AN ACT Relating to creating a tax preference child care requirement; adding a new section to chapter 82.04 RCW; and creating a new sections.

NEW SECTION. Sec. 1. (1) The legislature finds that high quality child care is critical to a child's success. The legislature recognizes the high cost of child care for parents can be a significant financial burden on families, as a report from the department of commerce in 2022 finds that the cost of child care is a disproportionate burden on Washington families. Washington is ranked ninth in the country for most expensive infant care. Parents spend 20 percent of a median family's income on child care for one child and 35.5 percent on child care for two children.

(2) The legislature finds that access to affordable child care increases economic growth and labor force participation and that an affordable and accessible system of high quality child care is necessary to the health of Washington's economy because employers benefit when parents have safe, stable, and appropriate care for their children. The legislature recognizes that many working parents are forced to reduce their hours, decline promotional opportunities, or leave the workforce due to a lack of affordable child care options.

(3) The legislature finds that there are 195 business and occupation tax incentives available for businesses in Washington and that these incentives saved businesses nearly $7,400,000,000 in fiscal year 2023.

(4) The legislature finds that when employers are invested in assisting employees with their child care needs, both parties benefit. The legislature intends to encourage employers to take an active role in assisting employees with child care costs by passing on a portion of the benefits they receive from business and occupation tax incentives.

(1) For all tax preferences created, expanded, or extended under this chapter on or after January 1, 2025, a taxpayer receiving a tax preference must provide child care for children or wards of employees.

(b) Payments or reimbursements made directly to employees or providers for a minimum of 25 percent of child care costs;

(c) For taxpayers with at least one employee with a salary of $250,000 or more, an annual payment made to the fair start for kids account created in RCW 43.216.770.

(i) The payment under this subsection (2)(c) is calculated as five percent of the sum of the annual total compensation as of December 31st of the prior calendar year for all employees with a salary of $250,000 or more. For purposes of this subsection, "compensation" includes: All payments for personal services, including commissions and bonuses and the cash value of all compensation paid in any medium other than cash; and remuneration as defined in RCW 50A.05.010.

(ii) The payment must be based off the taxpayer's wage data from the prior calendar year and reported in equal installments on excise tax returns filed for the following calendar year.

(iii) The department must transmit the fees to the state treasurer to be deposited in the fair start for kids account to be used according to RCW 43.216.772.

(3) If the employer is party to a collective bargaining agreement with employees and the agreement does not include child care as a requirement, the employer is exempt from the requirements of this section.

(4)(a) A certificate of compliance that attests to a taxpayer's compliance with subsection (1) of this section is required to be submitted by the taxpayer and verified by the department.

(5)(a) If a taxpayer fails to submit a certificate of compliance or the payment required under this section, the department must declare:

(i) 35 percent of the amount of the tax preference claimed for the previous calendar year to be immediately due and payable;

(ii) An additional 15 percent of the amount of the tax preference claimed for the previous calendar year to be immediately due and payable if the person has previously been assessed under this subsection for failure to submit a certificate of compliance or payment under this section for the same tax preference; and

(iii) If the tax preference is a deferral of tax, the deferred tax divided by the number of years in the repayment period to be immediately due and payable. If the economic benefits of the deferral are passed to a lessee, the lessee is responsible for payment to the extent the lessee has received the economic benefit.

NEW SECTION. Sec. 3. (1) It is the legislature's specific public policy objective to increase employer-provided child care for employees.

(2) By January 1, 2031, the joint legislative audit and review committee must perform a review of the effectiveness of the change in employer-supported child care in Washington provided pursuant to section 2 of this act.

(a) The number of business and occupation taxpayers in the state that add child care benefits for employees due to the requirements of section 2 of this act;

(b) The number of business and occupation taxpayers who decide to forego taking the tax preference rather than providing child care to employees after the effective date of this section;

(d) The most common form of child care business and occupation taxpayers provide to employees due to the requirements of section 2 of this act.

(4) In order to obtain the data necessary to measure the effectiveness of section 2 of this act in achieving the public policy objective described in this section, the joint legislative audit and review committee may refer to any data collected by the state.