HB358 Alabama 2024 Session

Summary

Primary Sponsor

Anthony DanielsRepresentative

Democrat

Session

Regular Session 2024

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

HB358 creates three programs—a broad employer childcare expense tax credit, a facility-based childcare tax credit, and nonprofit provider grants—to expand affordable, high-quality childcare and boost Alabama's workforce participation.

What This Bill Does

It establishes an employer tax credit for childcare-related expenses, equal to 75% of eligible expenses (100% for small businesses), with an annual per-employer cap of $600,000 and statewide caps of $15,000,000 (2025), $17,500,000 (2026), and $20,000,000 (2027). It also creates a facility tax credit for licensed childcare facilities, calculated by the facility’s average monthly eligible children times a per-child amount that depends on the facility’s quality rating, up to $25,000 per year per facility. Additionally, it authorizes nonprofit childcare provider grants up to $50,000 per provider per year (with a $5,000,000 annual cap). The credits and grants are funded through the Education Trust Fund, require documentation and forms, include rural-area reservations, and are effective for tax years 2025–2027 unless extended by law.

Who It Affects

• Employers (including small businesses and owners of pass-through entities): can reduce their state tax liability by claiming the employer tax credit for eligible childcare expenses, subject to the 75% (or 100% for small businesses) formula, per-employer cap, and annual aggregate caps; credits require verification and documentation and may be refunded if they exceed taxes owed in certain cases.
• Childcare facilities (for-profit) and nonprofit providers, along with their staff and the families they serve: can receive a facility tax credit based on quality rating and number of eligible children, and nonprofit providers can obtain grants to fund construction, expansion, or operation; there are caps, rural-area reservations, documentation requirements, and repayment obligations if terms are not met.

Key Provisions

• Employer tax credit: 75% of eligible expenses; 100% for small businesses; $600,000 per-employer annual cap; aggregate caps of $15,000,000 (2025), $17,500,000 (2026), $20,000,000 (2027); credits against applicable taxes; pass-through entity ownership rules apply; refunds possible if credits exceed taxes owed.
• Eligible expenses: construction, renovation, expansion, or repair of childcare facilities; equipment purchases; maintenance and operation; payments to facilities or employees for providing childcare; payments to reserve services; includes facilities operated by certain nonprofit or eligible organizations.
• Childcare facility tax credit: amount per eligible child based on facility quality (5-star $2,000; 4-star $1,750; 3-star $1,500; 2-star $1,250; 1-star $1,000); cap of $25,000 per facility per year; aggregate cap of $5,000,000 annually; documentation and owner identification required for pass-throughs; refunds possible if taxes owed are less than the credit.
• Nonprofit provider grants: up to $50,000 per nonprofit provider per calendar year; aggregate grant cap of $5,000,000; grant terms include sole use for approved purposes and repayment provisions if default; MOUs and required forms and disclosures; rules to prevent overfunding and ensure proper use.
• Administration and allocations: 25% reserved for rural areas for each program; priority considerations such as rural headquarter status and earned income tax credit alignment; funds sourced from Education Trust Fund and not to impact other state funds; rules to govern allocation order and refund mechanics; effective date January 1, 2025 through December 31, 2027.

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 & Revenue