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HB390 INTRODUCED
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HB390
11YTALL-1
By Representative Daniels
RFD: Ways and Means Education
First Read: 05-Feb-26
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11YTALL-1 12/10/2025 TEW (F)TEW 2025-3509
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First Read: 05-Feb-26
SYNOPSIS:
Current law provides for an employer tax credit
for certain expenses incurred by an employer to support
the provision of child care for children of employees.
This bill would allow expenses for adult day
care services to be included in this tax credit
program.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to extend the current
employer tax credit to include adult day care services.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 40-18-541 and 40-18-542, Code of
Alabama 1975, are amended as follows:
"§40-18-541
For the purposes of this article, the following terms
have the following meanings:
(1) ADULT DAY CARE FACILITY. A facility that provides a
program of care for a portion of a 24-hour day in a protective
setting for eligible adults 18 years of age and older.
(2) ADULT DAY CARE PROVIDER. An Alabama taxpayer that
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(2) ADULT DAY CARE PROVIDER. An Alabama taxpayer that
owns an adult day care facility or a nonprofit entity that
owns and operates an adult daycare facility in this state.
(1)(3) APPLICABLE TAXES. An employer's, taxpayer's,
adult day care provider's or child care provider's, or in the
case of a pass-through entity that is an employer, taxpayer,
adult day care provider, or child care provider, such
employer's, taxpayer's, adult day care provider's or child
care provider's owners' taxes as follows:
a. Taxes levied in Chapter 18 of Title 40.
b. The state portion of taxes levied in Chapter 16 of
Title 40.
c. Taxes levied in Section 27-4A-3(a).
d. Taxes levied in Article 2 of Chapter 21 of Title 40,
not to include the freight line and equipment tax levied in
Section 40-21-52.
(2)(4) CHILD or CHILDREN. Individuals who are five
years of age or less.
(3)(5) CHILD CARE FACILITY. A facility meeting the
definition found in Section 38-7-2(7), which is licensed by
the Department of Human Resources and is participating in the
quality rating and improvement system.
(4)(6) CHILD CARE PROVIDER. An Alabama taxpayer that
owns a child care facility or a nonprofit entity that owns and
operates a child care facility in this state.
(7) ELIGIBLE ADULT. Any individual that meets all of
the following conditions:
a. A dependent of an employee.
b. Is eighteen years of age or older.
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b. Is eighteen years of age or older.
c. Due to age, disability, cognitive impairment,
chronic health condition, or the need for supervision,
requires support or services that can be appropriately
provided in an adult day care setting.
(5)(8) ELIGIBLE CHILD or ELIGIBLE CHILDREN. Children
who participate in the Child Care Subsidy Program administered
by the Department of Human Resources and who attend a child
care facility operated by a child care provider.
(6)(9) ELIGIBLE EXPENSES. a. Expenses incurred by an
employer for:
1. The construction, renovation, expansion, or repair
of a child care facility, or for the purchase of equipment for
such facility, or for the maintenance and operation thereof.
2. Payments made to child care facilities or employees
for the provision of child care at child care facilities for
children of employees.
3. Payments made to child care facilities to reserve
services for children of employees.
4. Payments made to adult day care providers or
employees for the provision of adult day care at adult day
care facilities for dependent adults of employees.
5. Payments made to adult day care facilities to
reserve services for dependent adults of employees.
b. For purposes of this definition, "child care
facility" or "child care facilities" shall also include a
facility meeting the definition found in Section 38-7-2(7),
which is operated, directly or indirectly, by a public
institution of higher education as defined in Section 16-5-1.
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institution of higher education as defined in Section 16-5-1.
(7)(10) EMPLOYEE. A resident of this state who works on
a full-time or part-time basis for an employer. An employee
shall include independent contractors engaged by an employer
and the owners of an employer that also work for such employer
on a full-time or part-time basis. Employees whose wages,
excluding any overtime or bonuses, exceed eighty thousand
dollars ($80,000) in a calendar year are not employees for the
purposes of this article.
