BP BHEAD INT S

AN ACT Relating to economic incentives for employer-sponsored child care benefits; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new chapter to Title 82 RCW; 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. (1) A tax credit is authorized equal to twenty-five percent of the amounts expended for: (a) Constructing, repairing, or improving new or existing buildings or other structures used as an on-site child care facility for employees within the state; (b) operating expenditures made in providing child care in an on-site facility for employees within the state; and (c) purchasing of child-care services within the state 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; or (b) that are made under a salary reduction plan pursuant to the internal revenue code, 26 U.S.C. Sec. 125.

NEW SECTION. Sec. 3. (1)(a) The credit under section 2 of this act may be applied to taxes under chapter 82.04 or 82.16 RCW, or both. 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.

(2) The taxpayer shall repay all taxes not paid because of the credit granted under section 2(1)(a) of this act plus applicable interest under RCW 82.32.050, but not penalties, computed from the time the taxes would have been paid until the date of payment 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: (a) The business ceases operation; (b) the business no longer has employees who wish to utilize the child care facility; or (c) the child care facility is replaced with a child care facility of equal or greater capacity for which no credit or exemption was taken under section 2(1)(a), 5, or 6 of this act.

(3) 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. 4. Two or more entities that pay tax under chapter 82.04 or 82.16 RCW 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 3(1) 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. 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, repairing, or improving a new or existing building or other structure used as an on-site child care facility for employees within the state 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, repair, or improvement, 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 plus applicable interest under RCW 82.32.050, but not penalties computed from the time the taxes would have been paid until the date of payment, 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: (a) The business ceases operation; (b) the business no longer has employees who wish to utilize the child care facility; or (c) the child care facility is replaced with a child care facility of equal or greater capacity for which no exemption or credit was taken under section 2(1)(a), 5, or 6 of this act.

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, repairing, or improving a new or existing building or other structure used as an on-site child care facility for employees within the state of materials used directly in the construction, repair, or improvement of the facility, but only when the user provides the department with 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.

(2) The taxpayer shall repay all amounts not paid because of the exemptions granted under this section plus applicable interest under RCW 82.32.050, but not penalties, computed from the time the taxes would have been paid until the date of payment, 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: (a) The business ceases operation; (b) the business no longer has employees who wish to utilize the child care facility; or (c) the child care facility is replaced with a child care facility of equal or greater capacity for which no credit was taken under section 2(1)(a), 5, or 6 of this act.

NEW SECTION. Sec. 7. The department in cooperation with the child care coordinating committee shall report to the governor and legislature by December 1 of each year:

(1) The number of employers who receive the credits provided under sections 2 through 4 of this act and the number of employees for whom the credit has been given, including the amount of the credits granted; and

(2) The number of employers who receive the exemption provided under sections 4 and 5 of this act, including the amount of the exemption granted.

NEW SECTION. Sec. 8. The credits allowed under section 2 of this act and the exemptions allowed under sections 5 and 6 of this act are available only if the child care meets all the state and local requirements regarding the provision of child care, including licensing and operating the child care facility.

NEW SECTION. Sec. 9. The department shall adopt rules to administer this chapter and sections 5 and 6 of this act.

NEW SECTION. Sec. 10. Sections 1 through 4 and 7 through 9 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION. Sec. 11. This act takes effect January 1, 1998.