Child Care Business Tax Credit, the official text

Child Care Business Tax Credit
2026 GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Jason E. Thompson
Senate Sponsor: Heidi Balderree
Cosponsor: Doug Fiefia Carol S. Moss John Arthur Jake Fitisemanu Hoang Nguyen Melissa G. Ballard Jon Hawkins Clinton D. Okerlund Jefferson S. Burton Sahara Hayes Derrin R. Owens Tyler Clancy Sandra Hollins Karen M. Peterson Paul A. Cutler Colin W. Jack Candice B. Pierucci Jennifer Dailey-Provost Matt MacPherson Angela Romero Ariel Defay Ashlee Matthews Andrew Stoddard Rosalba Dominguez Verona Mauga Jordan D. Teuscher James A. Dunnigan Tracy J. Miller Joseph Elison Grant Amjad Miller
LONG TITLE
General Description:
This bill modifies income tax credits for employer-provided child care.
Highlighted Provisions:
This bill: defines terms;
expands the nonrefundable corporate and individual income tax credit for employer-provided child care to apply to off-site child care facilities;
disqualifies an employer from receiving the tax credit if the employer charges or deducts pay from employees for child care services;
increases the tax credit amount for certain small business employers, in relation to the employer's child care expenditures;
repeals the requirement for an employer to have claimed the tax credit for construction expenditures in order to claim the tax credit for child care expenditures;
requires the Governor's Office of Economic Opportunity to develop and maintain a webpage for employers to obtain information and resources regarding the tax credits; and
makes technical and conforming changes.

Money Appropriated in this Bill: None Other Special Clauses: This bill provides retrospective operation. Utah Code Sections Affected: AMENDS:
59-7-627 Effective 05/06/26 Applies beginning 01/01/26, as enacted by Laws of Utah 2025, Chapter 407
59-10-1048 Effective 05/06/26 Applies beginning 01/01/26, as enacted by Laws of Utah 2025, Chapter 407

ENACTS:
63N-1a-308 Effective 05/06/26, Utah Code Annotated 1953

Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-7-627 is amended to read:
59-7-627 Effective 05/06/26 Applies beginning 01/01/26. Nonrefundable tax credits for employer-provided child care.
(1) As used in this section: (a) "Eligible small business" means the same as that term is defined in Section 45F, Internal Revenue Code.
(b) "Off-site qualified child care facility" means a qualified child care facility that an employer does not own, control, operate, or manage.
(c) "On-site qualified child care facility" means a qualified child care facility that an employer owns, controls, operates, or manages, for the benefit of the employer's employees.
[(a)] (d) (i) "Qualified child care expenditure" means an amount [paid or incurred] an employer pays or incurs for: (A) the operating costs of [a] an on-site qualified child care facility[of the employer], whether the employer operates the on-site qualified child care facility or contracts with a third party provider to provide child care services at the on-site qualified child care facility[.];
(B) entering into a contract with an off-site qualified child care facility to provide child care services for the employer's employees; or
(C) entering into a contract with an intermediate entity that contracts with one or more off-site qualified child care facilities to provide child care services for the employer's employees.

(ii) ["Qualified] For an employer that operates an on-site qualified child care facility, "qualified child care expenditure" includes costs related to training employees and providing increased compensation to employees with higher levels of child care training.

[(b)] (e) "Qualified child care facility" means center based child care as that term is defined in Section 26B-2-401 that is located in the state.
[(c)] (f) "Qualified construction expenditure" means an amount [paid or incurred] an employer pays or incurs to acquire, construct, rehabilitate, or expand property: (i) for [a] an on-site qualified child care facility[of the employer]; and
(ii) with respect to which the employer is allowed a deduction for depreciation, or amortization in lieu of depreciation.

[(d)] (g) "Qualifying taxpayer" means a taxpayer that: (i) is an employer; [and]
(ii) qualifies for and claims the federal employer-provided child care tax credit described in Section 45F, Internal Revenue Code, for the current taxable year[.]; and
(iii) does not obtain payment from an employee or deduct from an employee's salary or wages for child care services, with respect to any qualified child care facility for which the taxpayer claims a tax credit under this section.

