Alabama Senate committee approves tax breaks for child care, housing

The Alabama Senate Finance and Taxation Education committee Wednesday approved measures extending tax credits for child care and housing construction, both aimed at improving the state’s workforce participation rate.

Lawmakers have been working on legislation, known as the “Working for Alabama” package, to increase access to work through a combination of education programs and tax credits encouraging the expansion of housing and child care, the lack of which may hold participation down. The bills have the support of Gov. Kay Ivey and legislative leaders from both parties.

“We have a serious workforce housing problem in the state of Alabama. If you’ve been to a restaurant and seen a whole section of it blocked off, it’s not blocked off because they don’t want it to be in service. It’s blocked off because they don’t have people,” said Sen. Chris Elliot, R-Josephine, who presented one of the bills to the committee.

Alabama’s workforce participation rate in March was 57.7%, slightly up from 57.1% in February, according to the St. Louis Federal Reserve. But it trailed the national rate of 62.7%, according to the Bureau of Labor Statistics. The state’s participation rates have lagged the nation’s for at least 48 years.

HB 358, sponsored by House Minority Leader Anthony Daniels, D-Huntsville, would establish an employer tax credit, a child care facility tax credit and a nonprofit child care provider grant program aimed at incentivizing employers to fund childcare for their employees.

Sen. Garlan Gudger, R-Cullman, presented the bill to the committee and said that the number one issue when visiting businesses throughout the state is having enough employees.

“Because most parents are trying to get back into the workforce, they have to make a decision. They can either get a job and pay for day care, or they’re going to stay at home and do nothing,” he said.

The bill would provide employers up to $600,000 per year for eligible child care expenses, such as construction of a child care center or payments to a center on behalf of an employee, to be applied against applicable taxes.

It would also give child care facilities a $25,000 tax credit per year to reduce their tax bill. The bill also creates a grant for nonprofit facilities to help with operations, construction or repairs. 

The bill would cap tax credits at $15 million for all employers in 2025. The cap increases to $17.5 million in 2026 and $20 million in 2027. The tax credits would sunset on Dec. 31, 2027 unless extended by the state.

Alabama House passes ‘Working for Alabama’ package

Tonya Wilson, a day care provider in Birmingham, said they struggle with finding qualified day care workers. She said they have a waiting list of 75 children and that the tax credit would help them provide better pay to attract qualified workers, which would help get parents back to work.

“With this, it will give us an opportunity to not only have quality childcare for our children, but it will also take some of the burden off of the parents of being able to afford quality childcare, not just dropping their children off anywhere,” Wilson said.

Camille Bennett, founder & executive director of Project Say Something, a nonprofit organization aimed at addressing anti-Black racism, said that the bill distinguishes an employer from a child care provider or facility.

The distinction, she said, would prevent child care businesses from accessing the up-to-$600,000 per year for eligible expenses. The way the bill was written, she said providers would only be able to access the yearly $25,000 tax credit to help with operations.

“Child care centers in Alabama need at least a one-year, $25 million state appropriation or line item for the stabilization of child care. The funds should be used to increase our childcare subsidy rates and decrease parent co-pays,” Bennett said.

Susan Kennedy, who helped write the bill and is with Levitate Legal & Consulting, was called up to clarify the bill’s language.

Kennedy said that “child care providers can double dip in this bill and we did that on purpose.” She said that small child care providers get the “same treatment” as the businesses supporting the bill.

“If a childcare provider spends $600,000, they can take the employer credit, just like Alabama Power or Blue Cross or any of those other people,” Kennedy said.

The committee also approved HB 346, sponsored by Rep. Cynthia Almond, R-Tuscaloosa, which would establish the Alabama Workforce Housing Tax Credit Act and provide tax credits to developers for housing projects.

The bill would provide housing developers a supplementary tax credit, which can also be used to offset financial institution excise tax, to the existing federal low-income housing tax credits already in place. The program would be capped at $5 million per year, with each company being able to claim as much as $2 million in tax credit.

Sen. Greg Albritton, R-Atmore, said that he was concerned with the amount allocated for the program, saying that they don’t know what could happen in the future. Even if data says one thing, it can say something different in the future, he said.

“Let’s get this moving along. Let’s get it in there, but let’s be a little bit cautious about while it may not be, as you argue, as effectual as it could be— it might also prevent us from going off another cliff,” Albritton said.

Elliot pushed back and said that providing people an opportunity to work is what will help the economy grow.

“The education budget grows when our economy grows, our economy grows when we have more people in the workforce. We have more people in the workforce when we have more people that have affordable housing that can go to work,” Elliot said.