SB 533: Income taxes: credit: childcare.
- Session Year: 2023-2024
- House: Senate
- Latest Version Date: 2023-05-04
Current Status:
Failed
(2024-02-01: Returned to Secretary of Senate pursuant to Joint Rule 56.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
What does this bill do?
For tax years 2024–2028, the bill creates state tax credits for businesses and property owners who pay startup costs to build onsite or nearby childcare or who pay for childcare information and referral services; the credit equals 30% of those costs and is capped at $30,000 per year. It also lets employers claim a 30% credit for contributions to qualified childcare plans for their employees' children, up to $360 per child per year.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, authorizes a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, would allow a credit in the amount of 30% of the costs of startup expenses for childcare programs or constructing a childcare facility, to be used primarily by the children of the taxpayers employees or by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer, or of the costs of providing childcare information and referral services to the taxpayers employees, as provided, not to exceed $50,000 $30,000 for the taxable year.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, would also allow a credit in the amount of 30% of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employees, not to exceed $360 for each qualified dependent.
Existing law requires any bill authorizing a new tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
The bill would make specified findings detailing the goals, purposes, and objectives of the above-described tax credits, performance indicators for determining whether the credits meets those goals, purposes, and objectives, and data collection requirements.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, authorizes a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2034, 2029, would allow a credit in the amount of 30% of the costs of startup expenses for childcare programs or constructing a childcare facility, to be used primarily by the children of the taxpayers employees or by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer, or of the costs of providing childcare information and referral services to the taxpayers employees, as provided, not to exceed $50,000 for the taxable year. The bill would require the taxpayer to submit to the Franchise Tax Board upon request a statement certifying the costs for which the credit is claimed, as specified. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2034, 2029, would also allow a credit in the amount of 30% of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employees, not to exceed $360 for each qualified dependent.
Existing law requires any bill authorizing a new tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
The bill would make specified findings detailing the goals, purposes, and objectives of the above-described tax credit, credits, performance indicators for determining whether the credit credits meets those goals, purposes, and objectives, and data collection requirements.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.This bill would provide that no reimbursement is required by this act for a specified reason.This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, authorizes a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2034, would allow a credit in the amount of 30% of the costs of startup expenses for childcare programs or constructing a childcare facility, to be used primarily by the children of the taxpayers employees or by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer, or of the costs of providing childcare information and referral services to the taxpayers employees, as provided, not to exceed $50,000 for the taxable year. The bill would require the taxpayer to submit to the Franchise Tax Board upon request a statement certifying the costs for which the credit is claimed, as specified. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2034, would also allow a credit in the amount of 30% of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employees, not to exceed $360 for each qualified dependent.
Existing law requires any bill authorizing a new tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
The bill would make specified findings detailing the goals, purposes, and objectives of the above-described tax credit, performance indicators for determining whether the credit meets those goals, purposes, and objectives, and data collection requirements.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, a credit for household and dependent care expenses necessary for gainful employment, as provided. This bill would state the intent of the legislature to enact legislation that would allow a credit against those taxes for businesses that provide childcare.The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill would state the intent of the legislature to enact legislation that would allow a credit against those taxes for businesses that provide childcare.
(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thirty thousand dollars ($50,000) ($30,000) for a taxable year.
(c)For purposes of this section, the following shall apply:
(1)Dependent has the same meaning as in Section 152 of the Internal Revenue Code.
(2)Primarily means enrollment of more than 50 percent on average during the taxable year.
(3)Startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to their respective share of the costs paid or incurred.
(e)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(g)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(h)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(i)This section shall remain in effect only until December 1, 2029, and as of that date is repealed.
SEC. 2.Section 10752.18 is added to the Revenue and Taxation Code, to read:10752.18.SEC. 2.Section 17052.18 is added to the Revenue and Taxation Code, to read:17052.18.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section shall not exceed three hundred sixty dollars ($360) for each qualified dependent per taxable year.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and daycare workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 11 (commencing with Section 23001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age at the end of the taxable year.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(h)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(i)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(j)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(k)This section shall remain in effect only until December 1, 2029, and as of that date is repealed.
