A bill allowing employers and childcare providers to claim a tax credit to help workers access childcare is now in effect.
Governor Kay Ivey joined lawmakers in rolling out the "Working for Alabama" package in March 2024. The package is designed to solve one of Alabama's most significant economic challenges: its labor force participation rate, one of the country's lowest. Almost half of the state's working-age individuals are neither employed nor seeking jobs.
House Bill 358 (HB358), sponsored by House Minority Leader Anthony Daniels (D-Huntsville), is part of a comprehensive workforce development legislative package. The bill creates an employer tax credit, childcare provider facility tax credit and nonprofit childcare provider grant to assist workers with childcare. The provisions in the bill are temporary, expiring in 2027 unless further approved by the legislature.
"It is the intent of the Legislature, by the passage of this legislation, to encourage more Alabamians to enter the workforce and gain employment by improving the quality and availability of childcare options for working parents," the bill reads.
Employers can now apply for the employer tax credit by filing with the Department of Revenue. The credit is equal to 75% of the eligible expenses incurred by an employer, except for small businesses, which are eligible for 100%. The credit is limited to an aggregate amount of $15 million for all employers.
The childcare provider facility tax credit allows childcare facilities to apply for a credit, the amount of which depends on the facility's quality rating: five-star facilities are allowed a $2,000 credit per applicable child, while one-star facilities may only apply for $1,000 per child. The facility tax credit is capped at $5 million total for the fiscal year.
The bill also allows the Department of Human Resources to establish priorities, guidelines, standards, and processes for awarding the nonprofit childcare provider grant. Individual nonprofit childcare providers are limited to $50,000 per calendar year, and the entire grant program is capped at $5 million.
Employer tax credits and facility tax credits may only be claimed by an employer or childcare provider or a taxpayer who owns a pass-through entity that is an employer or childcare provider.
To connect with the author of this story or to comment, email craig.monger@1819news.com.
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