89R8667 MM-F
By: Parker S.B. No. 2164
A BILL TO BE ENTITLED
AN ACT
relating to employer incentive payments for child care for
employees, including creating an employer child-care contribution
partnership program and a franchise tax credit for taxable entities
that make certain employer child-care contributions; authorizing a
civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. EMPLOYER CHILD-CARE CONTRIBUTION PARTNERSHIP PROGRAM
SECTION 1.01. Subtitle B, Title 4, Labor Code, is amended by
adding Chapter 318 to read as follows:
CHAPTER 318. EMPLOYER CHILD-CARE CONTRIBUTION PARTNERSHIP PROGRAM
Sec. 318.001. DEFINITION. In this chapter, "program" means
the employer child-care contribution partnership program
established under this chapter.
Sec. 318.002. ESTABLISHMENT. The commission shall
establish and administer the employer child-care contribution
partnership program to support families in this state in accessing
high-quality child care by incentivizing eligible employers to
contribute to eligible employee child-care costs and providing a
state match for funds contributed by eligible employers.
Sec. 318.003. ADMINISTRATION. (a) The commission shall:
(1) adopt rules and establish procedures necessary to
administer the program, including:
(A) standardized agreements for use by
employers, employees, and child-care providers to apply for and
enroll in the program;
(B) eligibility and income verification
procedures for employees;
(C) eligibility criteria for child-care
providers, including quality standards;
(D) procedures for notifying each relevant party
of:
(i) the results of an eligibility
determination; and
(ii) the party's enrollment in the program
as soon as practicable after receiving and processing an agreement
and determining each party's eligibility;
(E) procedures for determining the amount of the
state match in accordance with Section 318.009(b) and notifying the
employee and the child-care provider regarding the amount;
(F) procedures for prioritizing and approving
agreements, including maintaining a waitlist;
(G) procedures for notifying the commission and
the parties to an agreement regarding termination of the agreement
by any party;
(H) procedures for notifying the commission and
the parties to an agreement regarding nonpayment by any party;
(I) procedures for recouping state match money or
a portion of state match money if there is an overpayment to a
participating child-care provider;
(J) criteria for disqualifying participants from
the program;
(K) procedures for hearing appeals from program
participants;
(L) procedures for issuing and logging payments
to a participating child-care provider; and
(M) criteria and procedures for modifying or
terminating an agreement, including:
(i) if the relationship between the
employee and employer is severed;
(ii) if an employer fails to make a
contribution in accordance with the terms of an agreement; and
(iii) if a child-care provider ceases
participation or otherwise becomes ineligible to participate in the
program;
(2) select an administration assistance organization
described by Subsection (c);
(3) ensure confidentiality protocols to safeguard the
personal information of participating employers, employees, and
child-care providers, including ensuring that an employee's
personal information is not disclosed without the employee's
written consent;
(4) maintain records regarding the balance of the
program fund for each fiscal year and all payments made from the
fund;
(5) develop and distribute to employers, employees,
and child-care providers informational material regarding:
(A) the program's objectives, benefits, and
eligibility requirements; and
(B) any other child-care assistance programs or
benefits that may be available to an employee; and
(6) maintain a waitlist if the money in the program
fund is insufficient to approve all agreements received and provide
a state match in accordance with Section 318.009(b).
(a-1) The commission shall convene a work group to assist
the commission in developing the rules under Subsection (a). The
work group must include:
(1) child-care providers;
(2) community stakeholders, including stakeholders
with knowledge of or expertise in child care;
(3) employers or members of associations representing
employers; and
(4) at least one parent of a child who receives care
from a child-care provider.
(a-2) Subsection (a-1) and this subsection expire September
1, 2027.
(b) The commission may:
(1) delegate an administrative duty under the program
to a division of the commission or the administration assistance
organization described by Subsection (c);
(2) coordinate and share information with other state
agencies; and
(3) procure grants or contracts, in accordance with
other law, with third parties to administer the program or parts of
the program, including an administration assistance organization
described by Subsection (c).
