HOUSE BILL REPORT

HB 1511

BYRepresentatives Scott, Cantwell, Kremen, Winsley, Cole, Grant, Heavey, Wood, Walker, Van Luven, Jesernig, Beck, Jacobsen, Anderson, Wang, Patrick, Betrozoff, Cooper, R. King, Rector, Bowman, Youngsman, H. Myers, Crane, Jones, Todd, P. King and Wineberry

Providing a tax credit for employer-sponsored child care facilities.

House Committe on Trade & Economic Development

Majority Report:  Do pass with amendment.  (9)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Kremen, Moyer, Rasmussen, Raiter, Tate, Walk and Youngsman.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 21, 1989

BACKGROUND:

Child care is licensed and coordinated by the Department of Social and Health Services (DSHS).  In addition to regulating child care providers, DSHS also provides technical assistance and other programs to help child care providers.

In 1987, the Legislature created a coordinator for Child Care Resources in DSHS, and directed the coordinator to help encourage employer-provided assistance for child care.  This legislation expires in June 1989.

In 1988, the Legislature established a Child Care Coordinating Committee to help coordinate state agencies in this area and to provide recommendations to the legislature regarding child care subsidy programs.  Currently the major state subsidy programs are: (1) child care assistance provided through Aid to Families with Dependent Children (AFDC);  (2) child care assistance to low income, employed, and non-AFDC persons; (3) child care assistance to teenage parents who are completing their high school education or General Education Development Test (GED); (4) child care for seasonal workers who are low income; and (5) child care associated with Child Protective Services.

The Legislature created but did not fund a Child Care Expansion Grant Fund to provide one-time start-up grants to persons, organizations, or schools for new child care facilities, or to expand existing facilities to handle children with special needs.

The Legislature established a child care policy in statute in 1988.  The policy encourages the participation of families and businesses in operating and expanding the child care system in the state to meet the needs of the labor market and to assist families.  The policy encourages traditional at-home parenting, but also promotes the availability and affordability of quality child care for families that need child care assistance.

The business and occupation tax is a tax on the gross income of a business.

SUMMARY:

BILL AS AMENDED:  A business and occupation tax credit is provided to a taxpayer for construction of a child care facility. The amount of the tax credit is 30 percent of the construction cost.  The child care facility must be for the employees of the taxpayer.  The tax credit is available to a portion of a newly constructed building if that portion is to be a child care facility.

"Taxpayer" is defined as a business that employs at least 100 persons, or a consortium of businesses that combined have at least 100 employees.

The taxpayer must certify that the child care facility on which the tax credit is requested will be operated for at least 60 months. If the child care facility is not used as such for the required 60 months, the taxpayer must repay a proportionate amount of the tax credit, with interest.  The amount to be repaid is based on how many months of the required 60 the facility was used for child care.

The tax credit is limited to $30,000 per year, although unused tax credits can be carried over to future years for up to five years.

The tax credit is not available if the child care facility is out-of- state or is not licensed under state law.

AMENDED BILL COMPARED TO ORIGINAL:  Clarification is made that the tax credit is available to a portion of a newly constructed building if that portion is to be an child care facility.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested February 22, 1989.

House Committee ‑ Testified For:    Sandra Burud, Patty Siegal, and Karen Tvedt, Department of Social and Health Services; Bill Dethlefs, U. S. Sprint - General Telephone and Electronics; Denise Bohanna, Washington Association for the Education of Young Children; Cliff Finch, Association of Washington Businesses; Salina Chow, City of Seattle; and Randy Ray, National Association of Industrial Parks.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The dramatic increase in the participation of women in the workforce has resulted in the demand for child care exceeding the supply provided by the market. There is a lack of quality affordable child care.  Employees with child care concerns or problems affect economic development.  Child care problems cause higher absenteeism, lower productivity, and prevent some women from participating in the workforce.

Most employers know little about providing child care assistance. Tax credits would provide a small incentive that could significantly increase the availability of quality and affordable child care to employees by encouraging businesses that are thinking about child care to actually become directly involved.  Although there is a fiscal impact, a small investment by the state can lead to large investments by the private sector in providing child care assistance.

House Committee - Testimony Against:      None Presented.