LB266 fixes statutory language to allow child care providers to access school readiness tax credit

by | Feb 1, 2019

Note: The School Readiness Tax Credit program ended with the 2021 tax year. First Five Nebraska is exploring legislation to reinstate the tax credits to provide these important financial supports for child care providers.

The School Readiness Tax Credit Act of 2016 was created to help offset some of these challenges by offering financial incentives for providers who offer high-quality early care and learning services. However, problems in the statutory language of the Act makes it impossible for a great many early childhood professionals to take advantage of these tax credits. Today, the Revenue Committee conducted a public hearing of LB266, which is intended to correct these problems in the original legislation.

During his opening comments on the bill, Senator Brett Lindstrom (District 18) reflected on the purpose of the credits to encourage child care providers to develop their programs and “strive for higher levels of quality and affordability in the services they provide to Nebraska’s working parents and their youngest children.”

The original 2016 legislation created two types of tax credits. The first is a nonrefundable credit for child care owners and operators whose programs are rated at Step 3 in Step up to Quality, Nebraska’s child care quality rating and improvement system. The second is a refundable credit for early childhood professionals who have been employed for at least six months in an eligible, high-quality program, and who also participate in the Nebraska Early Childhood Professional Records System (NECPRS). The dollar amounts of the credits are tiered, based on providers’ quality ratings and employees’ professional credentials.

Unintended consequence
However, since passage of the School Readiness Tax Credit Act, it became apparent that statutory language prevented significant numbers of providers from taking advantage of the credits. These barriers apply to self-employed child care providers, as well as programs classified as S-Corporations.  As a result, the credits have been significantly under-utilized since they were introduced two years ago.

Senator Lindstrom represented LB266 as an effort to clarify the statutory language and remove those roadblocks, saying the bill can “encourage more skilled professionals to choose and build careers in this critically important, but often under-valued sector of our state’s workforce.”

First Five Nebraska Policy Associate Elizabeth Everett testified in support of the bill, pointing out that many parts of the state lack quality child care options to meet the needs of working parents and employers. “It’s in our own best interest to encourage small business operators and skilled early learning professionals to remain engaged and viable in this industry, which directly and indirectly generates significant revenue for our state and nation,” she said.

If voted out of committee, LB266 will proceed to General File, the next phase of the legislative process, where the bill will be debated by the full body of the Nebraska Legislature.

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