H.F. 661 program under section 237A.13 if a parent, guardian, or 1 custodian meets the following requirements: 2 a. The parent, guardian, or custodian is employed at 3 a child care facility, a child care home registered with 4 the department, or an unregistered child care home with an 5 agreement with the department to accept reimbursements from the 6 state child care assistance program. 7 b. The parent, guardian, or custodian works an average 8 minimum of thirty-two hours per week during the month in 9 a position with a primary duty of providing child care 10 directly to children, and is regularly counted in the minimum 11 child-to-staff ratio established by the department by rule. 12 c. If the parent, guardian, or custodian is employed at 13 a child care home or a child development home, the parent, 14 guardian, or custodian does not provide child care to the 15 parent, guardian, or custodians own child. A co-provider 16 at a child development home may qualify for state child care 17 assistance if such person meets all requirements set by this 18 section and by the department by rule. 19 d. The parent, guardian, or custodian is not a substitute or 20 an assistant at a child development home. 21 e. Based on the departments evaluation of the parent, 22 guardian, or custodians application for state child care 23 assistance, the department has determined the parent, guardian, 24 or custodian has a need for child care. 25 2. A director, co-director, or other administrative 26 staff member of a child care facility may qualify for state 27 child care assistance pursuant to subsection 1 if such person 28 is regularly counted in the minimum child-to-staff ratio 29 established by the department by rule. 30 3. A family participating in the state child care assistance 31 program pursuant to eligibility established under this section 32 shall make copayments for child care services received under 33 the program based on the familys household income. 34 4. The department shall adopt rules pursuant to chapter 17A 35 -6- LSB 2875YH (6) 91 dg/ko 6/ 10
H.F. 661 to implement and administer this section. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanations substance by the members of the general assembly. 4 This bill relates to child care and is separated into 5 divisions. 6 DIVISION I CHILD AND DEPENDENT CARE TAX CREDIT. The Iowa 7 child and dependent care tax credit is a refundable credit 8 calculated as a percentage of the federal child and dependent 9 care tax credit, depending on the Iowa net income of the 10 taxpayer. Currently, there are seven graduated Iowa net income 11 thresholds used to calculate the credit. This division strikes 12 the Iowa net income thresholds, and specifies a taxpayer may 13 claim a tax credit to reduce Iowa net income equal to the 14 amount of the child and dependent care credit of the federal 15 child and dependent care credit provided in section 21 of 16 the Internal Revenue Code, without regard to whether or not 17 the federal credit was limited by the taxpayers federal tax 18 liability. 19 The division applies retroactively to tax years beginning on 20 or after January 1, 2025. 21 DIVISION II CHILD CARE WORKFORCE MATCHING GRANT PROGRAM. 22 This division establishes a child care workforce matching grant 23 program (program). Moneys appropriated by the general assembly 24 to the department of health and human services (HHS) for the 25 program must be used to raise wages for persons employed by 26 a child care facility; provide health insurance, paid leave, 27 and retirement benefits for persons employed by a child care 28 facility; raise the quality of the work environment at each 29 child care facility; collect data to assess the needs of 30 persons employed by a child care facility; and assist persons 31 employed by a child care facility to identify sources and apply 32 for benefits for which a person may qualify. The division 33 requires HHS to adopt rules to administer the program. 34 DIVISION III SMALL BUSINESS CHILD CARE TAX CREDIT. 35 -7- LSB 2875YH (6) 91 dg/ko 7/ 10
H.F. 661 This division creates a small business child care tax credit 1 available against the individual and corporate income taxes, 2 the franchise tax, the insurance premiums tax, and the moneys 3 and credits tax. 4 The division defines small business as any enterprise 5 located in this state, which is operated for profit under a 6 single management and which has either fewer than 20 employees 7 or an annual gross income of less than $4 million computed as 8 the average of the three preceding fiscal years. 9 The division allows a small business to receive a tax credit 10 for providing child care employee benefits to employees of the 11 business. The amount of the credit equals the costs to provide 12 the benefit up to $3,000 per employee per year. The aggregate 13 amount of tax credits cannot exceed a total of $2 million per 14 fiscal year and are awarded on a first-come, first-served 15 basis. The division requires a small business to provide child 16 care employee benefits to employees through certain methods 17 in order to be eligible for the small business child care tax 18 credit. 19 The division applies retroactively to tax years beginning on 20 or after January 1, 2025. 21 DIVISION IV STATE CHILD CARE ASSISTANCE. This division 22 relates to state child care assistance (CCA). 23 Under current law, to be eligible for the CCA program, a 24 family must be described by one of six different circumstances 25 and meet income requirements. One of the six eligibility 26 circumstances is that a childs parent, guardian, or custodian 27 (parent) is employed a minimum of 32 hours per week or an 28 average of 32 hours per week during the month if the child 29 requires basic care, or 28 hours per week or an average of 28 30 hours per week during the month if the child is a special needs 31 child. The division changes the work requirements to 28 hours 32 per week or an average of 28 hours per week during the month for 33 parents of any child. 34 Under current law, a family is required to have income at or 35 -8- LSB 2875YH (6) 91 dg/ko 8/ 10
H.F. 661 below 160 percent of the federal poverty level applicable to 1 the familys size (FPL) for a family of a child needing basic 2 care; 200 percent of the FPL for a family of a special needs 3 child; or 85 percent of the state median gross monthly income, 4 whichever is lower. The division sets initial eligibility at 5 the lesser of 85 percent of the state median gross monthly 6 income, or 250 percent of the FPL for families of children 7 needing basic care or 290 percent of the FPL for families of 8 special needs children. 9 The division requires HHS to reimburse child care providers 10 participating in the CCA program at a rate equal to the rate 11 the provider charges a private-pay family for child care. 12 The division provides that HHS shall pay providers based 13 on the number of hours of child care scheduled for a child 14 enrolled in the CCA program instead of for child care provided. 15 The division makes a child eligible for CCA if the child 16 is in a family with a parent, guardian, or custodian who is 17 employed at a child care facility, a child care home registered 18 with HHS, or an unregistered child care home with an agreement 19 with HHS to accept CCA reimbursements; and who meets certain 20 requirements as detailed in the division (qualified parent). 21 The division provides that a director, co-director, or other 22 administrative staff of a child care facility may qualify as 23 a qualified parent if such person is regularly counted in the 24 minimum child-to-staff ratio established by HHS by rule. 25 The division requires a family who participates in CCA to 26 make copayments for services received from the program, if the 27 familys eligibility is based on a parent being a qualified 28 parent. 29 The division directs HHS to adopt rules to implement and 30 administer the divisions provisions related to qualified 31 parents. 32 The division prohibits HHS from applying waiting list 33 requirements for CCA on persons deemed eligible for CCA due to 34 eligibility based on a qualified parent. 35 -9- LSB 2875YH (6) 91 dg/ko 9/ 10
H.F. 661 The division makes a conforming change by striking Code 1 section 237A.13(6). 2 -10- LSB 2875YH (6) 91 dg/ko 10/ 10