School Readiness Tax Credits
In 2007, the Louisiana Legislature passed
Act 394, which enacted
Revised Statutes 47:6101-6109 to provide a package of tax credits known
as the School Readiness Tax Credits. These credits allow tax breaks to families,
child care providers, child care directors and staff, and businesses that support
child care in an effort to encourage child care facilities to voluntarily participate
in the quality rating program administered by the Louisiana Department of Children
and Family Services (DCFS) under the name of
Quality Start Child Care Rating System. The Quality Start web site also
includes a search
feature that can be used to determine the quality rating for child care centers
located in parishes throughout the state.
The School Readiness Tax Credits, which are effective for income tax years beginning
on or after January 1, 2008, and franchise tax years beginning on or after January
1, 2009, are as follows:
-
Child care expense tax credit -- (R.S. 47:6104)
-
Child care provider tax credit -- (R.S. 47:6105)
-
Credit for child care directors and staff -- (R.S. 47:6106)
-
Tax credit for business-supported child care -- (R.S. 47:6107)
-
Tax Credit For Donations To Resource And Referral Agencies -- (R.S. 47:6107)
To provide additional guidance for the School Readiness Tax Credits, the Louisiana
Department of Revenue (LDR) and DCFS adopted
LAC 61:I.1903.
1. Child Care Expense Tax Credit—R.S.
47:6104
A school readiness child care expense tax credit is allowed for taxpayers who have
a qualified dependent under the age of six who, during the year, attended a child
care facility that participates in the quality rating program and has earned at
least two stars.
The school readiness child care expense credit is based on the quality rating of
the child care facility and is a percentage of the existing Louisiana child care
expense credit provided for by
R.S. 47:297.4. The school readiness child care expense tax credit is in
addition to the regular child care expense credit.
The percentage of the regular child care expense credit allowed for the school readiness
tax credit is based on the child care facility’s quality rating as follows:
|
Quality Rating of Child Care Facility
|
Percent of Louisiana Child Care Tax Credit
|
|
Five Star
|
200%
|
|
Four Star
|
150%
|
|
Three Star
|
100%
|
|
Two Star
|
50%
|
|
One Star or not participating in Quality Start
|
0
|
Parents with multiple qualifying children are allowed credit for each child with
the credits separately calculated. Also, if a child receives services from more
than one child care facility during the year, the credit is calculated based on
the facility with the highest quality rating.
- Refundable credit—The school readiness child care expense tax credit is refundable
for taxpayers whose federal adjusted gross income is $25,000 or less. The refundable
credit is claimed by resident taxpayers on Line 20 of the Louisiana income tax return,
Form IT-540, and Line 21 of Form IT-540B for nonresidents.
- Nonrefundable credit—Taxpayers whose federal adjusted gross income is greater than
$25,000 may apply the credit to their tax liability and if the credit is more than
the taxpayer’s liability, the remaining credit can be carried forward and applied
to later tax years. Excess credits can be carried forward for up to five years.
The nonrefundable credit is claimed by resident taxpayers on Line 12D of the Louisiana
income tax return, Form IT-540, and Line 13D of Form IT-540B for nonresidents.
Proof of Credit
Taxpayers who claim the school readiness child care expense credit must obtain a
Louisiana School Readiness Tax Credit, Child Care Expense Credit Certificate, Form
R-10614 from their child care facility. The facility must complete the top portion
of the form including the facility’s name, license number, the Louisiana Revenue
Account Number, the facility’s quality rating, and the date of the rating award.
Child care providers must provide completed forms to parents or guardians for each
qualifying child who attended the facility.
The school readiness child care tax credit is calculated as follows:
Example 1
-
Family’s federal adjusted gross income...................................................................$20,000
-
Refundable or nonrefundable tax credit..............................................................Refundable
-
State child care credit amount...................................................................................$50
-
Qualified dependent under age six that attended a quality rated child care facility........................1
-
Quality rating of the child care facility............................................................................3*
-
Percentage of state child care credit allowed................................................................100%
-
School readiness child care expense tax credit ($50 x 100%)..............................................$50
-
The $50 school readiness child care expense credit can be claimed in addition to
the $50 regular child care credit and, if the credit exceeds the taxpayer’s tax
liability, the excess amount will be refunded.
