89R9125 DNC-D By: Button H.B. No. 3191 A BILL TO BE ENTITLED AN ACT relating to strategies to increase the availability of and access to child care, including the creation of an employer child-care contribution partnership program, a child-care innovation pilot program, and a franchise tax credit for taxable entities that make certain employer child-care contributions; authorizing a civil penalty. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter A, Chapter 302, Labor Code, is amended by adding Section 302.0064 to read as follows: Sec. 302.0064. CHILD-CARE RESOURCES FOR EMPLOYERS. (a) The commission shall maintain in a prominent location on its Internet website a link to a web page consisting of comprehensive and current information to help employers assist employees who are parents with accessing child care, including information on: (1) child-care assistance; (2) best practices for assisting employees who are parents; (3) any available state and federal tax credits; (4) dependent care savings accounts; (5) any available free tools or templates; (6) policies and benefits an employer may adopt to assist employees in accessing child care; and (7) other resources related to child care that the commission considers relevant. (b) The web page described by Subsection (a) must include an explanation that: (1) the commission does not and may not provide legal advice; and (2) an employer is not required to implement any employment policy or benefit included on the web page unless required by other law. SECTION 2. Subtitle B, Title 4, Labor Code, is amended by adding Chapters 318 and 320 to read as follows: CHAPTER 318. EMPLOYER CHILD-CARE CONTRIBUTION PARTNERSHIP PROGRAM Sec. 318.001. DEFINITION. In this chapter, "program" means the employer child-care contribution partnership program established under this chapter. Sec. 318.002. ESTABLISHMENT. The commission shall establish and administer the employer child-care contribution partnership program to support families in this state in accessing high-quality child care by incentivizing eligible employers to contribute to eligible employee child-care costs and providing a state match for funds contributed by eligible employers. Sec. 318.003. ADMINISTRATION. (a) The commission shall: (1) adopt rules and establish procedures necessary to administer the program, including: (A) standardized agreements for use by employers, employees, and child-care providers to apply for and enroll in the program; (B) eligibility and income verification procedures for employees; (C) eligibility criteria for child-care providers, including quality standards; (D) procedures for notifying each relevant party of: (i) the results of an eligibility determination; and (ii) the party's enrollment in the program as soon as practicable after receiving and processing an agreement and determining each party's eligibility; (E) procedures for determining the amount of the state match in accordance with Section 318.009(b) and notifying the employee and the child-care provider regarding the amount; (F) procedures for prioritizing and approving agreements, including maintaining a waitlist; (G) procedures for notifying the commission and the parties to an agreement regarding termination of the agreement by any party; (H) procedures for notifying the commission and the parties to an agreement regarding nonpayment by any party; (I) procedures for recouping state match money or a portion of state match money if there is an overpayment to a participating child-care provider; (J) criteria for disqualifying participants from the program; (K) procedures for hearing appeals from program participants; (L) procedures for issuing and logging payments to a participating child-care provider; and (M) criteria and procedures for modifying or terminating an agreement, including: (i) if the relationship between the employee and employer is severed; (ii) if an employer fails to make a contribution in accordance with the terms of an agreement; and (iii) if a child-care provider ceases participation or otherwise becomes ineligible to participate in the program; (2) select an administration assistance organization described by Subsection (c); (3) ensure confidentiality protocols to safeguard the personal information of participating employers, employees, and child-care providers, including ensuring that an employee's personal information is not disclosed without the employee's written consent; (4) maintain records regarding the balance of the program fund for each fiscal year and all payments made from the fund; (5) develop and distribute to employers, employees, and child-care providers informational material regarding: (A) the program's objectives, benefits, and eligibility requirements; and (B) any other child-care assistance programs or benefits that may be available to an employee; and (6) maintain a waitlist if the money in the program fund is insufficient to approve all agreements received and provide a state match in accordance with Section 318.009(b). (a-1) The commission shall convene a work group to assist the commission in developing the rules under Subsection (a). The work group must include: (1) child-care providers; (2) community stakeholders, including stakeholders with knowledge of or