SEC. 3.Section 23617 is added to the Revenue and Taxation Code, to read:23617.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thirty thousand dollars ($50,000) ($30,000) for a taxable year.
(c)For purposes of this section, the following shall apply:
(1)Dependent has the same meaning as in Section 152 of the Internal Revenue Code.
(2)Primarily means enrollment of more than 50 percent on average during the taxable year.
(3)Startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to its respective share of the costs paid or incurred.
(e)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(g)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(h)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(i)This section shall remain in effect only until December 1, 2029, and as of that date is repealed.
SEC. 4.Section 23618 is added to the Revenue and Taxation Code, to read:23618.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section shall not exceed three hundred sixty dollars ($360) for each qualified dependent per taxable year.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and daycare workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 10 (commencing with Section 17001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age at the end of the taxable year.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(h)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(i)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(j)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(k)This section shall remain in effect only until December 1, 2029, and as of that date is repealed.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, 2029, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The cost costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)For each taxable year beginning on or after January 1, 2024, the The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thousand dollars ($50,000) for a taxable year.
(c)For purposes of this section, startup the following shall apply:
(1)Dependent has the same meaning as in Section 152 of the Internal Revenue Code.
(2)Primarily means enrollment of more than 50 percent on average during the taxable year.
(3)Startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to their respective share of the costs paid or incurred.
(e)(1)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted. However, the excess from any one year shall not exceed fifty thousand dollars ($50,000).
(2)If the credit carryovers from preceding taxable years allowed under paragraph (1) plus the credit allowed for the taxable year under subdivision (b) would exceed an aggregate total of fifty thousand dollars ($50,000), then the credit allowed to reduce the net tax under this section for the taxable year shall be limited to fifty thousand dollars ($50,000) and the amount in excess of the fifty-thousand-dollar ($50,000) limit may be carried over and applied against the net tax in the following year, and succeeding years if necessary, in an amount which, when added to the credit allowed under subdivision (b) for that succeeding taxable year, does not exceed fifty thousand dollars ($50,000).(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction credit is based shall be reduced by the amount of the deduction credit allowed under this section.
(g)In lieu of claiming the tax credit provided by this section, the taxpayer may elect to take depreciation pursuant to Section 17250. In addition, the taxpayer may take depreciation pursuant to that section for the cost of a facility in excess of the amount of the tax credit claimed under this section.(h)The basis for any childcare facility for which a credit is allowed shall be reduced by the amount of the credit attributable to the facility. The basis adjustment shall be made for the taxable year for which the credit is allowed.(i)A credit shall not be allowed under subparagraph (B) of paragraph (1) of subdivision (b) in the case of any taxpayer that is required by any local ordinance or regulation to provide a childcare facility.(j)(1)In order to be eligible for the credit allowed under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall submit to the Franchise Tax Board upon request a statement certifying that the costs for which the credit is claimed are incurred with respect to the startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of the taxpayers employees or the children of the employees of tenants leasing commercial or office space in a building owned by the taxpayer and which will be in operation for at least 60 consecutive months after completion.(2)If the childcare center for which a credit is claimed pursuant to this section is disposed of or ceases to operate within 60 months after completion, that portion of the credit claimed which represents the remaining portion of the 60-month period shall be added to the taxpayers tax liability in the taxable year of that disposition or nonuse.(k)(g)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(l)(h)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)(i)This section shall remain in effect only until December 1, 2034, 2029, and as of that date is repealed.