[(e)] (h) "Recapture event" means an employer fails to operate [a] an on-site qualified child care facility for which the employer claims a tax credit under [this section] Subsection (2) as a child care facility for at least five consecutive taxable years after the taxable year on which the employer first claims a tax credit under [this section] Subsection (2).
[(f)] (i) "Third party provider" means: (i) a new child care provider; or
(ii) an existing child care provider that can perform the contract without reducing the provider's existing child care services.

(2) (a) A qualifying taxpayer may claim a nonrefundable tax credit equal to 20% of the qualified construction expenditures the qualifying taxpayer incurred during the taxable year.
(b) A qualifying taxpayer may carry forward, to the next five taxable years, the amount of the qualifying taxpayer's tax credit described in this Subsection (2) that exceeds the qualifying taxpayer's income tax liability for the taxable year.

(3) (a) [(i) Subject to Subsection (3)(a)(ii), a] A qualifying taxpayer may claim a nonrefundable tax credit equal to:
(i) 30% of the qualified child care expenditures the qualifying taxpayer incurred during the taxable year, for a qualifying taxpayer that qualifies as an eligible small business for the taxable year; or
(ii) 10% of the qualified child care expenditures the qualifying taxpayer incurred during the taxable year, for a qualifying taxpayer that does not qualify as an eligible small business for the taxable year.
[(ii) A qualifying taxpayer may claim a tax credit under this Subsection (3) for qualified child care expenditures only if the qualifying taxpayer claims a tax credit under Subsection (2) for the current taxable year or a previous taxable year.]

(b) A qualifying taxpayer may not carry forward or carry back the tax credit described in this Subsection (3) that exceeds the qualifying taxpayer's income tax liability for the taxable year.

(4) (a) (i) If a recapture event happens within two taxable years after the first taxable year in which the qualifying taxpayer claims a tax credit under this section, a qualifying taxpayer shall repay 100% of the tax credit a qualifying taxpayer receives under this section for any taxable year.
(ii) If a recapture event happens more than two taxable years but fewer than three taxable years after the first taxable year in which the qualifying taxpayer claims a tax credit under this section, a qualifying taxpayer shall repay 75% of the tax credit a qualifying taxpayer receives under this section for any taxable year.
(iii) If a recapture event happens more than three taxable years but fewer than four taxable years after the first taxable year in which the qualifying taxpayer claims a tax credit under this section, a qualifying taxpayer shall repay 50% of the tax credit a qualifying taxpayer receives under this section for any taxable year.
(iv) If a recapture event happens more than four taxable years but fewer than five taxable years after the first taxable year in which the qualifying taxpayer claims a tax credit under this section, a qualifying taxpayer shall repay 25% of the tax credit a qualifying taxpayer receives under this section for any taxable year.

(b) A qualifying taxpayer shall make a payment for a recapture event for the taxable year in which the recapture event occurs.

Section 2. Section 59-10-1048 is amended to read:
59-10-1048 Effective 05/06/26 Applies beginning 01/01/26. Nonrefundable tax credits for employer-provider child care.
(1) As used in this section: (a) "Eligible small business" means the same as that term is defined in Section 45F, Internal Revenue Code.
[(a)] (b) "Qualified child care expenditure" means the same as that term is defined in Section 59-7-627.
[(b)] (c) "Qualified child care facility" means the same as that term is defined in Section 59-7-627.
[(c)] (d) "Qualified construction expenditure" means the same as that term is defined in Section 59-7-627.
[(d)] (e) "Qualifying claimant" means a claimant, estate, or trust that: (i) is an employer; [and]
(ii) qualifies for and claims the federal employer-provided child care tax credit described in Section 45F, Internal Revenue Code, for the current taxable year[.]; and
(iii) does not obtain payment from an employee or deduct from an employee's salary or wages for child care services, with respect to any qualified child care facility for which the claimant, estate, or trust claims a tax credit under this section.

[(e)] (f) "Recapture event" means the same as that term is defined in Section 59-7-627.
[(f)] (g) "Third party provider" means the same as that term is defined in Section 59-7-627.