expertise in child care; (3) employers or members of associations representing employers; and (4) at least one parent of a child who receives care from a child-care provider. (a-2) Subsection (a-1) and this subsection expire September 1, 2027. (b) The commission may: (1) delegate an administrative duty under the program to a division of the commission or the administration assistance organization described by Subsection (c); (2) coordinate and share information with other state agencies; and (3) procure grants or contracts, in accordance with other law, with third parties to administer the program or parts of the program, including an administration assistance organization described by Subsection (c). (c) To be eligible for selection as an administration assistance organization, an organization must: (1) be exempt from federal taxation under Section 501(a) of the Internal Revenue Code of 1986 by being listed as an exempt organization in Section 501(c)(3) of that code; (2) be in good standing with the state; and (3) be able to administer elements of the program as determined by the comptroller, including the ability to process employer contribution payments made under Section 318.004. (d) The commission shall implement the program and issue a state match under Section 318.009(b) in a state fiscal year only if the legislature specifically appropriates money to the commission for that fiscal year for that purpose. The commission may implement the program and issue a state match using other money available to the commission for that purpose. Sec. 318.004. EMPLOYER DUTIES. An employer who provides child-care assistance to an employee as a benefit of employment may participate in the program by entering into an agreement described by Section 318.007. The employer shall: (1) provide at least $1,200 per year to or on behalf of an eligible employee for each child the employee has enrolled with a provider eligible under Section 318.006 for the employee's child-care costs as the employer contribution; (2) enter into a standardized agreement under Section 318.007; (3) submit the agreement to the commission for verification of eligibility and approval; (4) submit any additional information the commission considers necessary; and (5) on verification and approval of the agreement by the commission, make contributions to the employee's eligible child-care costs in accordance with commission guidelines. Sec. 318.005. EMPLOYEE DUTIES. (a) An employee shall complete an agreement described by Section 318.007 and provide any additional information the commission considers necessary. (b) An employee shall immediately notify the commission if a child for whom the employee receives a benefit under this chapter receives subsidized child care under the commission's subsidized child-care program. (c) The employee shall pay the child-care provider the cost of child-care services not covered by the employer's contribution and the state match. Sec. 318.006. PROVIDER ELIGIBILITY. (a) To be eligible to receive money under the program, a child-care provider must: (1) be a child-care facility or family home licensed under Chapter 42, Human Resources Code, including a facility operated by the employer; (2) be a high-quality program as determined by the commission; and (3) comply with an agreement and provide information the commission considers necessary. (b) The commission may waive or modify the eligibility requirements under this section. Sec. 318.007. PROGRAM AGREEMENTS. (a) The commission shall create a standardized agreement for use by employers and employees participating in the program, to be completed and agreed to by each party. (b) The commission may create a standardized agreement for use by child-care providers participating in the program. Sec. 318.008. PROGRAM FUND. (a) The program fund is a dedicated account in the general revenue fund administered by the commission. (b) The program fund consists of: (1) money appropriated by the legislature for deposit to the credit of the fund for the purposes of this chapter; (2) interest earned on the investment of money in the fund; (3) the proceeds of civil penalties collected under Section 318.011; and (4) gifts, grants, and donations received by the commission for the purposes of this chapter. (c) Money in the fund may be appropriated only to the commission for purposes authorized by this chapter. (d) In each state fiscal year and to the greatest extent practicable, at least 25 percent of the total amount appropriated from the fund for that year must be distributed under agreements with employers with fewer than 50 full-time employees. For an employer that operates multiple locations or has common ownership or affiliates, each location is considered a separate employer for the purposes of calculating the number of full-time employees under this subsection. (d-1) If in a state fiscal year there is money available from the allocation of money described by Subsection (d) after distributing money in the manner described by that subsection, the commission may distribute the money under agreements with any other eligible employers. (e) During the state fiscal year ending August 31, 2026, not more than 10 percent of the total amount deposited to the credit of the fund in