SEC. 2.Section 10752.18 is added to the Revenue and Taxation Code, to read:10752.18.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, 2029, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section in any taxable year shall not exceed three hundred sixty dollars ($360) for each qualified dependent. dependent per taxable year.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and day care daycare workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 11 (commencing with Section 23001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age. age at the end of the taxable year.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The credit shall not be available to an employer if the care provided on behalf of an employee is provided by an individual who:(1)Qualifies as a dependent of that employee or that employees spouse under subdivision (d) of Section 17054.(2)Is, within the meaning of Section 17056, a son, stepson, daughter, or stepdaughter of that employee and is under 19 years of age at the close of that taxable year.(h)(g)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(i)(h)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction credit is based shall be reduced by the amount of the deduction credit allowed under this section.
(j)If the credit is taken by an employer for contributions to a qualified care plan that is used at a facility owned by the employer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.(k)(i)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(l)(j)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)(k)This section shall remain in effect only until December 1, 2034, 2029, and as of that date is repealed.
SEC. 3.Section 23617 is added to the Revenue and Taxation Code, to read:23617.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, 2029, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The cost costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)For each taxable year beginning on or after January 1, 2024, the The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thousand dollars ($50,000) for a taxable year.
(c)For purposes of this section, startup the following shall apply:
(1)Dependent has the same meaning as in Section 152 of the Internal Revenue Code.
(2)Primarily means enrollment of more than 50 percent on average during the taxable year.
(3)Startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to its respective share of the costs paid or incurred.
(e)(1)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted. However, the excess from any one year shall not exceed fifty thousand dollars ($50,000).
(2)If the credit carryovers from preceding taxable years allowed under paragraph (1) plus the credit allowed for the taxable year under subdivision (b) would exceed an aggregate total of fifty thousand dollars ($50,000), then the credit allowed to reduce the tax under this section for the taxable year shall be limited to fifty thousand dollars ($50,000) and the amount in excess of the fifty-thousand-dollar ($50,000) limit may be carried over and applied against the tax in the following year, and succeeding years if necessary, in an amount which, when added to the credit allowed under subdivision (b) for that succeeding taxable year, does not exceed fifty thousand dollars ($50,000).(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction credit is based shall be reduced by the amount of the deduction credit allowed under this section.
(g)The basis for any childcare facility for which a credit is allowed shall be reduced by the amount of the credit attributable to the facility. The basis adjustment shall be made for the taxable year for which the credit is allowed.(h)A credit shall not be allowed under subparagraph (B) of paragraph (1) of subdivision (b) in the case of any taxpayer that is required by any local ordinance or regulation to provide a childcare facility.(i)(1)In order to be eligible for the credit allowed under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall submit to the Franchise Tax Board upon request a statement certifying that the costs for which the credit is claimed are incurred with respect to the startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of the taxpayers employees or the children of the employees of tenants leasing commercial or office space in a building owned by the taxpayer and which will be in operation for at least 60 consecutive months after completion.(2)If the childcare center for which a credit is claimed pursuant to this section is disposed of or ceases to operate within 60 months after completion, that portion of the credit claimed which represents the remaining portion of the 60-month period shall be added to the taxpayers tax liability in the taxable year of that disposition or nonuse.(j)(g)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(k)(h)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(l)(i)This section shall remain in effect only until December 1, 2034, 2029, and as of that date is repealed.
SEC. 4.Section 23618 is added to the Revenue and Taxation Code, to read:23618.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, 2029, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section in any taxable year shall not exceed three hundred sixty dollars ($360) for each qualified dependent. dependent per taxable year.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and day care daycare workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 10 (commencing with Section 17001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age. age at the end of the taxable year.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The credit shall not be available to an employer if the care provided on behalf of an employee is provided by an individual who:(1)Qualifies as a dependent of that employee or that employees spouse under subdivision (d) of Section 17054.(2)Is, within the meaning of Section 17056, a son, stepson, daughter, or stepdaughter of that employee and is under 19 years of age at the close of that taxable year.(h)(g)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(i)(h)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction credit is based shall be reduced by the amount of the deduction credit allowed under this section.
