Senator Franzen Introduces School Readiness Tax Credit

ST.PAUL, Minn. –State Senator Melisa Franzen (DFL-Edina) introduced legislation today to make it more affordable for parents to pay for the increasingly high costs of high-quality child care and promote school readiness. Additionally, businesses could qualify for a tax credit for payments to child care services.

On average, child care in Minnesota costs $901 per month, or $10,812 per year, for one child. Minnesota is the third-most expensive state in the nation for child care, based on the cost of infant care as a share of median income (15.5%). The legislation creates a School Readiness Tax Credit for families and businesses that seek high-quality child care.

“We know that high-quality early education is the best way for children to have long-term success not just in their learning, but also their personal and financial lives,” said Sen. Franzen. “Fewer than half our children who enter Kindergarten are fully prepared for it. This tax credit provides parents with the opportunity to give their kids access to the support they need by selecting providers that are quality rated.”

Based on a model currently used in Louisiana, the legislation uses the Parents Aware (http://parentawareratings.org/) ranking system to create tiered credits depending on the quality of the child care provider. The credit is applicable for parents at the following rates:

• A four star rated program: credit equal to 150% of existing dependent tax credit
• A three star rated program: credit equal to 100% of existing dependent tax credit
• A two star rated program: credit equal to 50% of existing dependent tax credit

A family could qualify for a savings of $1,050 for one child and a maximum of $2,100. The credit is refundable for taxpayers earning less than $25,750, adjusted for inflation, meaning those taxpayers can earn a refund equal to the credit amount even if they do not have tax liability. All other taxpayers would be allowed to carry forward the credit’s worth for up to five tax years.

The tax credit also includes businesses that offer on-site child care or provide subsidies or other support to employees paying for child care services. Linked to Parent Aware ratings, there are three types of financial contributions that would qualify for the credit:

1) Payments to construct, renovate, expand or repair a child care facility, purchase equipment for the facility, or maintain or operate a facility;
2) Payments made to an eligible child care facility on behalf of employees, not to exceed $5,000 per child;
3) Payments for the purchase of child care slots at eligible child care facilities reserved for employees’ children.

If the payments were made to a four-star rated program, the business could claim a credit equal to 15% of payments made; 10% for three-star programs; and 5% for two-star programs.

“Improving access to high-quality child care is a priority all Minnesotans can share. We want to encourage our families and businesses to seek quality ratings to support the school readiness needs of our kids and future workforce.” said Franzen.

For information on this or any legislation, please contact Sen. Melisa Franzen at 651-296-6238 or by email at sen.melisa.franzen@senate.mn.

Senator Franzen
Melisa Franzen represents District 49 in the southwest Twin Cities metropolitan area.

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