that fiscal year must be appropriated to the commission to establish the program. In each subsequent state fiscal year, money in the fund may be appropriated to the commission to administer the program as follows: (1) if the total amount of money available for appropriation from the fund in that state fiscal year is more than $50 million, not more than five percent of that amount may be used to administer the program; (2) if the total annual amount of money available for appropriation from the fund in that state fiscal year is more than $10 million but not more than $50 million, not more than 10 percent of that amount may be used to administer the program; and (3) if the total annual amount of money available for appropriation from the fund in that state fiscal year is not more than $10 million, not more than 15 percent of that amount may be used to administer the program. Sec. 318.009. STATE MATCH. (a) On verifying the eligibility of an employer, employee, and child-care provider and receiving any required agreements, the commission shall issue a state match in accordance with this section from the program fund to a child-care provider in accordance with the terms of the agreement. The commission may distribute the state match money directly or through a third-party vendor, as applicable. (b) The commission may approve an agreement and issue a state match only if there is sufficient money in the program fund to pay the costs under the agreement and the money has been appropriated to the commission for that purpose. (c) Subject to Subsections (b) and (e), the commission shall provide a state match equal to: (1) 100 percent of the contribution made by the employee's employer if the employee has a median household income that is less than or equal to 100 percent of the median state household income; (2) 75 percent of the contribution made by the employee's employer if the employee has a median household income that is greater than 100 percent and less than or equal to 200 percent of the median state household income; or (3) 50 percent of the contribution made by the employee's employer if the employee has a median household income that is greater than 200 percent and less than or equal to 300 percent of the median state household income. (d) A state match and an employer contribution issued under the program and administered by the commission may not be considered compensation for an employee's service. (e) The amount of the state match issued under Subsection (c) may not exceed $3,600 per child for each employee. (f) The total amount of the state match issued under the program may not exceed $25 million in a state fiscal biennium. Sec. 318.010. REPORTS. (a) The commission shall publish and submit to the legislature a report detailing the efficacy of the program not later than December 15 of each even-numbered year. The report must include the following information about the program: (1) the amount appropriated to the program fund during the preceding state fiscal year; (2) the total number of standardized agreements submitted by employers; (3) the total amount of state matches paid out of the program fund, disaggregated by county; (4) information regarding the size, geographical location, and industry type of employers who participated in the program; (5) the number, license type, quality rating level, and geographical distribution of participating child-care providers; (6) average cost for services charged by child-care providers participating in the program and information regarding the amount by which those costs have increased or decreased during the most recent reporting period compared with previous reporting periods; (7) the number and total dollar value of agreements not approved by the commission; and (8) demographic information regarding employees participating in the program. (b) Not later than January 1, 2026, the commission shall publish and submit to the legislature a report detailing the commission's plan for implementing the program. This subsection expires September 1, 2026. Sec. 318.011. FALSE INFORMATION; CIVIL PENALTY. A person who intentionally provides false information to the commission for purposes of receiving the benefits of the program shall be subject to a civil penalty of not more than $500 per violation. All money collected as a result of penalties assessed under this section shall be paid into the state treasury and credited to the program fund. CHAPTER 320. CHILD-CARE INNOVATION PILOT PROGRAM Sec. 320.001. DEFINITIONS. In this chapter: (1) "Board" means a local workforce development board created under Subchapter F, Chapter 2308, Government Code. (2) "Program" means the child-care innovation pilot program established under this chapter. (3) "Provider" means a child-care provider who is engaging with the program established under this chapter. Sec. 320.002. ESTABLISHMENT. (a) The commission shall establish and administer the child-care innovation pilot program to address strategic workforce needs of designated pilot regions across the state by increasing the supply of quality, affordable child care and encouraging child-care partnerships with employers. (b) The program shall enable boards designated by the commission to partner with local employers and