HB368 Alabama 2023 Session

Summary

Primary Sponsor

Anthony DanielsRepresentative

Democrat

Session

Regular Session 2023

Title

Relating to child care and workforce development; to establish the employer tax credit and child care provider tax credit; to make legislative findings.

Summary

HB368 would create refundable employer and child care facility tax credits to encourage employers to fund child care for employees and to improve access to high-quality child care in Alabama.

What This Bill Does

The bill establishes two refundable tax credits: an Employer Tax Credit for employers who incur eligible child care expenses for their employees, and a Facility Tax Credit for licensed child care providers based on the facility’s quality rating and number of eligible children. The Employer Tax Credit can be up to $1,000,000 per employer per year, with a $15,000,000 annual aggregate cap, and requires documentation to verify eligible expenses. The Facility Tax Credit pays a per-child amount determined by the facility’s quality rating (ranging from $1,000 to $2,000 per eligible child) with a $5,000,000 annual aggregate cap, and refunds are handled through the Education Trust Fund. The credits apply for tax years 2024 through 2028, are administered by the Department of Revenue, and include rural-area prioritization and ownership rules for pass-through entities, along with documentation and anti-transfer provisions.

Who It Affects

• Employers in Alabama may qualify for an refundable employer tax credit against their applicable taxes for eligible child care expenses, with documentation requirements and an annual aggregate cap of $15,000,000.
• Child care providers operating licensed facilities may qualify for a refundable facility tax credit based on the facility’s Quality STARS rating and the average monthly number of eligible children, with a $5,000,000 annual cap.
• Employees and working parents may benefit indirectly through more available, affordable, and higher-quality child care funded by their employers and supported by provider incentives.
• Owners of pass-through entities that are employers or child care providers may claim credits only for their pro rata share of ownership, and credits are not transferable to other taxpayers.

Key Provisions

• Creates refundable Employer Tax Credit up to $1,000,000 per employer per year, with a $15,000,000 annual aggregate cap for all employers.
• Creates refundable Facility Tax Credit for child care providers, calculated as average monthly eligible children times a per-child amount based on facility quality (5-star $2,000; 4-star $1,750; 3-star $1,500; 2-star $1,250; 1-star $1,000) with a $5,000,000 annual aggregate cap.
• Credits are applied against applicable taxes, require standardized documentation and verification by the Department of Revenue, and credits are refundable; non-transferability and pro rata treatment for pass-through entity owners are required.
• Effective for tax years 2024–2028 (subject to extension), with rules to reserve at least 25% of employer credits for rural areas and at least 25% of facility credits for rural providers; credits awarded in the order requested; refunds funded through the Education Trust Fund and a dedicated Child Care Tax Credit Account.
• The Department of Revenue must adopt forms, certify eligibility, and administer credits; automatic denial can occur for missing documentation; funding and impact reports are contemplated to assess effectiveness.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation, Childcare incentive tax credit created.