Alabama Lawmakers Approve Tax Incentives for Companies That Help Employees Pay for Child Care

MONTGOMERY, Alabama. Alabama lawmakers on Tuesday gave final approval to legislation to provide state tax incentives to companies that help their employees pay for child care.

The Alabama Senate voted 31-0 in favor of the bill that now goes to Governor Kay Ivey for her signature. Advocates said child care costs are a barrier for many parents considering returning to the workforce. House Minority Leader Anthony Daniels said the goal is to help families pay for child care and help businesses that are struggling to find workers.

“This brings workers back into the workforce,” Republican Sen. Garlan Gudger of Cullman said during the Senate debate.

The bill would set aside $15 million in tax credits that could be claimed by businesses that offer child care assistance, on-site child care or reserved spaces at licensed facilities. The tax credit program would begin in 2025 and end on December 31, 2027. After evaluating the cost and effectiveness of the program, lawmakers could choose to extend the tax credit.

The proposal would also provide tax credits and subsidies to providers, with incentives designed to expand the availability of care and improve quality.

The legislation would provide up to $25,000 in annual tax credits to child care providers who participate in the Department of Human Resources’ Quality Rating Improvement System, which provides ratings for programs that meet defined program standards. This part of the program would cost up to $5 million per year.

It would also provide $5 million in grants that nonprofit providers, including faith-based facilities, could seek to help improve quality or expand capacity.