Many employers are increasingly recognizing that childcare issues are workforce issues, but the support the public sector can provide to businesses seeking to invest in it is limited, at least at the federal level.
Though there are some federal childcare policies, they’re “not nearly enough,” said Brian Gutman, director of government relations for childcare company the Learning Care Group, in a recent panel at the Society for Human Resource Management’s annual conference in Chicago. Incentives such as the Internal Revenue Service’s (IRS) tax credit for employer-provided childcare, which was originally enacted in 2001, are “important” but “woefully out of date,” he said.
There are some bright spots at the state level, though, where business leaders have successfully engaged legislators to enact new programs incentivizing employers to offer childcare, according to Gutman. Though he said his team has been engaging policymakers in Washington, “it is going to be far far more effective for employers to be making that same shout-out to their local elected officials,” he told HR Brew. He highlighted a few recent examples of state childcare policies that were informed by the business community, including in Florida, Texas, and Michigan.
Florida’s childcare tax credit program. The Florida legislature included a new childcare tax credit in a tax package that was passed in May.
Under the new credit, businesses that open childcare facilities on or near their worksites can claim 50% of the development costs on their taxes. Employers that fund their workers’ childcare at a local or on-site facility can also deduct 100% of the out-of-pocket costs, up to a maximum of $3,600 per child per taxable year. The tax credits cap out at $5 million per fiscal year for the next three years.
A group of business, non-profit, and civic leaders in Sarasota spearheaded a campaign for this credit last fall after realizing childcare availability in their area had “reached a crisis point,” Gutman said. “This particular program really exemplifies the power of business voices in solving these problems,” he added.
Texas’s property tax exemption for childcare facilities. The Texas legislature approved a ballot measure last November that gives property tax breaks to childcare centers. Under the exemption, eligible childcare facilities can deduct 50% to 100% of their property’s appraised value when paying taxes.
To claim the credit, childcare centers have to be in a municipality that opts in for the exemption and meet certain standards, including accepting at least 20% of families who are receiving subsidized care. This requirement creates an incentive for new childcare centers “to develop with the idea of serving more subsidized-care kids,” Gutman said. It may also spur employers to build on- or near-site childcare facilities, he added, as “the footprint of that facility can also be exempted from their property taxes.”
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Texas’s restaurant and hospitality industries lobbied to get this exemption passed, Gutman noted, to help address childcare accessibility challenges for their workers. “I have absolutely no doubt that we’re going to see more proposals from them for the 2025 legislative session in Texas, continuing to chip away on this complex issue,” he said.
Iowa’s federal tax credit match. Under the IRS’s employer-provided childcare credit, businesses that cover childcare services for their employees can claim up to 25% of the expenses incurred from childcare facilities, and up to 10% of their expenses from childcare resources and referrals. This credit is capped at $150,000 a year.
In 2021 the Iowa house passed a bill matching this credit, essentially doubling the tax credit employers can receive on childcare expenses.
Michigan’s Tri-Share program. This program, which has been in place since 2021, divides the cost of childcare equally among employers, employees, and the state.
To receive the benefit, employers work with “hubs,” which are responsible for determining eligibility and financially administering the program. Hubs collect childcare payments from employers and the state, and then transfer these payments to the childcare provider of a family’s choosing. Participating families can pay the share they owe directly to the provider, or have payment deducted from their paycheck and handled by the hub.
North Carolina is now piloting a similar program.
Kentucky’s childcare assistance partnership. Under a program called the Employee Child Care Assistance Partnership, the state of Kentucky matches employers’ childcare contributions. The state match varies based on an employee’s household income. According to a recent scale provided by the state, if a family makes $77,700 a year or less, for example, the state will match 100% of what an employer contributes. When that household income rises above $139,860, however, the state match drops to 50%.