(j)If the credit is taken by an employer for contributions to a qualified care plan that is used at a facility owned by the employer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.(k)(i)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(l)(j)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)(k)This section shall remain in effect only until December 1, 2034, 2029, and as of that date is repealed.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.SEC. 6.SEC. 5.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The cost paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)For each taxable year beginning on or after January 1, 2024, the cost paid or incurred by the taxpayer for startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thousand dollars ($50,000) for a taxable year.
(c)For purposes of this section, startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to their respective share of the costs paid or incurred.
(e)(1)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted. However, the excess from any one year shall not exceed fifty thousand dollars ($50,000).
(2)If the credit carryovers from preceding taxable years allowed under paragraph (1) plus the credit allowed for the taxable year under subdivision (b) would exceed an aggregate total of fifty thousand dollars ($50,000), then the credit allowed to reduce the net tax under this section for the taxable year shall be limited to fifty thousand dollars ($50,000) and the amount in excess of the fifty-thousand-dollar ($50,000) limit may be carried over and applied against the net tax in the following year, and succeeding years if necessary, in an amount which, when added to the credit allowed under subdivision (b) for that succeeding taxable year, does not exceed fifty thousand dollars ($50,000).
(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction is based shall be reduced by the amount of the deduction allowed under this section.
(g)In lieu of claiming the tax credit provided by this section, the taxpayer may elect to take depreciation pursuant to Section 17250. In addition, the taxpayer may take depreciation pursuant to that section for the cost of a facility in excess of the amount of the tax credit claimed under this section.
(h)The basis for any childcare facility for which a credit is allowed shall be reduced by the amount of the credit attributable to the facility. The basis adjustment shall be made for the taxable year for which the credit is allowed.
(i)A credit shall not be allowed under subparagraph (B) of paragraph (1) of subdivision (b) in the case of any taxpayer that is required by any local ordinance or regulation to provide a childcare facility.
(j)(1)In order to be eligible for the credit allowed under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall submit to the Franchise Tax Board upon request a statement certifying that the costs for which the credit is claimed are incurred with respect to the startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of the taxpayers employees or the children of the employees of tenants leasing commercial or office space in a building owned by the taxpayer and which will be in operation for at least 60 consecutive months after completion.
(2)If the childcare center for which a credit is claimed pursuant to this section is disposed of or ceases to operate within 60 months after completion, that portion of the credit claimed which represents the remaining portion of the 60-month period shall be added to the taxpayers tax liability in the taxable year of that disposition or nonuse.
(k)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(l)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
SEC. 2.Section 10752.18 is added to the Revenue and Taxation Code, to read:10752.18.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, there shall be allowed as a credit against the net tax, as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section in any taxable year shall not exceed three hundred sixty dollars ($360) for each qualified dependent.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and day care workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 11 (commencing with Section 23001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent of a qualified employee who is under 12 years of age.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the net tax, the excess may be carried over to reduce the net tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The credit shall not be available to an employer if the care provided on behalf of an employee is provided by an individual who:
(1)Qualifies as a dependent of that employee or that employees spouse under subdivision (d) of Section 17054.
(2)Is, within the meaning of Section 17056, a son, stepson, daughter, or stepdaughter of that employee and is under 19 years of age at the close of that taxable year.
(h)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(i)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction is based shall be reduced by the amount of the deduction allowed under this section.
(j)If the credit is taken by an employer for contributions to a qualified care plan that is used at a facility owned by the employer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.
(k)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(l)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
SEC. 3.Section 23617 is added to the Revenue and Taxation Code, to read:23617.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A)The cost paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayers employees.
(B)For each taxable year beginning on or after January 1, 2024, the cost paid or incurred by the taxpayer for startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C)(i)The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayers employees, and make referrals of the taxpayers employees to childcare services where there are vacancies.
(ii)In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2)The amount of the credit allowed by this section shall not exceed fifty thousand dollars ($50,000) for a taxable year.
(c)For purposes of this section, startup expenses include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d)If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to its respective share of the costs paid or incurred.
(e)(1)In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted. However, the excess from any one year shall not exceed fifty thousand dollars ($50,000).
