Parker Child-Care Bill Lets Businesses Sell Their Tax Credits

The text as introduced · 3,158 words

89R8667 MM-F

By: Parker
S.B. No. 2164

A BILL TO BE ENTITLED

AN ACT

relating to employer incentive payments for child care for

employees, including creating an employer child-care contribution

partnership 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:

ARTICLE 1. EMPLOYER CHILD-CARE CONTRIBUTION PARTNERSHIP PROGRAM

SECTION 1.01. Subtitle B, Title 4, Labor Code, is amended by

adding Chapter 318 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.

ARTICLE 2. FRANCHISE TAX CREDIT FOR CHILD-CARE CONTRIBUTION

SECTION 2.01. 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.

ARTICLE 3. TRANSITION AND EFFECTIVE DATE

SECTION 3.01. 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 3.02. (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.