HB381 Alabama 2024 Session

Summary

Primary Sponsor

Reed IngramRepresentative

Republican

Session

Regular Session 2024

Title

Taxation, tax credit for childcare costs incurred by employers and for childcare facilities created

Summary

HB381 would create two refundable Alabama tax credits—one for employers' childcare expenses for employees' children and one for childcare facilities—plus rules for eligibility, amounts, and administration.

What This Bill Does

It provides an employer tax credit equal to 50% of eligible childcare expenses, with a cap of $12,000 per eligible employee (up to 50 eligible employees) and a statewide aggregate cap of $15 million per year, available for 2025–2027. It also creates a facility tax credit for childcare providers based on attendance and the facility's quality rating, capped at $25,000 per facility per year and $5 million statewide per year. Eligible expenses include constructing and maintaining facilities, purchasing equipment, payments to facilities or for childcare, and reservations; pass-through owners receive a pro rata share. The Department of Revenue will adopt rules, require documentation, and credits are refundable and applied to all applicable taxes; credits are not transferable and may be affected by rural/small business allocations and unemployment-rate adjustments.

Who It Affects

• Employers in Alabama that incur eligible childcare expenses for their employees' children, including small businesses, with tax credits and documentation requirements.
• Childcare facilities and their owners (including pass-through entities) that qualify for the facility credit based on attendance and quality rating, with limits, documentation, and pro rata ownership rules.

Key Provisions

• Two refundable tax credits: an Employer Tax Credit for costs incurred to provide childcare for employees' children, and a Facility Tax Credit for childcare providers based on attendance and quality rating.
• Employer credit: 50% of eligible expenses; $12,000 per eligible employee per year; up to 50 eligible employees; $15,000,000 annual aggregate cap; if the state's unemployment rate is at or above 4.7%, credit equals the average of the employer's credits from the previous two years.
• Facility credit: per eligible child, amount by quality rating (5-star $2,000; 4-star $1,750; 3-star $1,500; 2-star $1,250; 1-star $1,000); cap $25,000 per facility per year; $5,000,000 annual aggregate cap.
• Eligible expenses include facility construction/maintenance/operation/expansion/renovation/repair, equipment purchases, payments to facilities or employees for childcare, and payments to reserve childcare for employees' children.
• Pass-through entity owners receive a pro rata share of credits; credits are refundable and may not be transferred to other taxpayers; refunds are handled in accordance with tax type and year.
• Administration and documentation: Department of Revenue to issue standardized certificates, require documentation to substantiate expenses, and deny credits automatically if documentation is not provided; credits are awarded after documentation is reviewed.
• Funding and distribution: refunds for income tax credits flow from a dedicated Childcare Tax Credit Account within the Education Trust Fund; credits are distributed to eligible employers and providers according to the act, with rules to protect the Mental Health Trust Fund and reserve portions for rural/small businesses and rural providers.
• Effective date: the act becomes effective October 1, 2024; credits applicable to tax years 2025–2027 unless extended.

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

Subjects

Children; Economic Development; Taxation & Revenue