Child Care Tax Credit Waits Until 2027, After The Election

The text as introduced · 4,958 words

89R9125 DNC-D

By: Button
H.B. No. 3191

A BILL TO BE ENTITLED

AN ACT

relating to strategies to increase the availability of and access

to child care, including the creation of an employer child-care

contribution partnership program, a child-care innovation pilot

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:

SECTION 1. Subchapter A, Chapter 302, Labor Code, is

amended by adding Section 302.0064 to read as follows:

Sec. 302.0064. CHILD-CARE RESOURCES FOR EMPLOYERS. (a)

The commission shall maintain in a prominent location on its

Internet website a link to a web page consisting of comprehensive

and current information to help employers assist employees who are

parents with accessing child care, including information on:

(1) child-care assistance;

(2) best practices for assisting employees who are

parents;

(3) any available state and federal tax credits;

(4) dependent care savings accounts;

(5) any available free tools or templates;

(6) policies and benefits an employer may adopt to

assist employees in accessing child care; and

(7) other resources related to child care that the

commission considers relevant.

(b) The web page described by Subsection (a) must include an

explanation that:

(1) the commission does not and may not provide legal

advice; and

(2) an employer is not required to implement any

employment policy or benefit included on the web page unless

required by other law.

SECTION 2. Subtitle B, Title 4, Labor Code, is amended by

adding Chapters 318 and 320 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.

CHAPTER 320. CHILD-CARE INNOVATION PILOT PROGRAM

Sec. 320.001. DEFINITIONS. In this chapter:

(1) "Board" means a local workforce development board

created under Subchapter F, Chapter 2308, Government Code.

(2) "Program" means the child-care innovation pilot

program established under this chapter.

(3) "Provider" means a child-care provider who is

engaging with the program established under this chapter.

Sec. 320.002. ESTABLISHMENT. (a) The commission shall

establish and administer the child-care innovation pilot program to

address strategic workforce needs of designated pilot regions

across the state by increasing the supply of quality, affordable

child care and encouraging child-care partnerships with employers.

(b) The program shall enable boards designated by the

commission to partner with local employers and high-quality

providers to provide grants that will fund innovative child-care

expansion projects and employer partnerships that directly impact

strategic local workforce needs.

Sec. 320.003. ADMINISTRATION. The commission shall by rule

adopt a process for selecting each pilot region in which the program

will be administered by the local board, including a competitive

application process.

Sec. 320.004. APPLICATION; STRATEGIC PLAN. (a) A board

applying to participate in the program shall submit:

(1) a strategic plan proposing:

(A) measurable performance goals and progress

measures related to increasing the supply and accessibility of

quality, affordable child-care services;

(B) plans for engaging regional stakeholders,

including local employers, business associations, and

organizations that provide services to children and families, to

develop and meet regional performance goals that are based on

strategic workforce needs;

(C) the number of providers to whom the board

plans to award grants;

(D) staffing structures to support the effective

implementation of the program, including technical assistance for

child-care providers; and

(E) plans to maximize the results of the program

and support the future sustainability of child-care providers

participating in the program if state funding is not continued; and

(2) the total amount of money requested to implement

the board's strategic plan.

(b) A board may apply for the program under more than one

population category described by Section 320.005(a) but may only be

approved for participation based on one category.

Sec. 320.005. SELECTION; CRITERIA. (a) The commission

shall select not more than six boards to participate in the program

and ensure that the program is implemented in communities that

represent at least one of each of the following population sizes:

(1) a region with a population of more than 50,000;

(2) a region with a population of more than 10,000 and

less than 50,000; and

(3) a region with a population of less than 10,000.

(b) In selecting the boards to participate in the program,

the commission shall consider:

(1) the board's ability to demonstrate an unmet, local

workforce need for:

(A) child-care services in specific geographic

regions;

(B) child-care services for specific

populations, including infant care, toddler care, nontraditional

hours care, or care for children with disabilities; or

(C) child-care services described by Paragraphs

(A) and (B);

(2) whether the board has broad regional support from

diverse stakeholders, including private sector employers,

child-care providers, local governments, and parents to

participate in the program;

(3) the board's ability to leverage local funding or

partnerships to supplement state resources; and

(4) the strength of the board's proposed strategic

plan, as described by Section 320.004.

Sec. 320.006. AGREEMENTS WITH PARTICIPATING BOARDS. The

commission shall develop and enter into a performance agreement

with each board selected to participate in the program. Each board

shall comply with the terms of the performance agreement during its

participation in the program. The performance agreement must:

(1) include measurable performance goals and progress

measures that are:

(A) related to increasing the supply and

accessibility of quality, affordable child-care services in the

pilot region; and

(B) aligned to the board's strategic plan; and

(2) allocate responsibilities for accessing and

reporting progress and outcome information.

