Episode 12: The 2024 Election Impact on Childcare + Programs in West Virginia and Florida

Welcome to Episode 12 of the Tax Break Breakdown with your hosts, Greg and Doug. After a few months' hiatus, we're back with some important updates and discussions on childcare tax credits and their implications for both employers and employees.

Key Highlights:

Personal Update:

• Greg's New Baby: Greg shared the exciting news of welcoming his new baby boy, Sawyer, three months ago. He expressed gratitude for the generous paid leave policy at their company, Upwards, which allowed him to take three months off—a stark contrast to the limited leave he had with his first two children.

Childcare Crisis:

• Ongoing Issues: The childcare crisis remains a significant issue, regardless of political changes. We emphasized the importance of not solely relying on the government to solve this problem and highlighted the need for sustainable models involving multiple stakeholders.

Election Impact:

• Legislative Shifts: We discussed the potential impacts of the recent election results on childcare policies. While some initiatives like capping childcare spend to 7% of income may face challenges, there is hope for bipartisan support at the state level.

State-Level Initiatives:

• West Virginia: House Bill 226 established a state-level child and dependent care tax credit, benefiting around 16,000 families. This credit is non-refundable and can reduce tax liability to zero but does not result in a refund.
• Florida: Starting October 1st, employers in Florida can apply for tax credits to support childcare facilities or payments. This program offers significant credits, up to $1 million, for creating or maintaining childcare facilities and paying for employee childcare.

Practical Insights:

• Employer Strategies: We provided practical advice for employers on how to navigate and take advantage of these tax credits. From helping employees find care to implementing prepaid backup care programs, there are various ways to support employees without incurring prohibitive costs.

Application Details:

• Florida Tax Credit Application: We detailed the application process for Florida's tax credit program, including the necessary information and the cap of $3,600 per eligible child per year. Unused credits can be carried forward for up to five years, and credits can be transferred within affiliated groups.

Final Thoughts:

• Layering Benefits: We emphasized the importance of layering federal and state benefits to maximize support for childcare. Our company, Upwards, plays a crucial role in helping employers navigate these complex programs.

Thank you for tuning in to this episode of the Tax Break Breakdown. We look forward to bringing you more insights and updates in our next episode. Until then, take care!

Chapters

• 0:02 Child Care Tax Credit Legislation
• 5:56 Corporate Tax Credits for Child Care
• 15:59 Employer Child Care Tax Credit Overview

Transcript

Speaker 1: 0:02

Welcome to the Tax Break Breakdown with your hosts, greg and Doug. Sit back and relax while they review current and upcoming child care tax credit programs employers can take advantage of. Now on to the show.

Speaker 2: 0:18

Welcome everybody to Episode 12 of the Tax Break Breakdown with your hosts, Greg and Doug. It has been a few months, doug yeah, that we have done this, so we have a a good episode today, some pretty interesting things an episode at least good is subjective correct.

Speaker 2: 0:42

uh, we know that emotions are running high right now. The problem still remains, no matter who's leaving, who's coming, child care crisis is still going on. That is why we started. This was because we knew that stuff like this is going to happen and you can't fully rely on the government to solve the problem. They are just one stakeholder in a sustainable model that we have been advocating for for many, many years. So, no matter what, until their act gets together on any side, it's still a crisis and it's just getting worse and worse, and that's why we do what we do is because we want to share with employers and employees like what's already out there, because you can use that today.

Speaker 1: 1:33

Get into that and obviously you know the impacts of uh, the election and you know things that have been going on. There's a reason that we have not done one of these in a couple of months and that reason is what, what, what is that?

Speaker 2: 1:50

um, I think in our last episode 11 or 10 or maybe even a couple of them I did mention that my wife was pregnant. Well, we welcomed a new baby boy. He is now three months. His name is Sawyer. Um, I am so thankful to our company that we work with now. For those that don't know, doug and I work at a company called Upwards and um, obviously we are supporting child care, elder care, all different types of care, and so it would make sense to have a pretty generous uh paid leave, and so I was able to take advantage of that. Um, I wasn't able to take advantage of it from my previous companies for my first two kids, so this one was um, it was interesting to be able to be off for that long I'll think of it.

