House File 732 H-1374 Amend House File 732 as follows: 1 1. By striking everything after the enacting clause and 2 inserting: 3 < DIVISION I 4 CHILD AND DEPENDENT CARE TAX CREDIT 5 Section 1. Section 422.12C, subsection 1, Code 2023, is 6 amended by striking the subsection and inserting in lieu 7 thereof the following: 8 1. The taxes imposed under this subchapter, less the amounts 9 of nonrefundable credits allowed under this subchapter, shall 10 be reduced by a child and dependent care credit equal to the 11 following percentages of the federal child and dependent care 12 credit provided in section 21 of the Internal Revenue Code, 13 without regard to whether or not the federal credit was limited 14 by the taxpayer’s federal tax liability: 15 a. For a taxpayer with net income of forty-five thousand 16 dollars or less, one hundred percent. 17 b. For a taxpayer with net income exceeding forty-five 18 thousand dollars but not exceeding fifty thousand dollars, 19 eighty-eight percent. 20 c. For a taxpayer with net income exceeding fifty thousand 21 dollars but not exceeding sixty thousand dollars, seventy-five 22 percent. 23 d. For a taxpayer with net income exceeding sixty thousand 24 dollars but not exceeding seventy thousand dollars, sixty-three 25 percent. 26 e. For a taxpayer with net income exceeding seventy thousand 27 dollars but not exceeding eighty thousand dollars, fifty 28 percent. 29 f. For a taxpayer with net income exceeding eighty thousand 30 dollars but not exceeding ninety thousand dollars, thirty-eight 31 percent. 32 g. For a taxpayer with net income exceeding ninety thousand 33 dollars but not exceeding one hundred thousand dollars, 34 twenty-five percent. 35 -1- HF 732.2367 (2) 90 pf/rh 1/ 8 #1.

h. For a taxpayer with net income exceeding one hundred 1 thousand dollars but not exceeding one hundred twenty-five 2 thousand dollars, thirteen percent. 3 i. For a taxpayer with net income exceeding one hundred 4 twenty-five thousand dollars but not exceeding one hundred 5 fifty thousand dollars, ten percent. 6 j. For a taxpayer with net income exceeding one hundred 7 fifty thousand dollars but not exceeding one hundred 8 seventy-five thousand dollars, five percent. 9 k. For a taxpayer with net income exceeding one hundred 10 seventy-five thousand dollars but not exceeding two hundred 11 thousand dollars, three percent. 12 l. For a taxpayer with net income exceeding two hundred 13 thousand dollars but not exceeding two hundred fifty thousand 14 dollars, two percent. 15 m. For a taxpayer with net income exceeding two hundred 16 fifty thousand dollars, zero percent. 17 DIVISION II 18 CHILD CARE CENTER AND CHILD DEVELOPMENT HOME GRANTS 19 Sec. 2. NEW SECTION . 237D.1 Definitions. 20 As used in this chapter, unless the context otherwise 21 requires: 22 1. “Child” means the same as defined in section 237A.1. 23 2. “Child care” means the same as defined in section 237A.1. 24 3. “Child development home” means the same as defined in 25 section 237A.1. 26 4. “Department” means the department of health and human 27 services. 28 5. “Facility” means the same as defined in section 237A.1. 29 6. “Fund” means the child care center and child development 30 home grant fund. 31 7. “Home” means a child development home. 32 8. “Licensed child care center” or “center” means a facility 33 providing child care or preschool services for seven or more 34 children that has been issued a license by the department 35 -2- HF 732.2367 (2) 90 pf/rh 2/ 8