(2)If the credit carryovers from preceding taxable years allowed under paragraph (1) plus the credit allowed for the taxable year under subdivision (b) would exceed an aggregate total of fifty thousand dollars ($50,000), then the credit allowed to reduce the tax under this section for the taxable year shall be limited to fifty thousand dollars ($50,000) and the amount in excess of the fifty-thousand-dollar ($50,000) limit may be carried over and applied against the tax in the following year, and succeeding years if necessary, in an amount which, when added to the credit allowed under subdivision (b) for that succeeding taxable year, does not exceed fifty thousand dollars ($50,000).
(f)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction is based shall be reduced by the amount of the deduction allowed under this section.
(g)The basis for any childcare facility for which a credit is allowed shall be reduced by the amount of the credit attributable to the facility. The basis adjustment shall be made for the taxable year for which the credit is allowed.
(h)A credit shall not be allowed under subparagraph (B) of paragraph (1) of subdivision (b) in the case of any taxpayer that is required by any local ordinance or regulation to provide a childcare facility.
(i)(1)In order to be eligible for the credit allowed under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall submit to the Franchise Tax Board upon request a statement certifying that the costs for which the credit is claimed are incurred with respect to the startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of the taxpayers employees or the children of the employees of tenants leasing commercial or office space in a building owned by the taxpayer and which will be in operation for at least 60 consecutive months after completion.
(2)If the childcare center for which a credit is claimed pursuant to this section is disposed of or ceases to operate within 60 months after completion, that portion of the credit claimed which represents the remaining portion of the 60-month period shall be added to the taxpayers tax liability in the taxable year of that disposition or nonuse.
(j)In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(k)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C)The number of children served by these facilities.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(l)This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
SEC. 4.Section 23618 is added to the Revenue and Taxation Code, to read:23618.(a)For each taxable year beginning on or after January 1, 2024, and before January 1, 2034, there shall be allowed as a credit against the tax, as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b)(1)The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayers qualified employee.
(2)The amount of the credit allowed by this section in any taxable year shall not exceed three hundred sixty dollars ($360) for each qualified dependent.
(c)For purposes of this section:
(1)Qualified care plan means a plan providing qualified care.
(2)Qualified care includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employees dependents. Qualified care must be provided in this state under the authority of a license when required by California law.
(3)Specialized center means a facility that provides care to mildly ill children and that may do all of the following:
(A)Be staffed by pediatric nurses and day care workers.
(B)Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C)Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D)Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4)Contributions include direct payments to childcare programs or providers. Contributions do not include amounts contributed to a qualified care plan pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 10 (commencing with Section 17001) and this part.
(5)Qualified employee means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6)Employee includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individual treated as employee.
(7)Qualified dependent means any dependent of a qualified employee who is under 12 years of age.
(d)If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e)If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f)If the credit allowed by this section exceeds the tax, the excess may be carried over to reduce the tax in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(g)The credit shall not be available to an employer if the care provided on behalf of an employee is provided by an individual who:
(1)Qualifies as a dependent of that employee or that employees spouse under subdivision (d) of Section 17054.
(2)Is, within the meaning of Section 17056, a son, stepson, daughter, or stepdaughter of that employee and is under 19 years of age at the close of that taxable year.
(h)The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(i)Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the deduction is based shall be reduced by the amount of the deduction allowed under this section.
(j)If the credit is taken by an employer for contributions to a qualified care plan that is used at a facility owned by the employer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.
(k)In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children of employees served by the qualified childcare plan.
(l)(1)For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A)The dollar amount of credits claimed annually.
