89R1402 SRA-D

By: West S.B. No. 654

A BILL TO BE ENTITLED

AN ACT

relating to a franchise tax credit for certain child-care centers that increase their capacity to care for children.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. It is the intent of the legislature that the franchise tax credit proposed by this Act will incentivize large-scale child-care providers to create additional capacity at the providers' locations and therefore significantly increase the availability of child care in this state.

SECTION 2. Chapter 171, Tax Code, is amended by adding Subchapter P-1 to read as follows:

SUBCHAPTER P-1. TAX CREDIT FOR CHILD-CARE CENTERS THAT INCREASE

CAPACITY

Sec. 171.821. DEFINITION. In this subchapter, "licensed child-care center" means a child-care center licensed, certified, or registered by the Department of Family and Protective Services to provide assessment, care, training, education, custody, treatment, or supervision for a child who is not related by blood, marriage, or adoption to the owner or operator of the center, for all or part of the 24-hour day, whether or not the center is operated for profit or charges for the services it offers.

Sec. 171.822. ENTITLEMENT TO CREDIT. A taxable entity is entitled to a credit in the amount and under the conditions provided by this subchapter against the tax imposed under this chapter.

Sec. 171.823. QUALIFICATION. A taxable entity qualifies for a credit under this subchapter if the taxable entity operates one or more licensed child-care centers, each of which is certified as a provider in the Texas Rising Star Program.

Sec. 171.824. AMOUNT OF CREDIT; LIMITATIONS. (a) This subsection applies to a taxable entity other than a taxable entity described by Subsection (b). Subject to Subsections (c) and (d), the amount of the credit a taxable entity to which this subsection applies may claim on a report for each licensed child-care center location operated by the entity is equal to:

(1) if the capacity of the licensed child-care center is increased 25 percent or more but less than 50 percent during the period on which the report is based, 50 percent of the additional salary associated with the increase in the capacity of the licensed child-care center paid by the entity during the period on which the report is based;

(2) if the capacity of the licensed child-care center is increased by 50 percent or more but less than 75 percent during the period on which the report is based, 75 percent of the additional salary associated with the increase in the capacity of the licensed child-care center paid by the entity during the period on which the report is based; or

(3) if the capacity of the licensed child-care center is increased by 75 percent or more during the period on which the report is based, 100 percent of the additional salary associated with the increase in the capacity of the licensed child-care center paid by the entity during the period on which the report is based.

(b) This subsection applies only to a taxable entity that is a member of an affiliated group that files a combined report under Section 171.1014. Subject to Subsections (c) and (d), the amount of the credit a taxable entity to which this subsection applies may claim on a report is equal to:

(1) if the capacity of at least 50 percent of the licensed child-care center locations operated by all members of the taxable entity's combined group is increased by 25 percent or more but less than 50 percent during the period on which the report is based, 50 percent of the additional salary associated with the increase in capacity at those locations paid during the period on which the report is based;

(2) if the capacity of at least 50 percent of the licensed child-care center locations operated by all members of the taxable entity's combined group is increased by 50 percent or more but less than 75 percent during the period on which the report is based, 75 percent of the additional salary associated with the increase in capacity at those locations paid during the period on which the report is based; or

(3) if the capacity of at least 50 percent of the licensed child-care center locations operated by all members of the taxable entity's combined group is increased by 75 percent or more during the period on which the report is based, 100 percent of the additional salary associated with the increase in capacity at those locations paid during the period on which the report is based.

(c) A taxable entity may continue to claim a credit in the amount the entity claims on the first report on which the entity claims a credit under this subchapter on the two reports due subsequent to that first report if the entity maintains the increase in child-care capacity that forms the basis of the credit claimed on the first report during the period covered by each of the two subsequent reports.

(d) The total amount of credit claimed by a taxable entity on a report may not exceed the amount of franchise tax due for the report after the application of any other applicable credits.

Sec. 171.825. APPLICATION FOR CREDIT. (a) A taxable entity must apply for a credit under this subchapter on or with the report for the period for which the credit is claimed.

(b) A taxable entity must apply for the credit in the manner prescribed by the comptroller and include with the application any information requested by the comptroller to determine whether the entity is eligible for the credit under this subchapter.

Sec. 171.826. ASSIGNMENT PROHIBITED; EXEMPTION. A taxable entity may not convey, assign, or transfer a credit under this subchapter to another entity unless substantially all of the assets of the taxable entity are conveyed, assigned, or transferred in the same transaction.

Sec. 171.827. RULES. The comptroller shall adopt rules necessary to implement and administer this subchapter.

SECTION 3. This Act applies only to a report originally due on or after the effective date of this Act.

SECTION 4. This Act takes effect January 1, 2026.