Governor Jim Pillen signed LB754 into law this week, an important piece of legislation that will help offset financial pressures on parents and child care providers and encourage private sector involvement in growing child care infrastructure. The bill includes provisions to establish the Child Care Tax Credit Act and reinstate the School Readiness Tax Credit Act, both of which were initially introduced by Senator Eliot Bostar (District 29) as part of LB318 and later amended into LB754. LB754 cleared Final Reading in the Nebraska Legislature on May 25 with broad bipartisan support on a vote of 39-2-4.
Refundable credits for parents
LB754 offers tax credits focused on addressing key challenges to the availability and affordability of licensed child care throughout the state. The Child Care Tax Credit Act makes tiered, refundable tax credits available to parents with children enrolled in licensed child care. Parents whose household income is equal to or less than $75,000 may qualify for a $2,000 refundable credit per enrolled child. Households with annual income between $75,000 and $150,000 may qualify for a $1,000 refundable credit per enrolled child.
The Child Care Tax Credit Act also provides a nonrefundable credit for taxpaying individuals, businesses or other entities who make a qualifying contribution to strengthen local child care options. The nonrefundable credit structure especially encourages contributions to develop child care in Nebraska Opportunity Zones, where communities face the greatest economic challenges, and to support programs that serve children enrolled in the child care subsidy program.
Improves upon earlier credit for child care professionals
The School Readiness Tax Credit Act restores and improves upon an earlier tax credit program for child care providers and programs that expired in 2021. Under the new legislation, individual or self-employed child care professionals can apply for a refundable credit between $2,300 and $3,500 based on their professional training and work history. The legislation also offers a tiered, nonrefundable credit to programs serving children through the child care subsidy—a critical resource intended to help families of low income grow toward financial stability.
The Child Care Tax Credit Act and School Readiness Tax Credit Act go into effect with the 2024 tax year.
Child care crisis increasingly prominent
Nebraska’s child care crisis has become an increasingly prominent issue in public conversations about the financial stability of families, workforce participation and community development. The escalating costs of both delivering and purchasing licensed child care are rapidly outpacing the earnings of providers and parents alike. As a result, a growing number of providers are leaving the profession for more financially stable careers, while families are left with dwindling options for affordable, quality care. Nebraska has lost nearly 10% of its licensed child care programs since 2019.
“This problem isn’t just about simple supply-and-demand economics,” said First Five Nebraska Director Jason Prokop. “We can’t increase the availability of quality, licensed child care unless we make early childhood careers and programs more financially viable for the skilled professionals we need to fill them. At the same time, we can’t expect families to absorb those costs when they’re already struggling to fit the expense of child care within tightening family budgets. Traditionally, we’ve left it up to providers and parents to figure this out by themselves—but that’s simply not an acceptable strategy. LB754 is a first step in a more constructive and practical direction.”
Broad, bipartisan support
The tax credit legislation received the support of the Nebraska Chamber of Commerce & Industry, the Lincoln, Omaha and Columbus Chambers of Commerce, Nebraska Economic Developers Association, Nebraska Farm Bureau, Nebraska Catholic Conference and Nebraska Independent Community Bankers during its hearing (as LB318) in the Revenue Committee earlier this session. Prokop is confident that the passage of LB754 into law will alleviate financial pressures on families, strengthen the early childhood professional workforce and encourage private sector contributions to child care. He also says there is much work to be done to educate Nebraskans about the credits, how to apply for them in the 2024-25 tax season and how the credits fit into ongoing work to build a more sustainable early childhood system in our state.
“LB754 won’t solve Nebraska’s child care problem on its own, but it points to the kind of all-hands-on-deck approach we need to make progress,” said Prokop. “This issue can’t be solved by government, business and industry, philanthropy, service providers, community leaders or other stakeholders working in isolation from one another. We all have a role to play and stake in making sure Nebraska’s kids have the kind of experiences in their early years that prepare them for happy, healthy and productive lives. On behalf of those who supported LB754, we offer our gratitude to State Senators Bostar and Lou Ann Linehan (District 39) and for their leadership on this bill and to the other members of the Legislature who helped to advance it.”