(B)The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2)The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(m)This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 6.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.It is the intent of the legislature to enact legislation that would allow a credit against the taxes imposed by the Personal Income Tax Law and the Corporation Tax Law for businesses that provide childcare.It is the intent of the legislature to enact legislation that would allow a credit against the taxes imposed by the Personal Income Tax Law and the Corporation Tax Law for businesses that provide childcare.
|
Date
|
Status
|
|---|---|
| Feb 1, 2024 | Returned to Secretary of Senate pursuant to Joint Rule 56. |
| Jan 18, 2024 | January 18 hearing: Held in committee and under submission. |
| Jan 17, 2024 | Set for hearing January 18. |
| Jan 16, 2024 | January 16 hearing: Placed on APPR suspense file. |
| Jan 10, 2024 | Set for hearing January 16. |
| May 11, 2023 | May 15 set for first hearing canceled at the request of author. |
| May 9, 2023 | Set for hearing May 15. |
| May 4, 2023 | Read second time and amended. Re-referred to Com. on APPR. |
| May 3, 2023 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0. Page 993.) (May 3). |
| Apr 25, 2023 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on GOV. & F. |
| Apr 20, 2023 | Set for hearing May 3. |
| Mar 29, 2023 | Re-referred to Com. on GOV. & F. |
| Mar 20, 2023 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS. |
| Feb 22, 2023 | Referred to Com. on RLS. |
| Feb 15, 2023 | From printer. May be acted upon on or after March 17. |
| Feb 14, 2023 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jan 16, 2024 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| May 3, 2023 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| California Chamber Of Commerce | * Support | May 3, 2023 |
| City of Goleta | ** Support | |
| City of Golita | * Support | May 3, 2023 |
| the Early Care and Education Consortium | * Support | May 3, 2023 |
| the Early Care and Education Consortium | * Support | May 3, 2023 |
SENATE COMMITTEE ON
Senator Anthony Portantino, Chair
2023 - 2024 Regular Session
SB 533 (Limón) - Income taxes: credit: childcare
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
SB 533 would create two tax credits, for (1) the costs to build childcare centers, and (2) contributions made to provide specialized care for dependents of employees.
Fiscal Impact:
The Franchise Tax Board (FTB) estimated (in May 2023) that this bill would result in aggregate General Fund revenue losses of $9.3 million in 2024-25, and $11.5 million 2025-26. FTB’s costs to implement the bill have yet to be determined.
Background:
Tax expenditure programs (TEPs) are special tax provisions that reduce the amount of revenues the “basic” tax system would otherwise generate in order to provide (1) benefits to certain groups of taxpayers, and/or (2) incentives to encourage certain types of behavior and activities, such as charitable giving. Specifically, current law provides for, among other things, various income and corporation tax credits and deductions, as well as exemptions from the sales and use tax. The Department of Finance is required to publish a list of TEPs (currently totaling several hundred), which currently exceed $87 billion annually.
Under federal law, tax credits are available for 25 percent of qualified expenses for employee childcare, and 10 percent of qualified expenses for childcare resource and referral services. The total credit that may be claimed by a taxpayer is capped at $150,000 per taxable year. State law does not currently allow a comparable program.
Proposed Law:
This bill would, among other things, create two new credits under both the Personal Income and Corporation Tax Law for taxable years 2024 through 2028. FTB would be required to submit a report to the Legislature that includes specified information for each of the two credits on or before January 1, 2026, and annually thereafter.
- Employer Childcare Tax Credit. This credit would be equal to 30 percent of costs paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses, as defined, of establishing a childcare program or constructing a childcare facility in California, to be used primarily (more than 50 percent) by the dependents of the taxpayer's employees or employees of tenants leasing commercial or office space in a building owned by the taxpayer or the cost paid or incurred by the taxpayer for contributions to California childcare information and referral services, as specified. The amount of the credit shall not exceed $50,000 per taxable year.
- Childcare Contribution Credit. This credit would be in an amount equal to 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any of the qualified dependents of the taxpayer's qualified employee, not to exceed $360 for each qualified dependent per taxable year. Contributions must be direct payments to childcare providers and not pursuant to a salary reduction agreement. Additionally, the bill would:
- Specify that if an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. FTB may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
- Require that the employer prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks if the duration of the childcare received is less than 42 weeks.