Speaker 1: 2:42

I mean just having gone through that right um, because when rain was born is now like three and a half, like I didn't have any parental leave, um, where I was working at the time I didn't qualify for it like how different was that experience being supported by your employer right and being able to take that time versus previously not being able to yeah, I mean, I think, um, I wouldn't with the with the first two kids, um, I think I had a week off for the first one and maybe two weeks off for the second one.

Speaker 2: 3:19

This one I had three months and I didn't really appreciate, like how much I actually missed out on and you, um, because back then I was like, oh, I don't want to be passed up for a promotion, like, I don't want to appear weak, I'm just going to take the unlimited amount and this one, I said no, like things have changed. I mean, it's been from the first kid it's been 14 years and the second kid's been three years, so things like in that time it has shifted to like it is 100% in your right and advocated for to take time off, even as a even as a father.

Speaker 1: 3:57

Yeah.

Speaker 2: 3:58

Um, and so I think I appreciated there was a little bit of guilt that I didn't do this for the first two kids. So I'm glad that I took advantage of it here. But also it gave me more appreciation because I now saw how hard those first three months are, Because I didn't, I went back to work.

Speaker 2: 4:30

Um, there definitely has been a lot more appreciation for those that helped with all kids in those first three months. And it's it's hard for sure. It's like it's hard on the father, but it's significantly harder on the other partner. So, I am forever grateful.

Speaker 1: 4:41

Well, like you mentioned, um a couple of things we're going to talk about today yeah, well, we uh, you know world, world shifts a little bit every four years, um, and uh, no exception, uh, after the results last night, um, which is gonna have an impact on this space. There's, you know, no getting around that. So you know we can start to look at what may be a little bit of the shift. You know where, differences between platforms, current administration to incoming administration, but then we also have, you know, again, the the world turning at the state level, um, some news from West Virginia and uh, recent legislation that I think we touched on earlier episodes, but uh, is finally coming into act in Florida, uh, specific around corporation tax breaks, um, and that is ultimately why we're here, so shall we, your um.

Speaker 2: 5:46

What are your thoughts on um the transition and it affecting some of the current things that have been happening? Current legislation right there's, there's been. In 2025, they proposed an initiative as part of the budget to cap childcare spend to 7%. Yeah, and I know that on on the campaign trail? Um, thus far it's been. Um they asked it actually was a question that was finally brought up. Um, yeah, yeah, what are your thoughts on?

Speaker 1: 6:19

it. The our friends at bombs first did an incredible job pushing that question into the first debate and continuing to lean on. It came up in a couple of town halls, um, and there really was never an answer, given, which I just think is like that rare when we're in campaign season. I think, you know, trying to nail down specific policy, things can be tough. The you know, I do think some of the current things, like the 2025 budget, trying to cap child care at 7% of income, obviously is a lofty goal. I think that's dead right. Like I mean, will it get picked up in some way, shape or form? But realistically, um, you know, I think, given like how, the, how polarized the current environment is, there's a lot of things that are initiatives that may actually align across the aisle, that may just kind of get pushed to the side.

Speaker 1: 7:19

But the one thing we've seen consistently right with child care programs at the state level is there's been a lot of bipartisan coalition. We've seen programs go into the state level with heavy bipartisan support. We've seen them go in and very heavily Democratic states. We've seen programs go in and very Republicans pushes for programs is they tend to be taxpayer oriented, right, they're looking to support families directly or more firmly through other channels. So, expansion of tax credits right, investment into supply where I think what we've seen and we're going to talk about in Florida is there's a little bit more across red states and Republican initiatives to really push it more into the private space Right and into the corporate space, and so that's where we're seeing a lot of the tax credits and different things I think come into play at the corporate level.

Speaker 1: 8:39

Different things I think come into play at the corporate level. Um so so my gut feel at the moment is, you know, we looked at some of the bills that were starting to work their way through the ways and means committee in the house. Um, you know, some were broader, more corporate focused.