pursuant to section 237A.2. 1 9. “Program” means the child care center and child 2 development home grant program. 3 Sec. 3. NEW SECTION . 237D.2 Child care center and child 4 development home grant fund. 5 1. A child care center and child development home grant fund 6 is created and established as a separate and distinct fund in 7 the state treasury under the control of the department. 8 2. a. The fund may consist of any moneys appropriated by 9 the general assembly for purposes of this chapter and any other 10 moneys that are lawfully available to the department. Moneys 11 in the fund are appropriated to the department and shall be 12 used for the purposes of this chapter. 13 b. Notwithstanding section 8.33, moneys in the fund 14 that remain unencumbered or unobligated at the close of the 15 fiscal year shall not revert but shall remain available for 16 expenditure for the purposes of this section in succeeding 17 fiscal years. Notwithstanding section 12C.7, subsection 2, 18 interest earned on moneys in the fund shall be credited to the 19 fund. 20 Sec. 4. NEW SECTION . 237D.3 Child care center and child 21 development home grant program. 22 1. The department shall adopt rules to establish and 23 administer a child care center and child development home 24 grant program to provide for the allocation of money in the 25 fund in the form of grants, not to exceed fifty thousand 26 dollars per grant, to eligible persons for costs related to 27 the establishment of a new licensed child care center or 28 a new child development home, or for the expansion of an 29 existing licensed child care center or the expansion of an 30 existing child development home. For any one fiscal year, the 31 department shall not approve more than four million dollars 32 in grants. The rules adopted by the department shall specify 33 the eligibility requirements for applicants of the program and 34 the items eligible for a program grant. Items eligible for a 35 -3- HF 732.2367 (2) 90 pf/rh 3/ 8

program grant must include the costs related to licensing or 1 registration, supplies, employee salaries, and infrastructure. 2 2. A new center or a new home must be licensed or registered 3 and fully operational within two years of the date of an 4 applicant’s receipt of a grant. 5 3. Of the children for whom a new or expanded center or a 6 new or expanded home provide child care, a minimum of twenty 7 percent of the children must be from a family that qualifies 8 for state child care assistance pursuant to section 237A.13. 9 4. A person that is awarded a grant shall enter into an 10 agreement with the department that specifies the requirements 11 that must be maintained throughout the period of the agreement 12 in order for the person to retain the grant. The agreement 13 must contain, at a minimum, provisions addressing all of the 14 following: 15 a. The legal name of the person receiving the grant. 16 b. The amount of the grant. 17 c. Annual certification by the person to the department of 18 compliance with the requirements of the agreement, the program, 19 and this chapter. 20 d. The repayment of the grant, or a portion of the grant, 21 if the person does not meet all of the requirements of the 22 agreement, the program, and this chapter. 23 e. If a new center or a new home for which the grant was 24 received goes out of business within two years of the date the 25 new center or new home becomes fully operational pursuant to 26 subsection 2, the grant shall be subject to repayment. If an 27 expanded center or an expanded home for which the grant was 28 received goes out of business within two years of the date on 29 which the grant was received, the grant shall be subject to 30 repayment. 31 DIVISION III 32 SMALL BUSINESS CHILD CARE TAX CREDIT 33 Sec. 5. NEW SECTION . 237A.32 Small business child care tax 34 credit. 35 -4- HF 732.2367 (2) 90 pf/rh 4/ 8

1. As used in this section “small business” means any 1 enterprise which is located in this state, which is operated 2 for profit and under a single management, and which has either 3 fewer than twenty employees or an annual gross income of less 4 than four million dollars computed as the average of the three 5 preceding fiscal years. This definition does not apply to any 6 program or activity for which a definition for small business 7 is provided for the program or activity by federal law or 8 regulation or other state law. 9 2. A small business may receive a child care tax credit 10 for providing child care employee benefits to employees of the 11 business. The credit may be applied against income tax imposed 12 under chapter 422, subchapter II or III, the franchise tax 13 imposed under chapter 422, subchapter V, the gross premiums 14 tax imposed under chapter 432, or the moneys and credits tax 15 imposed in section 533.329. The amount of the credit equals 16 the costs to provide the benefit up to three thousand dollars 17 per employee per year. 18 3. The aggregate amount of tax credits authorized pursuant 19 to this section shall not exceed a total of two million 20 dollars per fiscal year, and shall be awarded on a first-come, 21 first-served basis. 22 4. To be eligible for a small business child care tax 23 credit, the small business must provide child care employee 24 benefits to employees of the business through any of the 25 following: 26 a. Build a new structure or rehabilitate an existing 27 structure to be used as a child care center at or near the small 28 business where the children of the employees of the business 29 are provided child care. A small business may construct or 30 rehabilitate the structure in conjunction with another business 31 but only the actual cost of the business shall be considered in 32 determining the credit. 33 b. Operate or lease a child care center at or near the small 34 business where the children of the employees of the business 35 -5- HF 732.2367 (2) 90 pf/rh 5/ 8

