6137-S

AN ACT Relating to economic incentives for employer-sponsored child care benefits; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating new sections; and providing an effective date.

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

NEW SECTION. Sec. 1. The legislature recognizes that care of children is the primary responsibility of parents. How that care is provided and by whom is of paramount importance to parents whose employment needs make it impossible for them to provide care to their own children during their work hours.

The legislature also recognizes that making high-quality child-care services more affordable throughout the state can benefit employers and families and that many employers would be able to improve their work force and competitiveness by expanding the pool of available workers. The legislature intends to facilitate this through providing tax credits for employer-sponsored child-care facilities and services, with a target of small and medium-sized businesses.

The legislature further finds that an increase in affordable high-quality child care presents an opportunity for ensuring healthier and safer environments for children and increases in children's educational growth opportunities.

Couples who choose to have one parent stay home and provide care to their children and forgo receiving two incomes should not experience tax penalties. The legislature finds that any public policy that transfers income in the forms of benefits or tax credits to parents who choose employer-sponsored care for their children must be considered carefully for its implications on the work force as well as on the well-being of families.

This act is intended to modify the state's tax and child-care policies by allowing a credit against the tax liability of an employer who voluntarily participates in expansion of workplace child care and provide incentives to the private sector to:

(1) Promote growth of employment opportunities;

(2) Assist employees in obtaining affordable high-quality child care;

(3) Increase opportunities for children to obtain early education and social skills; and

(4) Reduce public assistance caseloads.

NEW SECTION. Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:

(1) In computing the tax imposed under this chapter, a credit shall be granted against the amount of the tax otherwise due under this chapter equal to twenty-five percent of the amounts expended for: (a) Constructing, repairing, decorating, or improving new or existing buildings or other structures used as an on-site child care facility for employees, or to sales of tangible personal property that becomes an ingredient or component on the buildings or other structures during the course of the constructing, repairing, decorating, or improving, but only if the buyer provides the seller with an exemption certificate in a form prescribed by the department; (b) operating expenditures made in providing child care in an on-site facility for employees; and (c) purchasing of child-care services for employees from other child care providers.

(2) This section shall not apply to expenditures: (a) That are reimbursed by the employee or any third party; (b) for services provided out-of-state; or (c) that are made under a salary reduction plan pursuant to the internal revenue code, 26 U.S.C. Sec. 125.

(3)(a) The credit shall be taken against taxes due for the same calendar year in which the amounts were paid. The credit must be claimed by the due date of the last tax return for the calendar year in which the payment is made.

(b) The annual credit claimed by any person under this section shall not exceed the lesser of the tax otherwise due under this chapter during the same calendar year or two hundred thousand dollars.

(c) No portion of an application for credit under this section may be carried back or carried forward to a different calendar year.

(4) The taxpayer shall repay all taxes not paid because of the credit granted under subsection (1)(a) of this section if the taxpayer changes the use of the child care facility less than ten years after the facility is built. This subsection does not apply if the business ceases operation or if the business no longer has employees who wish to utilize the child care facility.

(5) A credit is only allowed under this section for operating expenditures attributable to, or other amounts expended for, employees and their spouses whose combined adjusted gross incomes are less than three times the amount listed in the federal register, each year, for the poverty guideline for a family of three living within the forty-eight contiguous states of the United States.

NEW SECTION. Sec. 3. A new section is added to chapter 82.04 RCW to read as follows:

Two or more entities that pay tax under this chapter may jointly receive the credit available under section 2 of this act under the following circumstances:

(1) An on-site facility is jointly owned or operated by the entities or the contract for provision of child care services is jointly executed by the entities with the same provider of child care;

(2) The conditions in section 2(3) of this act shall apply to the construction and operation or purchase of child care services;

(3) The percentage of the credit for construction of an on-site facility available to each entity shall be equal to the percentage of ownership interest each entity has in the facility;

(4) The percentage of the annual credit available to each entity for operating an on-site facility, or for the provision of child care services, shall be equal to the percentage of the operating or provision expenditures made by each entity; and

(5) The entities share common areas of real property including but not limited to walls, hallways, and parking or occupy the same parcel of land for property tax purposes.

NEW SECTION. Sec. 4. A new section is added to chapter 82.04 RCW to read as follows:

The department shall report to the governor and legislature by November of each year the number of employers who receive the credits provided under sections 2 and 3 of this act and the number of employees for whom the credit has been given, including the amount of the credits granted.

NEW SECTION. Sec. 5. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to sales to an employer for purpose of constructing an on-site child care facility for employees of materials used directly in the construction of the facility, or to sales of or charges made for labor and services rendered in respect to the construction, but only when the purchaser provides the seller with an exemption certificate in a form and manner prescribed by the department by rule, and the purchaser provides the department with a duplicate of the certificate or a summary of exempt sales as the department may require. The seller shall retain a copy of the certificate for the seller's files.

(2) The taxpayer shall repay all amounts not paid because of the exemptions granted under this section if the taxpayer changes the use of the child care facility less than ten years after the facility is built. This subsection does not apply if the business ceases operation or if the business no longer has employees who wish to utilize the child care facility.

(3) The department shall report to the governor and legislature by November of each year the number of employers who receive the exemption provided under this section, including the amount of the credits granted.

NEW SECTION. Sec. 6. A new section is added to chapter 82.12 RCW to read as follows:

(1) The provisions of this chapter shall not apply in respect to the use by an employer constructing an on-site child care facility for employees of materials used directly in the construction of the facility, but only when the user provides the department with:

(a) An exemption certificate in a form and manner prescribed by the department within sixty days of the first use of the materials in this state; or

(b) An annual summary listing the materials by January 31 of the year following the calendar year in which the materials are first used in this state.

NEW SECTION. Sec. 7. The credits allowed under sections 2 through 6 of this act are available only if the child care is provided in this state and meets all the state and local requirements regarding the provision of child care, including licensing and operating the child care facility.

NEW SECTION. Sec. 8. The department of revenue shall adopt rules to administer this act.

NEW SECTION. Sec. 9. This act shall take effect January 1, 1997.