Substitute House Bill No. 7240 establishes a refundable personal income tax credit of $500 for taxpayers who own a state-licensed family child care home, effective January 1, 2026. This credit applies against the personal income tax, excluding the withholding tax, and can be claimed by shareholders or partners of S corporations or partnerships, as well as by owners of single-member limited liability companies (LLCs) that are disregarded for federal tax purposes, provided they are subject to the personal income tax. If the credit exceeds the taxpayer's tax liability, the Commissioner of Revenue Services is required to treat the excess as an overpayment and issue a refund without interest.

The bill is expected to result in a General Fund revenue loss of approximately $0.9 million annually starting in FY 27, along with a one-time cost of up to $75,000 for necessary updates to the tax administration system. The legislation aims to support family child care home providers, who typically care for small groups of children, thereby enhancing the availability of child care services in the state.