Sec. 320.007. ALLOCATION OF FUNDS. From the funds

appropriated to the commission for the program, the commission

shall award an amount of money to each board participating in the

program. In determining the allocation of money, the commission

shall consider:

(1) the size and population of the pilot region;

(2) the unmet child-care needs in the region and the

proposed funding required to address the needs;

(3) the proposed number of eligible providers in each

region to whom the board intends to award grants;

(4) the budget requested in the board's proposed

strategic plan under Section 320.004(a)(2); and

(5) other factors determined by the commission.

Sec. 320.008. GRANTS. (a) From funds awarded to a board

participating in the program, the board, after conducting a

competitive selection process, shall award grants to eligible

providers that enter into a grant contract with the board to expand

quality, affordable child-care services in accordance with the

region's strategic workforce needs and the board's approved

strategic plan.

(b) In awarding a grant under the program, a board shall

give preference to an eligible provider that demonstrates capacity

to:

(1) provide high-demand child-care services

identified by the board; and

(2) partner with one or more local employers.

Sec. 320.009. PROVIDER ELIGIBILITY. (a) To be eligible to

receive a grant under the program, a child-care provider must:

(1) be a Texas Rising Star Program provider with a

three-star rating or higher;

(2) be accredited by the National Association for the

Education of Young Children;

(3) have an accreditation from a Montessori

accreditation organization; or

(4) meet an alternative quality criterion or waiver

prescribed by the commission.

(b) In consultation with local employers and other regional

stakeholders, the board shall develop a competitive application and

scoring process for eligible providers to apply for a grant under

the program to meet the goals in the board's approved strategic plan

under Section 320.004.

(c) A board shall develop and enter into a grant contract

with each eligible provider awarded a grant under the program. Each

eligible provider awarded a grant shall comply with the terms of the

grant contract. At a minimum, grant contracts must require eligible

providers to:

(1) maintain the ability to enroll the required number

of children within each designated service area outlined in the

board's grant contract;

(2) ensure all educators employed by the provider earn

a minimum wage that is equal to or above the self-sufficient wage

required by Section 2308A.012, Government Code, in the county in

which the provider is located;

(3) maintain participation in the child-care services

program administered by the commission and accept participating

children as openings become available;

(4) maintain tuition rates at the provider's posted

rate or at a rate lower than the posted rate for families who do not

receive subsidized child-care services;

(5) maintain all eligibility requirements of the

program;

(6) provide regular reports demonstrating compliance

with the board's grant contract; and

(7) provide any additional data requested by the

board.

Sec. 320.010. SUBCONTRACTING. (a) In accordance with

Section 2308.264(e), Government Code, a board may subcontract with

a coordinating entity to administer the program.

(b) The commission may adopt rules establishing

requirements for a coordinating entity with which a board

subcontracts under this section.

Sec. 320.011. USE OF FUNDS. (a) From money appropriated by

the legislature to implement the program, the commission may use

not more than:

(1) 15 percent of the total amount appropriated to pay

costs related to administering the program, including technical

assistance provided to providers under the program; and

(2) 2 percent of the total amount appropriated to pay

costs related to research and evaluation of the program.

(b) The commission shall use at least 83 percent of the

total amount appropriated for grants administered under the

program.

(c) The commission shall adopt rules relating to the award

of grants under the program that are designed to maximize the impact

of the program and ensure the funding is sufficient to execute on

the terms of the grant contract.

(d) In awarding a grant under the program, the commission or

boards may adjust reimbursement rates as necessary to account for

the costs of providing care to specialized populations, including

children with disabilities, infants, toddlers, and children

needing after-hours care.

(e) Each board participating in the program shall ensure

that all grant money has been allocated not later than December 31,

2028.

(f) In addition to funds appropriated by the legislature, to

administer and expand the impact of the program, the commission or

boards may:

(1) seek and apply for any available federal or local

funds; and

(2) solicit and accept gifts, grants, and donations

from any other public or private source.

Sec. 320.012. QUARTERLY REPORT TO THE COMMISSION. (a) Each

board participating in the program shall submit a quarterly report

to the commission, detailing the use of grant money received under

the program and related outcomes, including:

(1) a list of providers receiving grant money and the

provider's monthly grant awards;

(2) each provider's compliance with performance goals

outlined in the provider's grant contract with the board; and

(3) the board's progress toward outcomes identified in

the approved strategic plan under Section 320.004.

(b) A board shall submit the first report required by this

section not later than the 120th day after the date the board awards

its first grant under the program and submit subsequent reports

every 120 days thereafter.

Sec. 320.013. REPORT. Not later than December 1, 2028, the

commission shall review the effectiveness of the program and submit

to the governor, the lieutenant governor, the speaker of the house

of representatives, and the members of each legislative standing

committee with primary jurisdiction over economic development a

written report regarding the outcomes, challenges, and

opportunities of the program.

Sec. 320.014. RULES. The commission shall adopt rules

necessary to implement this chapter.

Sec. 320.015. EXPIRATION. This chapter expires September

1, 2029.

SECTION 3. 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.

SECTION 4. Not later than February 1, 2026, the Texas

Workforce Commission shall post on its Internet website the

information required by Section 302.0064, Labor Code, as added by

this Act.

SECTION 5. 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 6. (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.