The proposed legislation, HB358, aims to improve childcare accessibility and quality in Alabama to support workforce development. Key provisions include the establishment of an employer tax credit allowing employers to claim 75% of eligible childcare-related expenses, with small businesses receiving a 100% credit. The total amount available for these credits is capped at $15 million for 2025, increasing to $20 million by 2027. Additionally, a facility tax credit for childcare providers is introduced, effective from January 1, 2025, to December 31, 2027, with credit amounts based on the quality rating of the facility, ranging from $2,000 for five-star facilities to $1,000 for one-star facilities, capped at $5 million per year. The Alabama Department of Revenue will oversee the application process and compliance, requiring documentation from both employers and childcare providers.

The bill also includes provisions for grants to nonprofit childcare providers, with a similar cap of $5 million per year and a maximum of $50,000 per provider, while reserving at least 25% of funds for rural providers. It specifies that tax credits cannot be transferred and outlines the process for refunds if credits exceed taxes owed. The legislation ensures that the employer and facility tax credits do not negatively impact the Alabama Special Mental Health Trust Fund and mandates that all applications must be submitted using forms adopted by the Department of Revenue. The act is set to take effect on January 1, 2025, following its passage in both the House and Senate.