House File 695 - IntroducedA Bill ForAn Act 1relating to economic development including child
2care, grants and tax credits relating to child care, and
3state child care assistance, and including applicability
4provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2CHILD AND DEPENDENT CARE TAX CREDIT
3   Section 1.  Section 422.12C, subsection 1, Code 2023, is
4amended by striking the subsection and inserting in lieu
5thereof the following:
   61.  The taxes imposed under this subchapter, less the amounts
7of nonrefundable credits allowed under this subchapter, shall
8be reduced by a child and dependent care credit equal to the
9following percentages of the federal child and dependent care
10credit provided in section 21 of the Internal Revenue Code,
11without regard to whether or not the federal credit was limited
12by the taxpayer’s federal tax liability:
   13a.  For a taxpayer with net income of forty-five thousand
14dollars or less, one hundred percent.
   15b.  For a taxpayer with net income exceeding forty-five
16thousand dollars but not exceeding fifty thousand dollars,
17eighty-eight percent.
   18c.  For a taxpayer with net income exceeding fifty thousand
19dollars but not exceeding sixty thousand dollars, seventy-five
20percent.
   21d.  For a taxpayer with net income exceeding sixty thousand
22dollars but not exceeding seventy thousand dollars, sixty-three
23percent.
   24e.  For a taxpayer with net income exceeding seventy thousand
25dollars but not exceeding eighty thousand dollars, fifty
26percent.
   27f.  For a taxpayer with net income exceeding eighty thousand
28dollars but not exceeding ninety thousand dollars, thirty-eight
29percent.
   30g.  For a taxpayer with net income exceeding ninety thousand
31dollars but not exceeding one hundred thousand dollars,
32twenty-five percent.
   33h.  For a taxpayer with net income exceeding one hundred
34thousand dollars but not exceeding one hundred twenty-five
35thousand dollars, thirteen percent.
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   1i.  For a taxpayer with net income exceeding one hundred
2twenty-five thousand dollars but not exceeding one hundred
3fifty thousand dollars, ten percent.
   4j.  For a taxpayer with net income exceeding one hundred
5fifty thousand dollars but not exceeding one hundred
6seventy-five thousand dollars, five percent.
   7k.  For a taxpayer with net income exceeding one hundred
8seventy-five thousand dollars but not exceeding two hundred
9thousand dollars, three percent.
   10l.  For a taxpayer with net income exceeding two hundred
11thousand dollars but not exceeding two hundred fifty thousand
12dollars, two percent.
   13m.  For a taxpayer with net income exceeding two hundred
14fifty thousand dollars, zero percent.
15DIVISION II
16CHILD CARE CENTER AND CHILD development HOME GRANTS
17   Sec. 2.  NEW SECTION.  237D.1  Definitions.
   18As used in this chapter, unless the context otherwise
19requires:
   201.  “Child” means the same as defined in section 237A.1.
   212.  “Child care” means the same as defined in section 237A.1.
   223.  “Child development home” means the same as defined in
23section 237A.1.
   244.  “Department” means the department of health and human
25services.
   265.  “Facility” means the same as defined in section 237A.1.
   276.  “Fund” means the child care center and child development
28home grant fund.
   297.  “Home” means a child development home.
   308.  “Licensed child care center” or “center” means a facility
31providing child care or preschool services for seven or more
32children that has been issued a license by the department
33pursuant to section 237A.2.
   349.  “Program” means the child care center and child
35development home grant program.
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1   Sec. 3.  NEW SECTION.  237D.2  Child care center and child
2development home grant fund.
   31.  A child care center and child development home grant fund
4is created and established as a separate and distinct fund in
5the state treasury under the control of the department.
   62.  a.  The fund may consist of any moneys appropriated by
7the general assembly for purposes of this chapter and any other
8moneys that are lawfully available to the department. Moneys
9in the fund are appropriated to the department and shall be
10used for the purposes of this chapter.
   11b.  Notwithstanding section 8.33, moneys in the fund
12that remain unencumbered or unobligated at the close of the
13fiscal year shall not revert but shall remain available for
14expenditure for the purposes of this section in succeeding
15fiscal years. Notwithstanding section 12C.7, subsection 2,
16interest earned on moneys in the fund shall be credited to the
17fund.
18   Sec. 4.  NEW SECTION.  237D.3  Child care center and child
19development home grant program.
