The proposed bill, S.B. No. 654, aims to establish a franchise tax credit for licensed child-care centers in Texas that increase their capacity to care for children. The bill introduces a new subchapter, Subchapter P-1, to Chapter 171 of the Tax Code, which defines a "licensed child-care center" and outlines the eligibility criteria for the tax credit. To qualify, a taxable entity must operate one or more licensed child-care centers that are certified as providers in the Texas Rising Star Program. The credit amount is determined based on the percentage increase in capacity, with specific percentages of additional salary associated with the capacity increase being eligible for the credit.

The bill also stipulates that a taxable entity can continue to claim the credit for two subsequent reports if it maintains the increased capacity. However, the total credit claimed cannot exceed the franchise tax due after applying any other applicable credits. Additionally, the bill prohibits the assignment of the credit to another entity unless all assets are transferred in the same transaction. The comptroller is tasked with adopting necessary rules for the implementation and administration of this subchapter. The act is set to take effect on January 1, 2026, and applies to reports originally due on or after that date.

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