(c) To be eligible for selection as an administration
assistance organization, an organization must:
(1) be exempt from federal taxation under Section
501(a) of the Internal Revenue Code of 1986 by being listed as an
exempt organization in Section 501(c)(3) of that code;
(2) be in good standing with the state; and
(3) be able to administer elements of the program as
determined by the comptroller, including the ability to process
employer contribution payments made under Section 318.004.
(d) The commission shall implement the program and issue a
state match under Section 318.009(b) in a state fiscal year only if
the legislature specifically appropriates money to the commission
for that fiscal year for that purpose. The commission may implement
the program and issue a state match using other money available to
the commission for that purpose.
Sec. 318.004. EMPLOYER DUTIES. An employer who provides
child-care assistance to an employee as a benefit of employment may
participate in the program by entering into an agreement described
by Section 318.007. The employer shall:
(1) provide at least $1,200 per year to or on behalf of
an eligible employee for each child the employee has enrolled with a
provider eligible under Section 318.006 for the employee's
child-care costs as the employer contribution;
(2) enter into a standardized agreement under Section
318.007;
(3) submit the agreement to the commission for
verification of eligibility and approval;
(4) submit any additional information the commission
considers necessary; and
(5) on verification and approval of the agreement by
the commission, make contributions to the employee's eligible
child-care costs in accordance with commission guidelines.
Sec. 318.005. EMPLOYEE DUTIES. (a) An employee shall
complete an agreement described by Section 318.007 and provide any
additional information the commission considers necessary.
(b) An employee shall immediately notify the commission if a
child for whom the employee receives a benefit under this chapter
receives subsidized child care under the commission's subsidized
child-care program.
(c) The employee shall pay the child-care provider the cost
of child-care services not covered by the employer's contribution
and the state match.
Sec. 318.006. PROVIDER ELIGIBILITY. (a) To be eligible to
receive money under the program, a child-care provider must:
(1) be a child-care facility or family home licensed
under Chapter 42, Human Resources Code, including a facility
operated by the employer;
(2) be a high-quality program as determined by the
commission; and
(3) comply with an agreement and provide information
the commission considers necessary.
(b) The commission may waive or modify the eligibility
requirements under this section.
Sec. 318.007. PROGRAM AGREEMENTS. (a) The commission
shall create a standardized agreement for use by employers and
employees participating in the program, to be completed and agreed
to by each party.
(b) The commission may create a standardized agreement for
use by child-care providers participating in the program.
Sec. 318.008. PROGRAM FUND. (a) The program fund is a
dedicated account in the general revenue fund administered by the
commission.
(b) The program fund consists of:
(1) money appropriated by the legislature for deposit
to the credit of the fund for the purposes of this chapter;
(2) interest earned on the investment of money in the
fund;
(3) the proceeds of civil penalties collected under
Section 318.011; and
(4) gifts, grants, and donations received by the
commission for the purposes of this chapter.
(c) Money in the fund may be appropriated only to the
commission for purposes authorized by this chapter.
(d) In each state fiscal year and to the greatest extent
practicable, at least 25 percent of the total amount appropriated
from the fund for that year must be distributed under agreements
with employers with fewer than 50 full-time employees. For an
employer that operates multiple locations or has common ownership
or affiliates, each location is considered a separate employer for
the purposes of calculating the number of full-time employees under
this subsection.
(d-1) If in a state fiscal year there is money available
from the allocation of money described by Subsection (d) after
distributing money in the manner described by that subsection, the
commission may distribute the money under agreements with any other
eligible employers.
(e) During the state fiscal year ending August 31, 2026, not
more than 10 percent of the total amount deposited to the credit of
the fund in that fiscal year must be appropriated to the commission
to establish the program. In each subsequent state fiscal year,
money in the fund may be appropriated to the commission to
administer the program as follows:
(1) if the total amount of money available for
appropriation from the fund in that state fiscal year is more than
$50 million, not more than five percent of that amount may be used
to administer the program;
(2) if the total annual amount of money available for
appropriation from the fund in that state fiscal year is more than
$10 million but not more than $50 million, not more than 10 percent
of that amount may be used to administer the program; and
(3) if the total annual amount of money available for
appropriation from the fund in that state fiscal year is not more
than $10 million, not more than 15 percent of that amount may be
used to administer the program.
