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IA HF661

IA HF661
A bill for an act relating to child care, including the child and dependent care tax credit, a child care workforce matching grant program, a small business child care tax credit, and state child care assistance, and including applicability provisions.

summary

Introduced
02/28/2025
In Committee
02/28/2025
Crossed Over
Passed
Dead

Introduced Session

91st General Assembly

Bill Summary

This bill relates to child care and is separated into divisions. DIVISION I —— CHILD AND DEPENDENT CARE TAX CREDIT. The Iowa child and dependent care tax credit is a refundable credit calculated as a percentage of the federal child and dependent care tax credit, depending on the Iowa net income of the taxpayer. Currently, there are seven graduated Iowa net income thresholds used to calculate the credit. This division strikes the Iowa net income thresholds, and specifies a taxpayer may claim a tax credit to reduce Iowa net income equal to the amount of the child and dependent care credit of the federal child and dependent care credit provided in section 21 of the Internal Revenue Code, without regard to whether or not the federal credit was limited by the taxpayer’s federal tax liability. The division applies retroactively to tax years beginning on or after January 1, 2025. DIVISION II —— CHILD CARE WORKFORCE MATCHING GRANT PROGRAM. This division establishes a child care workforce matching grant program (program). Moneys appropriated by the general assembly to the department of health and human services (HHS) for the program must be used to raise wages for persons employed by a child care facility; provide health insurance, paid leave, and retirement benefits for persons employed by a child care facility; raise the quality of the work environment at each child care facility; collect data to assess the needs of persons employed by a child care facility; and assist persons employed by a child care facility to identify sources and apply for benefits for which a person may qualify. The division requires HHS to adopt rules to administer the program. DIVISION III —— SMALL BUSINESS CHILD CARE TAX CREDIT. This division creates a small business child care tax credit available against the individual and corporate income taxes, the franchise tax, the insurance premiums tax, and the moneys and credits tax. The division defines “small business” as any enterprise located in this state, which is operated for profit under a single management and which has either fewer than 20 employees or an annual gross income of less than $4 million computed as the average of the three preceding fiscal years. The division allows a small business to receive a tax credit for providing child care employee benefits to employees of the business. The amount of the credit equals the costs to provide the benefit up to $3,000 per employee per year. The aggregate amount of tax credits cannot exceed a total of $2 million per fiscal year and are awarded on a first-come, first-served basis. The division requires a small business to provide child care employee benefits to employees through certain methods in order to be eligible for the small business child care tax credit. The division applies retroactively to tax years beginning on or after January 1, 2025. DIVISION IV —— STATE CHILD CARE ASSISTANCE. This division relates to state child care assistance (CCA). Under current law, to be eligible for the CCA program, a family must be described by one of six different circumstances and meet income requirements. One of the six eligibility circumstances is that a child’s parent, guardian, or custodian (parent) is employed a minimum of 32 hours per week or an average of 32 hours per week during the month if the child requires basic care, or 28 hours per week or an average of 28 hours per week during the month if the child is a special needs child. The division changes the work requirements to 28 hours per week or an average of 28 hours per week during the month for parents of any child. Under current law, a family is required to have income at or below 160 percent of the federal poverty level applicable to the family’s size (FPL) for a family of a child needing basic care; 200 percent of the FPL for a family of a special needs child; or 85 percent of the state median gross monthly income, whichever is lower. The division sets initial eligibility at the lesser of 85 percent of the state median gross monthly income, or 250 percent of the FPL for families of children needing basic care or 290 percent of the FPL for families of special needs children. The division requires HHS to reimburse child care providers participating in the CCA program at a rate equal to the rate the provider charges a private-pay family for child care. The division provides that HHS shall pay providers based on the number of hours of child care scheduled for a child enrolled in the CCA program instead of for child care provided. The division makes a child eligible for CCA if the child is in a family with a parent, guardian, or custodian who is employed at a child care facility, a child care home registered with HHS, or an unregistered child care home with an agreement with HHS to accept CCA reimbursements; and who meets certain requirements as detailed in the division (qualified parent). The division provides that a director, co-director, or other administrative staff of a child care facility may qualify as a qualified parent if such person is regularly counted in the minimum child-to-staff ratio established by HHS by rule. The division requires a family who participates in CCA to make copayments for services received from the program, if the family’s eligibility is based on a parent being a qualified parent. The division directs HHS to adopt rules to implement and administer the division’s provisions related to qualified parents. The division prohibits HHS from applying waiting list requirements for CCA on persons deemed eligible for CCA due to eligibility based on a qualified parent. The division makes a conforming change by striking Code section 237A.13(6).

AI Summary

This bill addresses multiple aspects of child care support in Iowa through four key divisions. The first division modifies the child and dependent care tax credit by allowing taxpayers to claim a credit equal to the federal child and dependent care credit, without limitations, retroactive to tax years beginning January 1, 2025. The second division establishes a child care workforce matching grant program that aims to improve wages, benefits, and work environments for child care employees, with the Department of Health and Human Services responsible for administering the program. The third division creates a small business child care tax credit that allows businesses with fewer than 20 employees or less than $4 million in annual gross income to receive a tax credit up to $3,000 per employee for providing child care benefits, with a total annual credit cap of $2 million. The fourth division expands state child care assistance by reducing work hour requirements to 28 hours per week for all parents, increasing income eligibility thresholds to 250% of the federal poverty level for basic care and 290% for special needs children, requiring child care providers to be reimbursed at their private-pay rates, and creating a new pathway to eligibility for child care workers employed at child care facilities or homes. These changes collectively aim to support child care providers, working parents, and child care businesses in Iowa.

Committee Categories

Health and Social Services

Sponsors (29)

Last Action

Introduced, referred to Health and Human Services. H.J. 475. (on 02/28/2025)

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