Related Legislation:
SB 670 (Jackson, 2015) was similar to this bill, and was held under submission on the Suspense File of the Assembly Appropriations Committee.
Staff Comments:
The majority of the revenue loss resulting from this bill would come from the Childcare Contribution Credit; for example, FTB estimates a 2025-26 revenue loss of $11 million from the Childcare Contribution Credit, and $450,000 from the Employer Childcare Tax Credit.
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SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Anna M. Caballero, Chair
2023 - 2024 Regular
Bill No: | SB 533 | Hearing Date: | 5/3/23 |
Author: | Limón | Tax Levy: | Yes |
Version: | 4/25/23 | Fiscal: | Yes |
Consultant: | Deitchman | ||
Income taxes: credit: childcare
Creates two credits for the costs to build childcare centers and contributions made to provide specialized care for dependents of employees.
Background
Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts such tax incentives either to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something that but for the tax credit, they would otherwise not do. The Department of Finance is required annually to publish a list of tax expenditures, currently totaling around $87 billion per year.
Child Care in California. Child care in California has become increasingly hard to find and afford. The LA Times[1] calls the situation a “crisis” and, in their January 2023 article, noted that in December of last year, over 51,000 parents had to miss work due to child-care problems. A CalMatters[2] story from March 2021 notes, “Across California 8,500 licensed child care sites have shut down since the pandemic began, taking with them tens of thousands of child care slots for kids who need care while their parents work or attend school.”
Federal Incentives. Federal law allows tax credits equal to 25 percent of qualified expenses for employee childcare and 10 percent of qualified expenses for childcare resource and referral services. The maximum total credit that may be claimed by a taxpayer cannot exceed $150,000 per taxable year. Qualified child care expenses include costs paid or incurred. State law does not currently allow a program similar to the one offered at the federal level.
Seeking to help spur the creation of new childcare centers and encourage employers to contribute to their employees’ care of their children, the author wants to create two new tax credits.
Proposed Law
Senate Bill 533 creates two new credits under both the Personal Income and Corporation Tax Law for taxable years beginning on or after January 1, 2024, and before January 1, 2029.
Child Care Construction Credit. SB 533 creates a credit that is equal to 30 percent of any of the costs paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily (more than 50 percent) by the dependents of the taxpayer’s employees or employees of tenants leasing commercial or office space in a building owned by the taxpayer or the cost paid or incurred by the taxpayer for contributions to California childcare information and referral services, including those that identify local childcare services, offer information describing these resources to the taxpayer’s employees, and make referrals of the taxpayer’s employees to childcare services where there are vacancies. The amount of the credit shall not exceed $50,000 per taxable year.
The bill defines “startup expenses” include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or near site centers by one or more employers or one or more building owners leasing space to employers.
The measure allows any unused credit to be carried over for up to eight years or until exhausted.
SB 533 reduces any deduction that may be otherwise allowed by the amount of credit allowed.
Childcare Contribution Credit. Senate Bill 533 creates a credit in an amount equal to 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any of the qualified dependents of the taxpayer’s qualified employee, not to exceed $360 for each qualified dependent per taxable year. Contributions must be direct payments to child care providers and not pursuant to a salary reduction agreement.
The bill defines various terms and phrases.
The measure specifies that if an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board (FTB) may require information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
The bill requires that the employer prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks if the duration of the childcare received is less than 42 weeks.
SB 533 allows any unused credit to be carried over for up to eight taxable years or until exhausted.
The bill specifies that contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
SB 533 reduces any deduction that may be otherwise allowed by the amount of credit allowed.
The measure is repealed on December 1, 2029.
The bill requires the FTB to submit a report that includes the following for each of the two credits on or before January 1, 2026, and annually thereafter:
- For the childcare construction credit the FTB must provide the dollar amount of the credits claimed annually, the number of childcare facilities established or constructed, and the number of children served by these facilities.
- For the childcare contribution credit the FTB must the total dollar amount of the credits claimed annually, and the number of children of employees served by the qualified childcare plan.