high-quality providers to provide grants that will fund innovative child-care expansion projects and employer partnerships that directly impact strategic local workforce needs. Sec. 320.003. ADMINISTRATION. The commission shall by rule adopt a process for selecting each pilot region in which the program will be administered by the local board, including a competitive application process. Sec. 320.004. APPLICATION; STRATEGIC PLAN. (a) A board applying to participate in the program shall submit: (1) a strategic plan proposing: (A) measurable performance goals and progress measures related to increasing the supply and accessibility of quality, affordable child-care services; (B) plans for engaging regional stakeholders, including local employers, business associations, and organizations that provide services to children and families, to develop and meet regional performance goals that are based on strategic workforce needs; (C) the number of providers to whom the board plans to award grants; (D) staffing structures to support the effective implementation of the program, including technical assistance for child-care providers; and (E) plans to maximize the results of the program and support the future sustainability of child-care providers participating in the program if state funding is not continued; and (2) the total amount of money requested to implement the board's strategic plan. (b) A board may apply for the program under more than one population category described by Section 320.005(a) but may only be approved for participation based on one category. Sec. 320.005. SELECTION; CRITERIA. (a) The commission shall select not more than six boards to participate in the program and ensure that the program is implemented in communities that represent at least one of each of the following population sizes: (1) a region with a population of more than 50,000; (2) a region with a population of more than 10,000 and less than 50,000; and (3) a region with a population of less than 10,000. (b) In selecting the boards to participate in the program, the commission shall consider: (1) the board's ability to demonstrate an unmet, local workforce need for: (A) child-care services in specific geographic regions; (B) child-care services for specific populations, including infant care, toddler care, nontraditional hours care, or care for children with disabilities; or (C) child-care services described by Paragraphs (A) and (B); (2) whether the board has broad regional support from diverse stakeholders, including private sector employers, child-care providers, local governments, and parents to participate in the program; (3) the board's ability to leverage local funding or partnerships to supplement state resources; and (4) the strength of the board's proposed strategic plan, as described by Section 320.004. Sec. 320.006. AGREEMENTS WITH PARTICIPATING BOARDS. The commission shall develop and enter into a performance agreement with each board selected to participate in the program. Each board shall comply with the terms of the performance agreement during its participation in the program. The performance agreement must: (1) include measurable performance goals and progress measures that are: (A) related to increasing the supply and accessibility of quality, affordable child-care services in the pilot region; and (B) aligned to the board's strategic plan; and (2) allocate responsibilities for accessing and reporting progress and outcome information. Sec. 320.007. ALLOCATION OF FUNDS. From the funds appropriated to the commission for the program, the commission shall award an amount of money to each board participating in the program. In determining the allocation of money, the commission shall consider: (1) the size and population of the pilot region; (2) the unmet child-care needs in the region and the proposed funding required to address the needs; (3) the proposed number of eligible providers in each region to whom the board intends to award grants; (4) the budget requested in the board's proposed strategic plan under Section 320.004(a)(2); and (5) other factors determined by the commission. Sec. 320.008. GRANTS. (a) From funds awarded to a board participating in the program, the board, after conducting a competitive selection process, shall award grants to eligible providers that enter into a grant contract with the board to expand quality, affordable child-care services in accordance with the region's strategic workforce needs and the board's approved strategic plan. (b) In awarding a grant under the program, a board shall give preference to an eligible provider that demonstrates capacity to: (1) provide high-demand child-care services identified by the board; and (2) partner with one or more local employers. Sec. 320.009. PROVIDER ELIGIBILITY. (a) To be eligible to receive a grant under the program, a child-care provider must: (1) be a Texas Rising Star Program provider with a three-star rating or higher; (2) be accredited by the National Association for the Education of Young Children; (3) have an accreditation from a Montessori accreditation organization; or (4) meet an alternative quality criterion or waiver prescribed by the commission. (b) In consultation with local employers and other regional stakeholders, the