Alabama’s newest laws: What childcare tax credits and grants will mean for families in 2025
A handful of new laws passed by the Alabama Legislature go into effect with the start of the new year, including one intended to make reliable and affordable childcare more available to working parents.
HB358 by House Minority Leader Anthony Daniels, D-Huntsville, created two new tax credits and a grant program, all of which start on Jan. 1.
Daniels’ bill, which had 41 co-sponsors from both parties, was one of several bills in a “Working for Alabama” package aimed at increasing Alabama’s workforce participation rate, which ranks near the bottom among states.
The lack of childcare has made it harder for some people, especially single mothers, to join or return to the workforce, legislators and advocates said.
In 2022, almost 85,000 Alabama families needed access to childcare but had no affordable, quality options in their communities, according to the Women’s Foundation of Alabama.
“When we address the barriers that women and families face, we are making Alabama better, Alabama stronger,” Melanie Bridgeforth, CEO of the Women’s Foundation of Alabama, said when Gov. Kay Ivey signed the bill in May. “Pro business is being pro family.”
The three main components of the new law:
Employer tax credits – Companies can receive tax credits for offering child care facilities for their employees or for covering the cost of that care.
The credits can be up to $600,000 per year for a company to offset eligible expenses.
Eligible expenses are for construction, renovation, or expansion of a childcare facility, as well as the purchase of equipment, maintenance, and operation. Eligible expenses also include payments to childcare facilities for children of employees.
Companies with fewer than 25 employees can receive credits equal to 100% of their eligible expenses. Larger companies can receive up to 75%.
The credits will have a statewide, aggregate cap of $15 million in 2025, $17.5 million in 2026, and $20 million in 2027.
Facility tax credits – Childcare facilities can receive a tax credit of up to $25,000 per year.
The amount of the credits will be based on the number of children at a center who are enrolled in the federal child care subsidy program administered by the Alabama Department of Human Resources. A facility’s tax credit amount is also tied its quality of care rating by DHR, which assigns ratings of one star through five stars.
The aggregate statewide cap for facility tax credits will be $5 million.
Grants – DHR will award grants to nonprofit childcare providers for construction, expansion, repairs, or operations of facilities that increase quality or capacity. The maximum annual grant per provider is $50,000, with an aggregate annual cap of $5 million statewide.
The tax credits and grants will be available for three years, through 2027. The Legislature will decide whether to extend the law after reports from the Department of Revenue and the Department of Labor that will show the levels of participation in the tax credits and grants and the impact on the workforce participation rate.
The 2024 legislative session ended in May and saw the Republican majority pass many of their top priorities, including a bill to allow parents to use taxpayer funds for private school.
The CHOOSE Act creates education savings accounts, or ESAs, of up to $7,000 a year per child for private school or $2,000 for home school.
The first ESAs will be available for the 2025-26 school year and will be limited to specific groups of students. All students in the state will be eligible at the start of the 2027-28 school year.
Most bills passed during the 2024 legislative session have already gone into effect before the start of the new year. Many took effect within three months of being signed or on Oct. 1.
Here are the bills signed into law that are taking effect on Jan. 1:
Involuntary commitment for addiction: SB240 by Sen. Will Barfoot, R-Montgomery, will authorize probate judges to involuntarily commit to care an individual who suffers from a drug addiction that is secondary to a primary diagnosis of mental illness. The new law also creates a process for a probate judge to ask a court to suspend a jail sentence for a misdemeanor or municipal ordinance violation to allow the offender to receive care under an involuntary commitment order.
Mandatory training for mayors, councils: SB291 by Sen. Jabo Waggoner, R-Vestavia Hills, will require mayors and city council members to receive at least 10 hours of training on the powers and duties of municipal officials, including the use of public funds, ethics, public records, bidding on public works projects, budgeting, the open meetings law, and other topics.
First responder training on disabilities: HB126 by Rep. Leigh Hulsey, R-Helena, will require firefighters and emergency medical responders to receive training on interacting with people with sensory needs or invisible disabilities, such as individuals with hearing or vision loss, autism, or other conditions than are not readily apparent.
Exempting capital gains from income taxes: SB297 by Sen. Tim Melson, R-Florence, will exempt capital gains made from the exchange of precious metal bullion from the state income tax. Precious metal bullion includes coins, bars or rounds containing primarily refined gold, silver, platinum, or palladium that is marked and valued primarily by its weight, purity, and content.
Expanding military pay income tax exemptions: SB209 by Sen. Andrew Jones, R-Centre, expands a state income tax exemption for military pay in combat zones to apply to members of the National Guard and Reserve who are activated by the governor or president in response to emergencies.
Liability protection for cattle owners: SB164 by Sen. Randy Price, R-Opelika, protects cattle owners from liability for injury, loss, damage, or death resulting from “the inherent risk of bovine activity,” under certain circumstances. The protection does not apply in cases of “willful and wanton” disregard for safety, or if the owner does not post a warning sign on the fence or enclosure holding the cattle. Bovine activity also covers bison, buffalo, and oxen.
The 2025 legislative session starts Feb. 4.
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