HB358 is a bill designed to enhance childcare and workforce development in Alabama by establishing tax credits for employers and childcare providers, as well as grants for nonprofit childcare providers. The bill aims to increase workforce participation by making childcare more accessible and affordable, and it includes a mechanism for evaluating the effectiveness of these measures. Employers can receive tax credits of 75% of eligible expenses, or 100% for small businesses, with caps set for each calendar year from 2025 to 2027. Childcare providers are eligible for tax credits ranging from $1,000 to $2,000 per eligible child, with a $5 million annual cap, and nonprofit providers can receive grants up to $50,000, also capped annually at $5 million. The bill reserves at least 25% of the tax credits and grants for entities in rural areas and outlines the administrative process for applying for these benefits, including the requirement for proper documentation and compliance with the Department of Revenue and the Department of Human Resources' rules.

The bill also safeguards the Alabama Special Mental Health Trust Fund by ensuring that its distributions are not reduced due to the new tax credits. It specifies that unencumbered funds will be used to maintain the Trust Fund's stability. Tax credits are non-transferable, and if the tax credit exceeds the taxes owed by a childcare provider, they are entitled to a refund, but cannot carry the credit forward. Refunds will be paid from the Education Trust Fund's Childcare Tax Credit Account. The bill emphasizes that the state does not assume any company's debt or allow its credit to be used in support of any company, and taxpayers must strictly comply with the bill's provisions to receive benefits. HB358 was passed by the Senate on May 7, 2024, and is set to become effective on January 1, 2025.