board shall develop a competitive application and scoring process for eligible providers to apply for a grant under the program to meet the goals in the board's approved strategic plan under Section 320.004. (c) A board shall develop and enter into a grant contract with each eligible provider awarded a grant under the program. Each eligible provider awarded a grant shall comply with the terms of the grant contract. At a minimum, grant contracts must require eligible providers to: (1) maintain the ability to enroll the required number of children within each designated service area outlined in the board's grant contract; (2) ensure all educators employed by the provider earn a minimum wage that is equal to or above the self-sufficient wage required by Section 2308A.012, Government Code, in the county in which the provider is located; (3) maintain participation in the child-care services program administered by the commission and accept participating children as openings become available; (4) maintain tuition rates at the provider's posted rate or at a rate lower than the posted rate for families who do not receive subsidized child-care services; (5) maintain all eligibility requirements of the program; (6) provide regular reports demonstrating compliance with the board's grant contract; and (7) provide any additional data requested by the board. Sec. 320.010. SUBCONTRACTING. (a) In accordance with Section 2308.264(e), Government Code, a board may subcontract with a coordinating entity to administer the program. (b) The commission may adopt rules establishing requirements for a coordinating entity with which a board subcontracts under this section. Sec. 320.011. USE OF FUNDS. (a) From money appropriated by the legislature to implement the program, the commission may use not more than: (1) 15 percent of the total amount appropriated to pay costs related to administering the program, including technical assistance provided to providers under the program; and (2) 2 percent of the total amount appropriated to pay costs related to research and evaluation of the program. (b) The commission shall use at least 83 percent of the total amount appropriated for grants administered under the program. (c) The commission shall adopt rules relating to the award of grants under the program that are designed to maximize the impact of the program and ensure the funding is sufficient to execute on the terms of the grant contract. (d) In awarding a grant under the program, the commission or boards may adjust reimbursement rates as necessary to account for the costs of providing care to specialized populations, including children with disabilities, infants, toddlers, and children needing after-hours care. (e) Each board participating in the program shall ensure that all grant money has been allocated not later than December 31, 2028. (f) In addition to funds appropriated by the legislature, to administer and expand the impact of the program, the commission or boards may: (1) seek and apply for any available federal or local funds; and (2) solicit and accept gifts, grants, and donations from any other public or private source. Sec. 320.012. QUARTERLY REPORT TO THE COMMISSION. (a) Each board participating in the program shall submit a quarterly report to the commission, detailing the use of grant money received under the program and related outcomes, including: (1) a list of providers receiving grant money and the provider's monthly grant awards; (2) each provider's compliance with performance goals outlined in the provider's grant contract with the board; and (3) the board's progress toward outcomes identified in the approved strategic plan under Section 320.004. (b) A board shall submit the first report required by this section not later than the 120th day after the date the board awards its first grant under the program and submit subsequent reports every 120 days thereafter. Sec. 320.013. REPORT. Not later than December 1, 2028, the commission shall review the effectiveness of the program and submit to the governor, the lieutenant governor, the speaker of the house of representatives, and the members of each legislative standing committee with primary jurisdiction over economic development a written report regarding the outcomes, challenges, and opportunities of the program. Sec. 320.014. RULES. The commission shall adopt rules necessary to implement this chapter. Sec. 320.015. EXPIRATION. This chapter expires September 1, 2029. SECTION 3. Chapter 171, Tax Code, is amended by adding Subchapter N-1 to read as follows: SUBCHAPTER N-1. TAX CREDIT FOR CHILD-CARE CONTRIBUTION Sec. 171.721. DEFINITION. In this subchapter, "child-care contribution" means the dollar amount of a contribution made by a taxable entity to an employee of the entity for use by the employee to secure child care at a child-care facility or family home licensed under Chapter 42, Human Resources Code, including a licensed child-care facility operated by the entity. The term does not include wages paid by the taxable entity to the employee or a payment to the employee that is considered compensation for the employee's service. Sec. 171.722. ENTITLEMENT TO CREDIT. A taxable entity is entitled to a credit in the amount and under the conditions