State Innovation – Tax Credits
In 2007, the Louisiana State Legislature passed legislation to provide five tax credits, which are collectively referred to as the School Readiness Tax Credits. e credits are designed to strengthen the quality of child care and incentivize child care programs to participate in the state’s voluntary child care quality rating system.
The School Readiness Tax Credit package includes:
Child Care Expense Tax Credit (for parents)
Child Care Provider Tax Credit (for programs)
A tax credit for child care directors and staff (for child care personnel)
A tax credit for business-supported child care
A tax credit for donations to Child Care Resource and Referral agencies
Average Tax Credit Parents Claimed in 2012
Average Tax Credit for Child Care Providers in 2012
Average Credit Claimed by Child Care Professionals in 2012
Average Business Tax Credit in 2012
The child care expense tax credit allows parents with children under age six who a end a program with at least two stars (out of five) in the Quality Start Child Care Rating System to receive a tax credit, which increases as the star-rating of the child care program increases. More than 14,500 parents claimed the credit in 2012. The average credit in 2012 was $194.
For Star-Rated Child Care Programs
Child care providers who care for foster children or children who participate in the Child Care Assistance Program (child care subsidy) are eligible for a refundable credit based on the average monthly number of those children who a end the program multiplied by a credit amount that increases as the star rating of the program increases. More than 530 providers claimed the credit in 2012 with an average credit of $7,640.
For Child Care Workforce Professional Development
Child care directors and staff are eligible for a refundable credit if they work at least six months for a licensed program that participates in the Quality Start Child Care Rating System and are enrolled in the Louisiana Pathways Child Care Career Development System. Over 3,300 directors and teachers claimed an average credit of $2,000 in 2012. The credit increases as the level of professional development increases.
A business tax credit is available for employers that support quality child care. e credit is a percentage of eligible expenses and is based on the quality rating of the child care program (i.e., the credit increases as the star level of the program increases). The average credit in 2012 was $4,070.
Eligible support includes:
- Expenses to construct, renovate, expand or repair an eligible child care center, purchase equipment for a center or maintain or operate a center. Expenses cannot exceed $50,000 in per tax year.
- Payments made to an eligible child care program for child care services to support employees, not to exceed $5,000 per child per tax year.
- The purchase of child care slots at an eligible child care program not to exceed $50,000 per tax year.
- The credit is 20 percent of expenses for five-star programs, 15 percent of expenses for four-star programs, 10 percent of expenses for three-star programs, and five percent of expenses for two-star programs.
For Donations to Resource & Referral Agencies
Businesses can receive a credit for donations up to $5,000 per year to Child Care Resource and Referral agencies. The average credit in 2012 was $1,750.
In 2012, 90 businesses claimed the credit generally and 210 businesses claimed the credit for donations to Child Care Resource and Referral agencies. In total for 2012, the credits resulted in an additional $14.4 million for child care. Some of this funding also was used as state match for the Child Care and Development Block Grant (CCDBG) program.