   201.  The department shall adopt rules to establish and
21administer a child care center and child development home
22grant program to provide for the allocation of money in the
23fund in the form of grants, not to exceed fifty thousand
24dollars per grant, to eligible persons for costs related to
25the establishment of a new licensed child care center or
26a new child development home, or for the expansion of an
27existing licensed child care center or the expansion of an
28existing child development home. For any one fiscal year, the
29department shall not approve more than four million dollars
30in grants. The rules adopted by the department shall specify
31the eligibility requirements for applicants of the program and
32the items eligible for a program grant. Items eligible for a
33program grant must include the costs related to licensing or
34registration, supplies, employee salaries, and infrastructure.
   352.  A new center or a new home must be licensed or registered
-3-1and fully operational within two years of the date of an
2applicant’s receipt of a grant.
   33.  Of the children for whom a new or expanded center or a
4new or expanded home provide child care, a minimum of twenty
5percent of the children must be from a family that qualifies
6for state child care assistance pursuant to section 237A.13.
   74.  A person that is awarded a grant shall enter into an
8agreement with the department that specifies the requirements
9that must be maintained throughout the period of the agreement
10in order for the person to retain the grant. The agreement
11must contain, at a minimum, provisions addressing all of the
12following:
   13a.  The legal name of the person receiving the grant.
   14b.  The amount of the grant.
   15c.  Annual certification by the person to the department of
16compliance with the requirements of the agreement, the program,
17and this chapter.
   18d.  The repayment of the grant, or a portion of the grant,
19if the person does not meet all of the requirements of the
20agreement, the program, and this chapter.
   21e.  If a new center or a new home for which the grant was
22received goes out of business within two years of the date the
23new center or new home becomes fully operational pursuant to
24subsection 2, the grant shall be subject to repayment. If an
25expanded center or an expanded home for which the grant was
26received goes out of business within two years of the date on
27which the grant was received, the grant shall be subject to
28repayment.
29DIVISION III
30SMALL BUSINESS CHILD CARE TAX CREDIT
31   Sec. 5.  NEW SECTION.  237A.32  Small business child care tax
32credit.
   331.  As used in this section “small business” means any
34enterprise which is located in this state, which is operated
35for profit and under a single management, and which has either
-4-1fewer than twenty employees or an annual gross income of less
2than four million dollars computed as the average of the three
3preceding fiscal years. This definition does not apply to any
4program or activity for which a definition for small business
5is provided for the program or activity by federal law or
6regulation or other state law.
   72.  A small business may receive a child care tax credit
8for providing child care employee benefits to employees of the
9business. The credit may be applied against income tax imposed
10under chapter 422, subchapter II or III, the franchise tax
11imposed under chapter 422, subchapter V, the gross premiums
12tax imposed under chapter 432, or the moneys and credits tax
13imposed in section 533.329. The amount of the credit equals
14the costs to provide the benefit up to three thousand dollars
15per employee per year.
   163.  The aggregate amount of tax credits authorized pursuant
17to this section shall not exceed a total of two million
18dollars per fiscal year, and shall be awarded on a first-come,
19first-served basis.
   204.  To be eligible for a small business child care tax
21credit, the small business must provide child care employee
22benefits to employees of the business through any of the
23following:
   24a.  Build a new structure or rehabilitate an existing
25structure to be used as a child care center at or near the small
26business where the children of the employees of the business
27are provided child care. A small business may construct or
28rehabilitate the structure in conjunction with another business
29but only the actual cost of the business shall be considered in
30determining the credit.
   31b.  Operate or lease a child care center at or near the small
32business where the children of the employees of the business
33are provided child care.
   345.  A taxpayer who elects to claim the small business child
35care tax credit shall not claim the employer child care tax
-5-1credit under section 237A.31
   26.  Any credit in excess of the tax liability is not
3refundable but the excess for the tax year may be credited
4to the tax liability for the following five years or until
5depleted, whichever is earlier. The director of revenue shall
6adopt rules to implement this section.
7   Sec. 6.  NEW SECTION.  422.12P  Small business child care tax
8credit.
   91.  The taxes imposed under this subchapter, less the credits
10allowed under section 422.12, shall be reduced by a small
11business child care tax credit received pursuant to section
12237A.32.
   132.  An individual may claim the tax credit allowed a
14partnership, S corporation, limited liability company, estate,
15or trust electing to have the income taxed directly to the
16individual. The amount claimed by the individual shall be
17based upon the pro rata share of the individual’s earnings of a
18partnership, S corporation, limited liability company, estate,
19or trust.
