The proposed legislation, HB358, aims to improve childcare accessibility and workforce participation in Alabama by introducing several financial incentives, including an employer tax credit, a childcare provider tax credit, and grants for nonprofit childcare providers. The employer tax credit will cover 75% of eligible expenses related to childcare facilities, increasing to 100% for small businesses, and will be available for tax years 2025 to 2027. The bill also establishes a facility tax credit for childcare providers, which ranges from $1,000 to $2,000 per eligible child based on the facility's quality rating, with a total cap of $5 million for all providers in a calendar year. Key definitions are introduced, including "eligible expenses" and "childcare provider," and the Department of Revenue is tasked with overseeing the application process for these credits.

Additionally, the bill allows the Department of Human Resources to grant funds to nonprofit childcare providers, with a maximum of $50,000 per provider per year and an aggregate limit of $5 million in a calendar year. The legislation emphasizes prioritizing rural childcare providers and includes provisions to ensure that the employer and facility tax credits do not negatively impact the Alabama Special Mental Health Trust Fund. All applications and filings related to the tax credits and grants must adhere to forms adopted by the respective departments, and the act is set to take effect on January 1, 2025. The Senate passed the bill on May 7, 2024, following its initial passage by the House on April 18, 2024.