Sec. 318.009. STATE MATCH. (a) On verifying the
eligibility of an employer, employee, and child-care provider and
receiving any required agreements, the commission shall issue a
state match in accordance with this section from the program fund to
a child-care provider in accordance with the terms of the
agreement. The commission may distribute the state match money
directly or through a third-party vendor, as applicable.
(b) The commission may approve an agreement and issue a
state match only if there is sufficient money in the program fund to
pay the costs under the agreement and the money has been
appropriated to the commission for that purpose.
(c) Subject to Subsections (b) and (e), the commission shall
provide a state match equal to:
(1) 100 percent of the contribution made by the
employee's employer if the employee has a median household income
that is less than or equal to 100 percent of the median state
household income;
(2) 75 percent of the contribution made by the
employee's employer if the employee has a median household income
that is greater than 100 percent and less than or equal to 200
percent of the median state household income; or
(3) 50 percent of the contribution made by the
employee's employer if the employee has a median household income
that is greater than 200 percent and less than or equal to 300
percent of the median state household income.
(d) A state match and an employer contribution issued under
the program and administered by the commission may not be
considered compensation for an employee's service.
(e) The amount of the state match issued under Subsection
(c) may not exceed $3,600 per child for each employee.
(f) The total amount of the state match issued under the
program may not exceed $25 million in a state fiscal biennium.
Sec. 318.010. REPORTS. (a) The commission shall publish
and submit to the legislature a report detailing the efficacy of the
program not later than December 15 of each even-numbered year. The
report must include the following information about the program:
(1) the amount appropriated to the program fund during
the preceding state fiscal year;
(2) the total number of standardized agreements
submitted by employers;
(3) the total amount of state matches paid out of the
program fund, disaggregated by county;
(4) information regarding the size, geographical
location, and industry type of employers who participated in the
program;
(5) the number, license type, quality rating level,
and geographical distribution of participating child-care
providers;
(6) average cost for services charged by child-care
providers participating in the program and information regarding
the amount by which those costs have increased or decreased during
the most recent reporting period compared with previous reporting
periods;
(7) the number and total dollar value of agreements
not approved by the commission; and
(8) demographic information regarding employees
participating in the program.
(b) Not later than January 1, 2026, the commission shall
publish and submit to the legislature a report detailing the
commission's plan for implementing the program. This subsection
expires September 1, 2026.
Sec. 318.011. FALSE INFORMATION; CIVIL PENALTY. A person
who intentionally provides false information to the commission for
purposes of receiving the benefits of the program shall be subject
to a civil penalty of not more than $500 per violation. All money
collected as a result of penalties assessed under this section
shall be paid into the state treasury and credited to the program
fund.
ARTICLE 2. FRANCHISE TAX CREDIT FOR CHILD-CARE CONTRIBUTION
SECTION 2.01. Chapter 171, Tax Code, is amended by adding
Subchapter N-1 to read as follows:
SUBCHAPTER N-1. TAX CREDIT FOR CHILD-CARE CONTRIBUTION
Sec. 171.721. DEFINITION. In this subchapter, "child-care
contribution" means the dollar amount of a contribution made by a
taxable entity to an employee of the entity for use by the employee
to secure child care at a child-care facility or family home
licensed under Chapter 42, Human Resources Code, including a
licensed child-care facility operated by the entity. The term does
not include wages paid by the taxable entity to the employee or a
payment to the employee that is considered compensation for the
employee's service.
Sec. 171.722. ENTITLEMENT TO CREDIT. A taxable entity is
entitled to a credit in the amount and under the conditions provided
by this subchapter against the tax imposed under this chapter.
