Bill Summary – FastDemocracy

           Stricken language would be deleted from and underlined language would be added to present law.
 State of Arkansas
 95th General Assembly                          A Bill
 Regular Session, 2025                                                               HOUSE BILL 1019
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 By: Representative A. Collins
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                                    For An Act To Be Entitled
                     AN ACT TO CREATE THE AFFORDABLE CHILDCARE ACT OF
                     2025; TO CREATE AN INCOME TAX CREDIT FOR EMPLOYERS
                     WHO ASSIST EMPLOYEES WITH CHILDCARE COSTS; TO REPLACE
                     THE EXISTING INCOME TAX CREDIT FOR EMPLOYER-OPERATED
                     CHILDCARE FACILITIES; AND FOR OTHER PURPOSES.
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                                                Subtitle
                           TO CREATE THE AFFORDABLE CHILDCARE ACT
                           OF 2025; TO CREATE AN INCOME TAX CREDIT
                           FOR EMPLOYERS WHO ASSIST EMPLOYEES WITH
                           CHILDCARE COSTS; AND TO REPLACE THE
                           EXISTING INCOME TAX CREDIT FOR EMPLOYER-
                           OPERATED CHILDCARE FACILITIES.
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 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
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         SECTION 1.         Arkansas Code Title 26, Chapter 51, Subchapter 5, is
 amended to add an additional section to read as follows:
         26-51-518.         Affordable Childcare Act of 2025 — Employer childcare
 assistance tax credit.
         (a)     This section shall be known and may be cited as the "Affordable
 Childcare Act of 2025".
         (b)(1)        There is allowed an income tax credit against the income tax
 imposed by this chapter in the amount determined under subsection (c) of this
 section for a business that pays for or provides childcare for the dependent
 children of its employees.
                     (2)   To qualify for the income tax credit allowed under this
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 section, the childcare must be provided by a childcare facility that is
 licensed under the Childcare Facility Licensing Act, § 20-78-201 et seq.
      (c)   The income tax credit allowed under this section is allowed in
 amounts equal to the following:
               (1)   Thirty percent (30%) of the total amount expended by a
 business for childcare services purchased to provide care for the dependent
 children of its employees or for the provision of the service of locating
 childcare services for the dependent children of its employees;
               (2)(A)     In the tax year in which a facility providing childcare
 services for use primarily by the dependent children of employees is
 established by a business independently or in conjunction with one or more
 other businesses, fifty percent (50%) of the total amount expended by a
 business in the establishment and operation of the facility.
                        (B)   In tax years other than the tax year in which a
 childcare facility is established under subdivision (c)(2)(A) of this
 section, the income tax credit allowed under this section is equal to thirty
 percent (30%) of the total amount expended by a business for the operation of
 a childcare facility less the amount of moneys received by the business for
 use of the facility for childcare services; and
               (3)   Fifty percent (50%) of the total amount expended by a
 business as payments to an organization providing access to available
 childcare services for the business’s employees.
      (d)(1)     The credit allowed by subdivisions (c)(1) and (c)(2)(B) of this
 section shall not exceed thirty thousand dollars ($30,000) for any business
 during any tax year.
               (2)   The credit allowed by subdivisions (c)(2)(A) and (c)(3) of
 this section shall not exceed forty-five thousand dollars ($45,000) for any
 business during any tax year.
      (e)   If the amount of the income tax credit allowed under this section
 exceeds the business's income tax liability, the excess shall be refunded to
 the business.
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      SECTION 2.        Arkansas Code §§ 26-51-507 and 26-51-508 are repealed.
      26-51-507.        Employer-provided child care — As qualified under former §
 26-52-401 — Definition.
      (a)   A business which qualifies for the exemption from the gross
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 receipts tax under former § 26-52-401(29) shall be allowed an income tax
 credit of three and nine-tenths percent (3.9%) of the annual salary of
 employees employed exclusively in providing childcare services.
      (b)    If two (2) or more businesses participate in a childcare program
 for their employees as provided by former § 26-52-401(29), then each business
 will be allowed an income tax credit of three and nine-tenths percent (3.9%)
 of the annual salary of only those employees who are on the respective
 business' payroll and are employed exclusively for providing childcare
 services.
      (c)(1)     To qualify for the income tax credit, the revenue to the
 business or businesses from the childcare facility cannot exceed the direct
 operating costs of the facility. If, on an annual basis, the childcare
 facility receives revenue which exceeds the direct operating costs of the
 facility, the business or businesses will not be entitled to the income tax
 credit.
               (2)   As used in this section, “direct operating costs” means:
                     (A)   The cost of food and beverages provided to the
 children;
                     (B)   The cost of labor for personnel whose services are
 performed exclusively on the premises of the childcare facility for the care
 of the children and all related employment taxes paid by the employer; and
                     (C)   All materials and supplies necessary to operate the
 childcare facility.
      (d)    The income tax credit created by subsection (a) of this section
 shall first be available in the taxable year following the year the business
 makes payment of wages to childcare workers. To the extent that the credit is
 not fully utilized in this first year, it may be carried forward for an
 additional two (2) years. Any credit remaining thereafter shall expire.
      (e)    The income tax provisions of this section shall be in full force
 and effect for all income tax years beginning on and after January 1, 1993.
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      26-51-508. Employer-provided child care — As qualified under § 26-52-
 516 or § 26-53-132 — Definition.
      (a)    A business which qualifies for the refund of the gross receipts
 tax or compensating use tax under § 26-52-516 or § 26-53-132 shall be allowed
 an income tax credit of three and nine-tenths percent (3.9%) of the annual
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 salary of its employees employed exclusively in providing childcare service,
 or a five-thousand-dollar income tax credit for the first tax year the
 business provides its employees with a childcare facility.
      (b)    If two (2) or more businesses participate in a childcare program
 for their employees as provided by § 26-52-516 or § 26-53-132, then each
 business will be allowed an income tax credit of three and nine-tenths
 percent (3.9%) of the annual salary of only those employees who are on the
 respective business' payroll and are employed exclusively for providing
 childcare services. The first year's five-thousand-dollar credit will be
 prorated among the businesses based upon the percentage of the cost paid by
 each business for the initial construction and equipping of the childcare
 facility.
      (c)(1)(A)    To qualify for the income tax credit, the revenue to the
 business or businesses from the childcare facility cannot exceed the direct
 operating costs of the facility.
                   (B)   If, on an annual basis, the business receives revenues
 from the operation of the childcare facility which exceed the direct
 operating costs of the facility, the businesses will not be entitled to the
 income tax credit.
             (2)   As used in this subsection, “direct operating costs” means:
                   (A)   The cost of food and beverages provided to the
 children;
                   (B)   The cost of labor for personnel whose services are
 performed exclusively on the premises of the childcare facility for the care
 of the children and all related employment taxes paid by the employer; and
                   (C)   All materials and supplies necessary to operate the
 childcare facility.
      (d)    The income tax credit created by subsection (a) of this section
 shall first be available in the taxable year following the year the business
 makes payment of wages to childcare workers. To the extent that the credit is
 not fully utilized in this first year, it may be carried forward for an
 additional two (2) years. Any credit remaining thereafter shall expire.
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      SECTION 3.    EFFECTIVE DATE.   Sections 1 and 2 of this act are effective
 for tax years beginning on or after January 1, 2025.
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