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Last week the House Ways and Means Committee passed three child care bills with bipartisan support. These key pieces of legislation meet the House GOP goal of incentivizing an increase in child care availability to Iowa’s workforce—specifically in rural areas.

House File 2593
This piece of legislation is a child care incentive for employers that allows child care projects to qualify for high quality jobs awards with specific focus on economically distressed areas of Iowa. The bill provides that this expansion of the high quality jobs program operates within the current program cap and no additional funds would be needed.

In determining the eligibility of a business’s project under the program, the bill requires IEDA to consider the quality of the jobs to be created or retained, with an emphasis placed on jobs that:

  • are full-time or career-type positions
  • provide comprehensive health benefits
  • pay wages equal to or higher than similar jobs within a 25-mile radius of the business’s proposed project.

The bill also requires IEDA to consider the economic impact of the proposed project on the state. In measuring economic impact, they must place greater emphasis on projects that:

  • are located in economically distressed areas
  • will have the capacity to care for 20 or more children
  • are located in areas that have an inadequate number of existing child care providers
  • will provide child care to the business’s employees at a low-cost rate as determined pursuant to rules adopted by IEDA

House File 2594
This piece of legislation is a child care incentive for an employer and creates a non-refundable tax credit of up to $150,000. The bill is modeled after the existing federal tax credit. The bill has a fiscal impact of -$710,000 for fiscal year 2021 from the general fund.  The amount of the credit equals 25 percent of the costs to provide the child care benefit up to $150,000 per year.

The bill allows for flexibility to employers on how they want to provide the benefit to their employees. The child care employee benefits could include the following: building or rehabilitating an existing structure as a child care center for employee use, leasing a child care center, or paying the annual operating expenses of the child care center including training for the employees of the center.

House File 2595
This piece of legislation is a child care incentive for developers (to construct more child care centers) and creates a workforce child care facility tax credit for the developer of a new or rehabilitated child care facility. This program includes both income tax credits and sales and use tax refunds and is modeled after the existing workforce housing tax credit. The tax credit is non-refundable, but is transferable. The program cap is $3.0 million annually with at least 60 percent going to small cities.

The bill provides that to qualify for a tax credit a project must include at least one of the following:

  • Construction of a new child care facility
  • Rehabilitation, repair, or redevelopment of an existing structure to be used as a child care facility

Additionally, the bill provides that a developer seeking a workforce child care facility tax credit must apply to IEDA. Applications will be reviewed and scored competitively and an awarded project must be completed within three years.

The three bills are now eligible for consideration by the full House chamber. House Democrats offered an amendment three times in committee.  That amendment created a small business tax credit for child care that is similar in effect as the legislation the committee ultimately passed.  Additionally, the Democrat amendment also contained a provision that greatly expanded the child care credit. This amendment included allowing income levels of up to $250,000 to get some child care deduction.  Last session, the House doubled this tax credit from $45,000 to $90,000.  The Governor endorsed this plan in her condition of the state address in January.  The cost of The Democrats’ expanded tax credit comes in at nearly $23 million in fiscal year 2021.

Norlin Mommsen

Author: Norlin Mommsen