State Revenue Impact
Pending.
Comments
1. Purpose of the bill. According to the author, “Access to affordable and quality child care in California is a constant challenge for working families, where demand for care consistently outpaces supply. Prior to 2012, the Employer Child Care Contribution Credit provided tax credits for the development of childcare programs and contributions to qualified care plans. The tax credit helped facilitate the child care industry in the state to grow, ensuring individuals were more likely to find affordable childcare options for their families. Unfortunately, the tax credit was not extended beyond its 2012 sunset date, contributing to California’s ongoing affordable childcare crisis. SB 533 reintroduces the tax credit by allowing a 30 percent credit of the costs incurred by a taxpayer for childcare program startup expenses or for constructing a childcare facility to be used by employees or office space tenants and a 30% credit of the cost paid by the taxpayer for contributions to a qualified care plan. The bill also requires the establishment of goals, purposes, and objectives of the tax credit, performance indicators for determining whether the credit meets the goals, purposes, and objectives, and data collection requirements.”
2. Revenue loss. Existing tax law provides various credits, deductions, exclusions, and exemptions for certain taxpayers. Since these items are enacted to accomplish some governmental purpose and determined to have a cost — in the form of foregone revenues — state law refers to them as "tax expenditures." This bill would create a new tax expenditure, costing the General Fund in foregone revenue. As a result, the state will have to reduce spending or increase taxes to match the foregone revenue. The Committee may wish to consider whether SB 533 is worth the tradeoff of spending cuts and/or raising taxes, and may consider amending the bill to reduce the amount of the maximum credit allowed to reduce the revenue cost to the state.
3. Effective? Tax benefits directed for specific purposes generally do two things. First, they reward behavior that would have occurred without the subsidy, providing a windfall benefit for firms who would’ve built daycare centers anyway. In these instances, the state receives no marginal benefit, and transfers funds from purposes it would otherwise spend money on to the firm. Second, the bill may encourage some taxpayers to build new childcare, thereby providing the employee of the company with reliable childcare, and potentially resulting in parents being able to work and thus contribute to the economy. A successful tax benefit’s gains exceed its losses, but no tax expenditure has yet conclusively demonstrated that its benefits outweigh its costs. The Committee may wish to consider SB 533’s effectiveness as a tool to boost daycare construction.
4. History. The Employer Child Care Contribution Credit was established in 1988 and is largely similar to this bill. AB 3144 (Hannigan, 1994), reduced the credit percentage to its current 30% level, reduced the maximum allowable credit per dependent from $600 to $360, lowered the age of qualified dependents from under 15 years to under 12 years, and repealed the option for employer to reimburse employees for their child care expenses. Under AB 3144, employers were required to contribute directly to qualified care plans on behalf of their employees in order to qualify for the credit. AB 866 (Diaz, 2001) extended the sunset date for the credit to January 1, 2007 and changed the definition of qualified contributions that may qualify for the Employer Child Care Contribution Credit. AB 1282 (Mullin, 2006) extended the sunset date for the credit to January 1, 2012. Because no subsequent legislation extended the credit, it has been defunct from tax year 2012-2014. SB 670 (Jackson, 2015) tried to revive the credit, and was held in the Assembly Appropriations Committee.
5. Section 41. Section 41 of the Revenue and Taxation Code requires any bill enacting a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). To satisfy these requirements, SB 533 states that to measure its impact, the bill directs FTB to prepare a report no later than January 1, 2026, and annually thereafter, to the Legislature that compiles the dollar amount of the credits claimed annually, the number of childcare facilities established or constructed, the number of children served by these facilities, the total dollar amount of the credits claimed annually, and the number of children of employees served by the qualified childcare plan.
Support and Opposition
(4/28/23)
Support:
California Chamber of Commerce
City of Goleta
Opposition: None received.
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Discussed in Hearing
7MIN
Senate Standing Committee on Governance and Finance
Bill Author
Bill Co-Author(s):