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.