Example 2
-
Family’s federal adjusted gross income..................................................................$30,000
-
Refundable or nonrefundable tax credit.........................................................Nonrefundable
-
State child care credit amount..................................................................................$50
-
Qualified dependents under age six that attended a quality rated child care facility.....................2
-
Quality rating of the child care facility for first child...........................................................4*
-
Percentage of state child care credit allowed for first child .............................................150%
-
School readiness child care expense tax credit for first child ($50 x 150%).............................$75
-
Quality rating of the child care facility for second child.......................................................3*
-
Percentage of state child care credit allowed for second child .........................................100%
-
School readiness child care expense tax credit for second child ($50 x 100%)........................$50
-
Total school readiness child care expense tax credit ($75 + $50)......................................$125
-
The $125 school readiness child care expense credit can be claimed in addition to
the $50 regular child care credit and can be applied against the taxpayer’s liability
with any excess credit carried forward for up to five years.
For additional information concerning the school readiness child care expense tax
credit, see DCFS’ Frequently Asked
Questions.
2. Child Care Provider Tax Credit—R.S.
47:6105
Child care providers who own and operate a facility where care is given to foster
children in the custody of the DCFS or to children who participate in the
Child Care Assistance Program administered by the DCFS are eligible for
the refundable School Readiness Child Care Provider tax credit.
The tax credit is based on the average monthly number of children who attend the
facility multiplied by the applicable credit amount based on quality rating of the
child care facility.
|
Quality Rating of Child Care Facility
|
Tax Credit Per Eligible Child
|
|
Five Star
|
$1,500
|
|
Four Star
|
$1,250
|
|
Three Star
|
$1,000
|
|
Two Star
|
$750
|
|
One Star or not participating in Quality Start
|
0
|
The DCFS will provide certification by March 1 to qualifying child care providers
regarding the average number of children participating in the program. The certificates
must be retained in the Child Care Provider’s records and be available to LDR on
request.
The credit can be taken against individual income tax, corporation income tax, or
corporation franchise tax depending on the child care facility’s entity type as
follows:
- Individual income tax credit—If the child care facility is owned by a sole proprietor,
or a flow-through entity such as a Limited Liability Company (LLC), Partnership,
Subchapter S corporation, the credit will be claimed on the Resident Individual
Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year Resident
Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders
should apportion the credit based on the each partner or shareholder’s percentage
of ownership.
- Corporation income or franchise tax credits—If the child care facility is owned
by a corporation, the credit will be claimed on the Corporation Income and Franchise
Tax Return, Form CIFT-620, Schedule RC.
- Nonprofit Organizations—If the child care facility is owned by a nonprofit organization,
the tax credit will be taken on the Corporation Income and Franchise Tax Return,
Form CIFT-620, Schedule RC, or Form CIFT-620SF, available only on
LaTAP . Nonprofit organizations that are not registered with LDR because
they are exempt from tax must register with LDR and obtain a Louisiana tax identification
number to be able to claim the credit.
For additional information concerning the school readiness child care provider tax
credit, see DCFS’ Frequently
Asked Questions.
3. School Readiness Directors and Staff Tax Credit—R.S.
47:6106
Child care directors and eligible staff are eligible for a refundable tax credit
if they work at least six months for a licensed child care facility that participate
in the quality rating system and are enrolled in the
Louisiana Pathways Child Care Career Development System.
The refundable tax credit is based on the educational level attained through Louisiana
Pathways Child Care Career Development System. The credit is adjusted annually by
the percentage increase in the Consumer Price Index United States city average for
all urban consumers (CPI-U), as prepared by the United States Department of Labor,
Bureau of Labor Statistics, as determined by the secretary of the Department of
Revenue on December first of the preceding calendar year. The credit amount for
the 2012 tax year is as follows:
|
School Readiness Tax Credit Levels
|
Amount of 2012 Refundable School Readiness Tax Credit
|
|
Director I
|
$1,573
|
|
Director II
|
$2,097
|
|
Director III
|
$2,621
|
|
Director VI
|
$3,146
|
|
Child Care Teacher I
|
$1,573
|
|
Child Care Teacher II
|
$2,097
|
|
Child Care Teacher III
|
$2,621
|
|
Child Care Teacher VI
|
$3,146
|
The tax credit is claimed on the Resident Individual Income Tax return, Form IT-540,
Schedule F, or the Nonresident and Part-Year Resident Individual Income Tax Return,
Form IT-540B, Schedule F-NR.
