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S.F. No. 244 - School Readiness Tax Credit (as proposed by the A-2 amendment)
 
Author: Senator Melisa Franzen
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 25, 2015



 

This bill establishes a tax credit for qualifying expenses made on behalf of a child to a child care facility with a Parent Aware rating of at least two stars, for businesses that incur certain expenses for child care facilities with a Parent Aware rating of at least two stars, and for directors and teachers at child care facilities.  The credit is refundable for qualifying taxpayers and other taxpayers may carry the credit forward for up to five years.  The credit would be effective beginning in tax year 2015.

Subdivision

Provision

1

Establishes a credit for payments by individual taxpayers to a child care facility, as defined in subdivision 3.  The credit established in this bill would be in addition to the dependent care credit existing under current law.  Establishes the percentages of expenses that may be used to claim the credit, which are based on the Parent Aware rating of the facility to which the payments are made.  The maximum amount of credit that may be claimed is $1,050 for payments made on behalf of one child and $2,100 for payments made on behalf of two or more children.  The credit must be calculated separately for payments made by a taxpayer on behalf of multiple children.
 

2

Establishes a credit for businesses for a percentage of eligible businesses expenses, as defined in subdivision 3, made for or to a child care facility.  The credit is available to the extent that the expenses used to claim the credit were not deducted as business expenses.  Establishes the percentages of expenses that may be used to claim the credit, which are based on the Parent Aware rating of the facility to which the payments are made.  The credit is nonrefundable and may be carried forward for up to five years. 
 

3

Establishes a $250 credit for child care facility teachers and directors.  The credit may be claimed for employment at only one child care facility in a tax year. 
 

4

Provides definitions for the following terms:

  • “Child” or “children” means individuals five years of age and under;
  • “Child care facility” means a facility with a quality (i.e., Parent Aware) rating of at least two stars;
  • “Director” means an individual qualifying under Minnesota Rules;
  • “Eligible business child care expenses” are the expenses that businesses may use to claim the credit:

-construction, renovation, operation, and similar expenses for a child care facility, up to $50,000 per year;

-payments to a child care facility on behalf of the business’s employees, up to $5,000 per child per year; and

-payments for slots at a child care facility for use by the business’s employees, up to $50,000 per year.

  • “Quality rating” is the rating (otherwise known as Parent Aware rating) awarded to a child care facility by the Department of Human Services;
  • “Teacher” means an individual qualifying under Minnesota Rules.
     

5

Requires that taxpayers claiming the credit must provide sufficient documentation to claim the credit.  Documentation must be provided in a form and manner prescribed by the commissioner of revenue and commissioner of human services.
 

6

Provides that the credit must be pro-rated as required under existing law for claimants who are nonresidents or part-year residents.
 

7

Provides that the credit is refundable for taxpayers with income, as defined for purposes of the dependent care credit under current law, of $25,750 or less.  For claimants with income greater than $25,750, the credit is nonrefundable but may be carried forward against the claimant’s tax liability for up to five years. 
 

8

Provides allocation requirements for claimants that have multiple ownership.
 

9

Provides an inflation adjustment for the income threshold in subdivision 6.
 

10

Provides an appropriation to pay refunds authorized in the bill.

 

 
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