20   Sec. 7.  Section 422.33, Code 2023, is amended by adding the
21following new subsection:
22   NEW SUBSECTION.  33.  The taxes imposed under this subchapter
23shall be reduced by a small business child care tax credit
24received pursuant to section 237A.32.
25   Sec. 8.  Section 422.60, Code 2022, is amended by adding the
26following new subsection:
27   NEW SUBSECTION.  16.  The taxes imposed under this subchapter
28shall be reduced by a small business child care tax credit
29received pursuant to section 237A.32.
30   Sec. 9.  NEW SECTION.  432.12P  Small business child care tax
31credit.
   32The taxes imposed under this chapter shall be reduced by
33a small business child care tax credit received pursuant to
34section 237A.32.
35   Sec. 10.  Section 533.329, subsection 2, Code 2022, is
-6-1amended by adding the following new paragraph:
2   NEW PARAGRAPH.  n.  The moneys and credits tax imposed under
3this section shall be reduced by a small business child care
4tax credit received pursuant to section 237A.32.
5   Sec. 11.  APPLICABILITY.  This division of this Act applies
6to tax years beginning on or after January 1, 2023.
7DIVISION IV
8STATE CHILD CARE ASSISTANCE
9   Sec. 12.  Section 237A.13, subsection 8, paragraph c, Code
102023, is amended to read as follows:
   11c.  Families with an income of more than one hundred
12percent but not more than one two hundred forty-five percent
13of the federal poverty level whose members, for at least
14twenty-eight hours per week in the aggregate, are employed
15or are participating at a satisfactory level in an approved
16training program or educational program.
17   Sec. 13.  DIRECTIVE TO DEPARTMENT OF HEALTH AND HUMAN
18SERVICES — CHILD CARE ASSISTANCE.
   191.  The department of health and human services shall amend
20its administrative rules pursuant to chapter 17A to do all of
21the following:
   22a.  Provide income eligibility for state child care
23assistance, according to family size for children needing basic
24care, to families whose nonexempt gross monthly income does not
25exceed two hundred percent of the federal poverty level.
   26b.  Adjust the state child care assistance copayment
27schedule in incrementally increased amounts for families whose
28nonexempt gross monthly income does not exceed two hundred
29percent of the federal poverty level.
   302.  The rules adopted pursuant to this section shall take
31effect January 1, 2024.
32EXPLANATION
33The inclusion of this explanation does not constitute agreement with
34the explanation’s substance by the members of the general assembly.
   35This bill relates to economic development including child
-7-1care, grants and tax credits relating to child care, and state
2child care assistance.
   3DIVISION I — CHILD AND DEPENDENT CARE TAX CREDIT. The
4bill adjusts the percentage of the federal child and dependent
5care tax credit by which a taxpayer may reduce the taxpayer’s
6individual state income taxes. A taxpayer with net income of
7$45,000 or less receives 100 percent of the credit; a taxpayer
8with net income exceeding $45,000 but not exceeding $50,000
9receives 88 percent of the credit; a taxpayer with net income
10exceeding $50,000 but not exceeding $60,000 receives 75 percent
11of the credit; a taxpayer with net income exceeding $60,000
12but not exceeding $70,000 receives 63 percent of the credit; a
13taxpayer with net income exceeding $70,000 but not exceeding
14$80,000 receives 50 percent of the credit; a taxpayer with net
15income exceeding $80,000 but not exceeding $90,000 receives 38
16percent of the credit; a taxpayer with net income exceeding
17$90,000 but not exceeding $100,000 receives 25 percent of the
18credit; a taxpayer with net income exceeding $100,000 but
19not exceeding $125,000 receives 13 percent of the credit; a
20taxpayer with net income exceeding $125,000 but not exceeding
21$150,000 receives 10 percent of the credit; a taxpayer with net
22income exceeding $150,000 but not exceeding $175,000 receives
235 percent of the credit; a taxpayer with net income exceeding
24$175,000 but not exceeding $200,000 receives 3 percent of the
25credit; a taxpayer with net income exceeding $200,000 but not
26exceeding $250,000 receives 2 percent of the credit; and a
27taxpayer with net income exceeding $250,000 receives 0 percent
28of the credit.
   29DIVISION II — CHILD CARE CENTER AND CHILD DEVELOPMENT HOME
30GRANTS — FUND. The bill creates a new Code chapter relating
31to child care center and child care development home grants.