Sec. 171.723. AMOUNT OF CREDIT; LIMITATION. (a) Subject to
Subsections (b) and (c), the amount of the credit a taxable entity
may claim on a report is equal to the total amount of child-care
contributions paid by the entity during the period on which the
report is based. For purposes of computing the total amount of
child-care contributions paid by the taxable entity, a child-care
contribution in an amount that exceeds $3,600 for a child is
considered to be a child-care contribution in the amount of $3,600
for that child.
(b) The total credit claimed on a report, including the
amount of any carryforward under Section 171.724, may not exceed
the amount of franchise tax due for the report after applying all
other applicable credits.
(c) The total amount of credits that may be awarded under
Subsection (a) in a state fiscal year may not exceed $25 million.
(d) The comptroller by rule shall prescribe procedures by
which the comptroller will allocate the amount of credits available
under Subsection (c). The procedures must provide that credits are
allocated to taxable entities that applied for the credit on a pro
rata basis.
Sec. 171.724. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit that exceeds the limitation under Section
171.723(b), the entity may carry the unused credit forward for not
more than five consecutive reports.
(b) A carryforward is considered the remaining portion of a
credit that cannot be claimed on a report because of the limitation
under Section 171.723(b).
(c) Credits, including a carryforward, are considered to be
used in the following order:
(1) a carryforward under this section; and
(2) a credit for the period on which the report is
based.
Sec. 171.725. APPLICATION FOR CREDIT. (a) A taxable entity
must apply for a credit under this subchapter on or with the report
for the period for which the credit is claimed.
(b) A taxable entity must apply for the credit in the manner
prescribed by the comptroller and include with the application any
information requested by the comptroller to determine whether the
entity is eligible for the credit under this subchapter.
(c) The comptroller may award a credit to a taxable entity
that applies for the credit under Subsection (a) of this section if
the taxable entity is eligible for the credit and the credit is
available under Section 171.723(c). The comptroller has discretion
in determining whether to grant or deny an application for a credit.
(d) The comptroller shall notify a taxable entity in writing
of the comptroller's decision to grant or deny the application
submitted under Subsection (a). If the comptroller denies a
taxable entity's application, the comptroller shall include in the
notice of denial the reasons for the comptroller's decision.
Sec. 171.726. SALE OR ASSIGNMENT OF CREDIT. (a) A taxable
entity that makes a child-care contribution may sell or assign all
or part of the credit that may be claimed for that contribution to
one or more taxable entities, and any taxable entity to which all or
part of the credit is sold or assigned may sell or assign all or part
of the credit to another taxable entity. There is no limit on the
total number of transactions for the sale or assignment of all or
part of the total credit authorized under this subchapter.
(b) A taxable entity that sells or assigns a credit under
this section and the taxable entity to which the credit is sold or
assigned shall jointly submit written notice of the sale or
assignment to the comptroller not later than the 30th day after the
date of the sale or assignment. The notice must include:
(1) the date on which the credit was originally
established;
(2) the date of the sale or assignment;
(3) the amount of the credit sold or assigned and the
remaining period during which it may be used;
(4) the names, addresses, and federal tax
identification numbers of the taxable entity that sold or assigned
the credit or part of the credit and the taxable entity to which the
credit or part of the credit was sold or assigned; and
(5) the amount of the credit owned by the selling or
assigning taxable entity before the sale or assignment, and the
amount the selling or assigning taxable entity retained, if any,
after the sale or assignment.
(c) The sale or assignment of a credit in accordance with
this section does not extend the period for which a credit may be
carried forward.
(d) After a taxable entity claims a credit for a child-care
contribution under this subchapter, another entity may not use the
same expenditure as the basis for another credit.
Sec. 171.727. RULES. The comptroller shall adopt rules
necessary to implement and administer this subchapter.
ARTICLE 3. TRANSITION AND EFFECTIVE DATE
SECTION 3.01. Subchapter N-1, Chapter 171, Tax Code, as
added by this Act, applies only to a report originally due on or
after January 1, 2026.
SECTION 3.02. (a) Except as provided by Subsection (b) of
this section, this Act takes effect September 1, 2025.
(b) Subchapter N-1, Chapter 171, Tax Code, as added by this
Act, takes effect January 1, 2026.