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 legislation 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 under the Texas Rising Star Program. The bill specifies the amount of credit available based on the percentage increase in capacity, with higher credits for greater increases in capacity.

Additionally, the bill includes provisions for the application process for the credit, limitations on the total amount of credit that can be claimed, and rules regarding the assignment of credits. The legislation is designed to incentivize child-care providers to expand their services, thereby increasing the availability of child care in Texas. The act is set to take effect on January 1, 2026, and applies to reports due on or after that date.

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