provided by this subchapter against the tax imposed under this chapter. Sec. 171.723. AMOUNT OF CREDIT; LIMITATION. (a) Subject to Subsections (b) and (c), the amount of the credit a taxable entity may claim on a report is equal to the total amount of child-care contributions paid by the entity during the period on which the report is based. For purposes of computing the total amount of child-care contributions paid by the taxable entity, a child-care contribution in an amount that exceeds $3,600 for a child is considered to be a child-care contribution in the amount of $3,600 for that child. (b) The total credit claimed on a report, including the amount of any carryforward under Section 171.724, may not exceed the amount of franchise tax due for the report after applying all other applicable credits. (c) The total amount of credits that may be awarded under Subsection (a) in a state fiscal year may not exceed $25 million. (d) The comptroller by rule shall prescribe procedures by which the comptroller will allocate the amount of credits available under Subsection (c). The procedures must provide that credits are allocated to taxable entities that applied for the credit on a pro rata basis. Sec. 171.724. CARRYFORWARD. (a) If a taxable entity is eligible for a credit that exceeds the limitation under Section 171.723(b), the entity may carry the unused credit forward for not more than five consecutive reports. (b) A carryforward is considered the remaining portion of a credit that cannot be claimed on a report because of the limitation under Section 171.723(b). (c) Credits, including a carryforward, are considered to be used in the following order: (1) a carryforward under this section; and (2) a credit for the period on which the report is based. Sec. 171.725. APPLICATION FOR CREDIT. (a) A taxable entity must apply for a credit under this subchapter on or with the report for the period for which the credit is claimed. (b) A taxable entity must apply for the credit in the manner prescribed by the comptroller and include with the application any information requested by the comptroller to determine whether the entity is eligible for the credit under this subchapter. (c) The comptroller may award a credit to a taxable entity that applies for the credit under Subsection (a) of this section if the taxable entity is eligible for the credit and the credit is available under Section 171.723(c). The comptroller has discretion in determining whether to grant or deny an application for a credit. (d) The comptroller shall notify a taxable entity in writing of the comptroller's decision to grant or deny the application submitted under Subsection (a). If the comptroller denies a taxable entity's application, the comptroller shall include in the notice of denial the reasons for the comptroller's decision. Sec. 171.726. SALE OR ASSIGNMENT OF CREDIT. (a) A taxable entity that makes a child-care contribution may sell or assign all or part of the credit that may be claimed for that contribution to one or more taxable entities, and any taxable entity to which all or part of the credit is sold or assigned may sell or assign all or part of the credit to another taxable entity. There is no limit on the total number of transactions for the sale or assignment of all or part of the total credit authorized under this subchapter. (b) A taxable entity that sells or assigns a credit under this section and the taxable entity to which the credit is sold or assigned shall jointly submit written notice of the sale or assignment to the comptroller not later than the 30th day after the date of the sale or assignment. The notice must include: (1) the date on which the credit was originally established; (2) the date of the sale or assignment; (3) the amount of the credit sold or assigned and the remaining period during which it may be used; (4) the names, addresses, and federal tax identification numbers of the taxable entity that sold or assigned the credit or part of the credit and the taxable entity to which the credit or part of the credit was sold or assigned; and (5) the amount of the credit owned by the selling or assigning taxable entity before the sale or assignment, and the amount the selling or assigning taxable entity retained, if any, after the sale or assignment. (c) The sale or assignment of a credit in accordance with this section does not extend the period for which a credit may be carried forward. (d) After a taxable entity claims a credit for a child-care contribution under this subchapter, another entity may not use the same expenditure as the basis for another credit. Sec. 171.727. RULES. The comptroller shall adopt rules necessary to implement and administer this subchapter. SECTION 4. Not later than February 1, 2026, the Texas Workforce Commission shall post on its Internet website the information required by Section 302.0064, Labor Code, as added by this Act. SECTION 5. Subchapter N-1, Chapter 171, Tax Code, as added by this Act, applies only to a report originally due on or after January 1, 2026. SECTION 6. (a) Except as provided by Subsection (b) of this section, this Act takes effect September 1, 2025. (b) Subchapter N-1, Chapter 171, Tax Code, as added by this Act, takes effect January 1, 2026.