89R8667 MM-F     By: Parker S.B. No. 2164       A BILL TO BE ENTITLED   AN ACT   relating to employer incentive payments for child care for   employees, including creating an employer child-care contribution   partnership 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:   ARTICLE 1.  EMPLOYER CHILD-CARE CONTRIBUTION PARTNERSHIP PROGRAM          SECTION 1.01.  Subtitle B, Title 4, Labor Code, is amended by   adding Chapter 318 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.   ARTICLE 2.  FRANCHISE TAX CREDIT FOR CHILD-CARE CONTRIBUTION          SECTION 2.01.  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.   ARTICLE 3.  TRANSITION AND EFFECTIVE DATE          SECTION 3.01.  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 3.02.  (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.