are provided child care. 1 5. A taxpayer who elects to claim the small business child 2 care tax credit shall not claim the employer child care tax 3 credit under section 237A.31 4 6. Any credit in excess of the tax liability is not 5 refundable but the excess for the tax year may be credited 6 to the tax liability for the following five years or until 7 depleted, whichever is earlier. The director of revenue shall 8 adopt rules to implement this section. 9 Sec. 6. NEW SECTION . 422.12P Small business child care tax 10 credit. 11 1. The taxes imposed under this subchapter, less the credits 12 allowed under section 422.12, shall be reduced by a small 13 business child care tax credit received pursuant to section 14 237A.32. 15 2. An individual may claim the tax credit allowed a 16 partnership, S corporation, limited liability company, estate, 17 or trust electing to have the income taxed directly to the 18 individual. The amount claimed by the individual shall be 19 based upon the pro rata share of the individual’s earnings of a 20 partnership, S corporation, limited liability company, estate, 21 or trust. 22 Sec. 7. Section 422.33, Code 2023, is amended by adding the 23 following new subsection: 24 NEW SUBSECTION . 33. The taxes imposed under this subchapter 25 shall be reduced by a small business child care tax credit 26 received pursuant to section 237A.32. 27 Sec. 8. Section 422.60, Code 2023, is amended by adding the 28 following new subsection: 29 NEW SUBSECTION . 16. The taxes imposed under this subchapter 30 shall be reduced by a small business child care tax credit 31 received pursuant to section 237A.32. 32 Sec. 9. NEW SECTION . 432.12P Small business child care tax 33 credit. 34 The taxes imposed under this chapter shall be reduced by 35 -6- HF 732.2367 (2) 90 pf/rh 6/ 8

a small business child care tax credit received pursuant to 1 section 237A.32. 2 Sec. 10. Section 533.329, subsection 2, Code 2023, is 3 amended by adding the following new paragraph: 4 NEW PARAGRAPH . n. The moneys and credits tax imposed under 5 this section shall be reduced by a small business child care 6 tax credit received pursuant to section 237A.32. 7 Sec. 11. APPLICABILITY. This division of this Act applies 8 to tax years beginning on or after January 1, 2023. 9 DIVISION IV 10 STATE CHILD CARE ASSISTANCE 11 Sec. 12. Section 237A.13, subsection 8, paragraph c, Code 12 2023, as amended by 2023 Iowa Acts, House File 707, section 5, 13 is amended to read as follows: 14 c. Families with an income of more than one hundred percent 15 but not more than one two hundred sixty percent of the federal 16 poverty level whose members, for at least thirty-two hours 17 per week in the aggregate, are employed or are participating 18 at a satisfactory level in an approved training program or 19 educational program. 20 Sec. 13. DIRECTIVE TO DEPARTMENT OF HEALTH AND HUMAN 21 SERVICES —— CHILD CARE ASSISTANCE. 22 1. The department of health and human services shall amend 23 its administrative rules pursuant to chapter 17A to do all of 24 the following: 25 a. Provide income eligibility for state child care 26 assistance, according to family size for children needing basic 27 care, to families whose nonexempt gross monthly income does not 28 exceed two hundred percent of the federal poverty level. 29 b. Adjust the state child care assistance copayment 30 schedule in incrementally increased amounts for families whose 31 nonexempt gross monthly income does not exceed two hundred 32 percent of the federal poverty level. 33 2. The rules adopted pursuant to this section shall take 34 effect January 1, 2024. > 35 -7- HF 732.2367 (2) 90 pf/rh 7/ 8