(8)(11) EMPLOYER. A for -profit business lawfully
operating in this state.
(9)(12) EMPLOYER TAX CREDIT. A tax credit to be applied
against applicable taxes for the year in which the eligible
expenses are incurred by an employer, equal to the total
eligible expenses incurred by the employer, up to six hundred
thousand dollars ($600,000) per year for each employer.
(10)(13) FACILITY TAX CREDIT. A tax credit to be
applied against applicable taxes, calculated in accordance
with Section 40-18-543(a), but not exceeding twenty-five
thousand dollars ($25,000) per year for each child care
facility.
(11)(14) GRANT. A grant awarded by the Department of
Human Resources to nonprofit child care providers for the
purpose of funding expenses related to the construction,
expansion, improvement, repair, or operation of a child care
facility or child care facilities, so long as such expenses
are made in furtherance of the child care services offered at
such child care facility and result in increased quality of
care or increased capacity for children at each applicable
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care or increased capacity for children at each applicable
child care facility.
(12)(15) OWNER. A shareholder, partner, or member of a
pass-through entity.
(13)(16) PASS-THROUGH ENTITY. An Alabama S corporation
or a subchapter K entity.
(14)(17) QUALITY RATING. The rating applicable to a
child care facility under the quality rating and improvement
system.
(15)(18) QUALITY RATING AND IMPROVEMENT SYSTEM. A
system of the Department of Human Resources known as the
Alabama Quality STARS program that measures the quality of
child care facilities on a scale of one to five stars, with
five stars denoting the highest level of quality.
(16)(19) RURAL AREA. Any Alabama county that meets the
definition of "targeted county" found in Section
40-18-376.1(a)(2).
(17)(20) SMALL BUSINESS. An employer that has fewer
than 25 employees.
(18)(21) STATE. The State of Alabama.
"§40-18-542
(a) Effective for tax years beginning on or after
January 1, 2025, and ending December 31, 2027, unless extended
by an act of the Legislature, an employer may apply to the
Department of Revenue for an employer tax credit to be applied
against applicable taxes. The employer tax credit shall be in
an amount equal to 75 percent of the eligible expenses
incurred by an employer; except, in the case of a small
business, the employer tax credit shall be in an amount equal
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business, the employer tax credit shall be in an amount equal
to 100 percent of the eligible expenses incurred by an
employer.
(b) For the calendar year ending December 31, 2025, the
employer tax credit is limited to an aggregate amount for all
employers of fifteen million dollars ($15,000,000), which
amount shall increase to seventeen million five hundred
thousand dollars ($17,500,000) for the calendar year ending
December 31, 2026; and twenty million dollars ($20,000,000)
for the calendar year ending December 31, 2027.
(c) The Department of Revenue shall:
(1) Provide a standardized format for, and require
completion of, a certificate to be signed by the employer
applying for the employer tax credit certifying that the
expenses incurred by the employer were eligible expenses
incurred to support the provision of child care at child care
facilities for the children of employees , or to support the
provision of adult day care at adult day care facilities for
the dependent adults of employees .
(2) Require the employer to provide documentation to
substantiate to the satisfaction of the Department of Revenue
the amount of the employer tax credit applied for pursuant to
this section and that the expenses incurred by the employer
were eligible expenses incurred to support the provision of
child care at child care facilities for the children of
employees , or to support the provision of adult day care at
adult day care facilities for the dependent adults of
employees .
(3) If the employer is a pass-through entity, require
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(3) If the employer is a pass-through entity, require
that the employer identify the identity and pro rata
percentage ownership of its owners.
(d) The Department of Revenue shall award the tax
credit to the employer after the employer provides the
documentation required in subsection (c). Failure to provide
the documentation required in subsection (c) shall result in
the automatic denial of the employer tax credit."
Section 2. This act shall become effective on January
1, 2027.
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