   32The bill creates definitions for “child”, “child care”,
33“child development home”, “department”, “facility”, “fund”,
34“home”, “licensed child care center”, and “program”.
   35The bill creates a child care center and child development
-8-1home grant fund (fund) in the state treasury under the control
2of the department of health and human services (HHS). The fund
3may consist of any moneys appropriated by the general assembly
4for purposes of the fund and any other moneys that are lawfully
5available to HHS. Moneys in the fund do not revert to the
6general fund of the state, and interest earned on the fund is
7credited to the fund.
   8The bill requires HHS to adopt rules to establish and
9administer a child care center and child development home
10program (program) to provide for the allocation of moneys
11in the fund in the form of grants, not to exceed $50,000
12per grant, to eligible persons for costs related to the
13establishment of a new licensed child care center or a new
14child development home, or for the expansion of an existing
15child care center or child development home. For any one
16fiscal year, HHS may not approve more than $4 million in
17grants. Rules adopted by HHS must specify the eligibility
18requirements for applicants of the program grant and the items
19eligible for a program grant. Items eligible for a program
20grant must include costs related to licensing or registration,
21supplies, employee salaries, and infrastructure.
   22The bill requires a program grant recipient to build and
23make a new child care center or child development home fully
24operational within two years of receiving a program grant.
   25The bill requires that a new or expanded facility that
26receives a program grant must have a minimum of 20 percent of
27its children from families that qualify for state child care
28assistance.
   29The bill requires a person who receives a program grant
30to enter into an agreement with HHS that specifies the
31requirements that must be maintained throughout the period of
32the agreement in order for the person to retain the grant, as
33detailed in the bill.
   34DIVISION III — SMALL BUSINESS CHILD CARE TAX CREDIT. The
35bill creates a small business child care tax credit.
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   1The bill defines “small business” as any enterprise located
2in this state, which is operated for profit under a single
3management and which has either fewer than 20 employees or an
4annual gross income of less than $4 million computed as the
5average of the three preceding fiscal years.
   6The bill allows a small business to receive a tax credit
7for providing child care employee benefits to employees of the
8business. The amount of the credit equals the costs to provide
9the benefit up to $3,000 per employee per year. The aggregate
10amount of tax credits cannot exceed a total of $2 million per
11fiscal year and are awarded on a first-come, first-served
12basis. The bill requires a small business to provide child
13care employee benefits to employees through certain methods
14in order to be eligible for the small business child care tax
15credit.
   16The small business child care tax credit applies toward
17reducing personal net income taxes, the taxes on corporations,
18the taxes on financial institutions, and the taxes on insurance
19companies. The tax reduction applies to tax years beginning on
20or after January 1, 2023.
   21DIVISION IV — STATE CHILD CARE ASSISTANCE. The state
22offers child care assistance (CCA) to persons who meet certain
23eligibility requirements. CCA is only open to a certain number
24of participants at one time. If CCA is currently unavailable
25to new participants, families applying for CCA will be placed
26on a waiting list. The priority of families on the waiting
27list are, in descending order of prioritization, families with
28an income at or below 100 percent of the federal poverty level
29(FPL) whose members, for at least 28 hours per week in the
30aggregate, are employed or are participating at a satisfactory
31level in an approved training program or educational program,
32and parents with a family income at or below 100 percent of
33the FPL who are under 21 years of age and are participating
34in an educational program leading to a high school diploma
35or the equivalent; parents with a family income at or below
-10-1100 percent of the FPL who are under 21 years of age and are
2participating, at a satisfactory level, in an approved training
3program or in an educational program; families with an income
4of more than 100 percent but not more than 145 percent of
5the FPL whose members, for at least 28 hours per week in the
6aggregate, are employed or are participating at a satisfactory
7level in an approved training program or educational program;
8and families with an income at or below 200 percent of the
9FPL whose members are employed at least 28 hours per week
10with a special needs child as a member of the family. The
11bill changes the maximum income to be eligible for the third
12category of prioritization for purposes of the waiting list
13from 145 percent to 200 percent.
   14The bill directs HHS to amend its administrative rules
15to provide income eligibility for state CCA, according to
16family size for children needing basic care, to families whose
17nonexempt gross monthly income does not exceed 200 percent
18of the FPL and to adjust the state CCA copayment schedule in
19incrementally increased amounts for families whose nonexempt
20gross monthly income does not exceed 200 percent of the FPL.
21The bill makes such adopted rules effective January 1, 2024.
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