DCFS will provide certification to child care directors and staff indicating the
educational level achieved by January 31. The Louisiana School Readiness Tax Credit,
For Child Care Director and Staff, Form R-10615 must be completed by the child care
provider and given to the directors and staff. The DCFS will also furnish the certification
information to LDR as verification of the directors and staff’s eligibility for
the tax credit.
Directors and staff who file paper returns must attach a copy of the certification
Form R-10615 to the return when filed. If the tax return is filed electronically,
the form should be retained by the taxpayer to be provided to LDR if requested.
For additional information concerning the School Readiness Directors and Staff Tax
Credit, see DCFS’ Frequently
Asked Questions.
For additional information concerning the Louisiana Pathways Child Care Career Development
System (LA Pathways) see the DCFS' rule,
LAC 67:III.5125 and 5127.
4. Tax Credit For Business-Supported Child Care—R.S.
47:6107
Businesses that support quality child care are eligible for a refundable tax credit
based on the quality rating of the center. Eligible support includes:
- Expenses to construct, renovate, expand, or repair an eligible child care center,
purchase equipment for a center, maintain or operate a center, not to exceed $50,000
in expenses per tax year;
- Payments made to an eligible child care facility for child care services to support
employees, not to exceed $5,000 per child per tax year; and/or
- The purchase of child care slots at eligible child care facilities actually provided
or reserved for children of employees, not to exceed $50,000 per tax year
The credit is for a percentage of the eligible expenses based on the quality rating
of the child care facility to which the expenses are related or the rating of the
child care facility that the child attends as follows:
|
Quality Rating of Child Care Facility
|
Percentage of Eligible Expenses
|
|
Five Star
|
20%
|
|
Four Star
|
15%
|
|
Three Star
|
10%
|
|
Two Star
|
5%
|
|
One Star or not participating in Quality Start
|
0%
|
The refundable credit can be taken against individual income tax, corporation income
tax, or corporation franchise tax depending on the business’s entity type as follows:
- Individual income tax credit—If the business providing the support is owned by a
sole proprietor or a flow-through entity such as a Limited Liability Company (LLC),
Partnership, Subchapter S corporation, the credit will be claimed on the Resident
Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year
Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and
shareholders should apportion the credit based on the each partner or shareholder’s
percentage of ownership.
- Corporation income or franchise tax credits—If the business providing the support
is a corporation, the credit will be claimed on the Corporation Income and Franchise
Tax Return, Form CIFT-620, Schedule RC.
- Nonprofit Organizations—If the business providing the support is a nonprofit organization,
the tax credit must be taken on the Corporation Income and Franchise Tax Return,
Form CIFT-620, Schedule RC.
If the nonprofit organization is not registered with the Department of Revenue because it is exempt,
the organization must register and obtain a Louisiana tax identification number and file the tax return to claim the credit.
For additional information concerning the Tax Credit For Business-Supported Child
Care, see DCFS’ Frequently Asked
Questions.
5. Tax Credit For Donations To Resource And Referral Agencies—R.S.
47:6107
Businesses may also receive a tax credit for donations made to Child Care Resource
and Referral Agencies. These are private agencies that contract with the Department
of Social Services to provide information and services to parents and child care
providers. The credit is equal to the amount donated but cannot exceed $5,000 per
tax year.
The refundable credit can be taken against individual income tax, corporation income
tax, or corporation franchise tax depending on the business’s entity type as follows:
- Individual income tax credit—If the business making the donation is owned by a sole
proprietor or a flow-through entity such as a Limited Liability Company (LLC), Partnership,
Subchapter S corporation, the credit will be claimed on the Resident Individual
Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year Resident
Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders
should apportion the credit based on the each partner or shareholder’s percentage
of ownership.
- Corporation income or franchise tax credits—If the business making the donation
is a corporation or C-corporation, the credit will be claimed on the Corporation
Income and Franchise Tax Return, Form CIFT-620, Schedule RC.
- Nonprofit Organizations—If the business making the donation is a nonprofit organization,
the tax credit must be taken on the Corporation Income and Franchise Tax Return,
Form CIFT-620, Schedule RC.
If the nonprofit organization is not registered with the Department of Revenue because it is exempt,
the organization must register and obtain a Louisiana tax identification number and file the tax return to claim the credit.
For additional information concerning the Tax Credit For Fees and Grants to Resource
and Referral Agencies, see DCFS’
Frequently Asked Questions.