(2) (a) A qualifying claimant may claim a nonrefundable tax credit equal to 20% of the qualified construction expenditures the qualifying claimant incurred during the taxable year.
(b) A qualifying claimant may carry forward, to the next five taxable years, the amount of the qualifying claimant's tax credit described in this Subsection (2) that exceeds the qualifying claimant's income tax liability for the taxable year.

(3) (a) [(i) Subject to Subsection (3)(a)(ii), a] A qualifying claimant may claim a nonrefundable tax credit equal to:
(i) 30% of the qualified child care expenditures the qualifying claimant incurred during the taxable year, for a qualifying claimant that qualifies as an eligible small business for the taxable year; or
(ii) 10% of the qualified child care expenditures the qualifying claimant incurred during the taxable year, for a qualifying claimant that does not qualify as an eligible small business for the taxable year.
[(ii) A qualifying claimant may claim a tax credit under this Subsection (3) for qualified child care expenditures only if the qualifying claimant claims a tax credit under Subsection (2) for the current taxable year or a previous taxable year.]

(b) A qualifying claimant may not carry forward or carry back the tax credit described in this Subsection (3) that exceeds the qualifying claimant's income tax liability for the taxable year.

(4) (a) (i) If a recapture event happens within two taxable years after the first taxable year in which the qualifying claimant claims a tax credit under this section, a qualifying claimant shall repay 100% of the tax credit a qualifying claimant receives under this section for any taxable year.
(ii) If a recapture event happens more than two taxable years but fewer than three taxable years after the first taxable year in which the qualifying claimant claims a tax credit under this section, a qualifying claimant shall repay 75% of the tax credit a qualifying claimant receives under this section for any taxable year.
(iii) If a recapture event happens more than three taxable years but fewer than four taxable years after the first taxable year in which the qualifying claimant claims a tax credit under this section, a qualifying claimant shall repay 50% of the tax credit a qualifying claimant receives under this section for any taxable year.
(iv) If a recapture event happens more than four taxable years but fewer than five taxable years after the first taxable year in which the qualifying claimant claims a tax credit under this section, a qualifying claimant shall repay 25% of the tax credit a qualifying claimant receives under this section for any taxable year.

(b) A qualifying claimant shall make a payment for a recapture event for the taxable year in which the recapture event occurs.

Section 3. Section 63N-1a-308 is enacted to read:
63N-1a-308 Effective 05/06/26. Office to maintain webpage for employers regarding employer-provided child care tax credits.
(1) For purposes of this section, "employer-provided child care tax credits" means the nonrefundable income tax credits available to employers under Sections 59-7-627 and 59-10-1048.
(2) The office shall develop and maintain a webpage on the office's public website through which employers may obtain information and resources regarding the employer-provided child care tax credits.
(3) The webpage described in Subsection (2) shall: (a) provide a simple and easy-to-understand overview of the employer-provided child care tax credits, including the eligibility requirements and an explanation as to how the state's employer-provided child care tax credits relates to the federal employer-provided child care tax credit under Section 45F, Internal Revenue Code;
(b) provide instructions to employers for how to claim an employer-provided child care tax credit, including: (i) a description of applicable filing deadlines;
(ii) links for accessing any necessary forms or documentation; and
(iii) contact information for relevant state or federal agencies, intermediaries, and other stakeholders that may be able to assist employers with claiming a tax credit;

(c) provides examples of the various ways in which an employer may qualify to receive an employer-provided child care tax credit; and
(d) includes any other information the office determines will increase employer awareness and the effectiveness of the employer-provided child care tax credits.

(4) The office may coordinate with the State Tax Commission and any other relevant agencies in developing and maintaining the webpage required by this section.

Section 4. Effective Date.
This bill takes effect on May 6, 2026.

Section 5. Retrospective operation.
(1) Except as provided in Subsection (2), this bill has retrospective operation to January 1, 2026.
(2) Section 63N-1a-308 (Effective 05/06/26) has no retrospective operation.

3-6-26 11:25 AM