Speaker 1: 8:52

Some were like expanding the child tax credit, like significantly significant, I would expect things that are more corporation focused, to take, um, you know, kind of take a little bit of the lead and we're going to see a little bit more of that um, expansion potentially of the, you know, corporation tax credit right for supporting child care, um, and things like that, versus more expansion of individual tax credits, um, yeah, I mean that's that I think is. That is is the difference between like parties and the initiatives. I don't know like what do you think?

Speaker 2: 9:32

well, we have two examples of kind of coming from what you thought.

Speaker 2: 9:36

So west West Virginia was more of a ground up perspective, so trying to target families, and then Florida was more top down. You know, distribution's a little bit easier of the message from an employer to their employees those employers that are in West Virginia here is something you can share with your employees. If you're a family, an employee, somebody, if you qualify for the federal child independent care tax credit, because there's certain parameters that you need to qualify, when it's based off income, you're going to get that same credit at the state level, but it's 50%. So an example would be like if you are an individual, on your federal tax credit, you qualify for $450 in a federal credit, you would receive 50% of that on your state taxes, and so what they anticipate is helping about 16,000 West Virginia families and returning about 4.2 million dollars to taxpayers and so um. The key thing I think to know is that it is a non-refundable credit. So, uh, it can reduce the tax viability to zero, but it doesn't result in a refund yeah and there obviously are income thresholds.

Speaker 2: 11:15

I don't have those right in front of me but I believe from my research it's usually tiered. It's not usually like take it or leave it, it's tiered. And then, obviously, keeping record of your documentation so that when you file you can at least have proof.

Speaker 2: 11:42

At least have proof In this legislation there wasn't any direct incentives or tax credits for employers like there is from the Florida one that we're going to go through, and I think when you think of things like these as an employer, you are a distribution tool to get this message across, just like we are a distribution tool, and these are funds that are already out there. I'm hopeful that programs like TurboTax or your tax accountant, whoever your advisor, knows about these things, but these are little things that can offset the taxes that you pay, which is just more money back into your pocket. So employers in West Virginia, while this one is focused on bottom up, helping employees, families, share this knowledge with them, and this is just one way that they can lower their cost of care overall. So interesting program standard, though right, we've seen these across many states.

Speaker 1: 12:40

It's the bottom-up approach yeah, I mean, I think the, you know the, the state level, the, the, the expansion or creation of right, like the tax credits, are nice. It's difficult because it doesn't help you as a family till till the end of the year and you need to owe right and so, and so you know it does be. It becomes a bit regressive right at that point as far as supporting folks. But maybe this is where you know again, we may see more programs like what's happening in Florida here that I believe launches October 24 is when applications open up for this on the corporate side. That actually, again, isn't directly progressive but enables corporations in Florida right to put progressive programs in place. First, employers can apply to the Department of Revenue for tax credit allocation. This tax credit right will support organizations that establish an eligible child care facility for employees operate one. So, whether it's a new one or they're currently operating an on-site, near-site daycare or pay right for child care at an eligible facility, um, and so really covering again three basis creation of supply, maintenance of supply right and helping to pay for care. Uh, at the end of the day, um can be used to reduce corporate income tax um, as well as some other taxes, um, in Florida, uh, insurance premium tax, which, uh, uh, don't imagine insurance rates in Florida are going down anytime soon. Uh, as well as, uh, you know, taxes associated with it.

Speaker 1: 14:34

Um, as far as what we can tell today, not a whole lot going into the application. Um, you know FEININ, number of employees and likely some type of description of what the credit is going to be utilized for. But it looks like depending on what you're doing, the credit can change. But if we look at starting a facility right, that credit can go up to a million dollars. Operating a facility can go up to a million dollars is tiered by employee size and then, but payments to an eligible facility and this is the one that I think right is, there's the opportunity to do the most good in the shortest amount of time.

Speaker 1: 15:21

Right Is actually helping people pay for childcare, um, and this for an organization over 250 employees that can get up to $1 million right as a tax credit. Right, to help offset the cost of paying for care. You can get to that number pretty quickly. Right, if you have a decent workforce, um, and so that is what I think is going to be really interesting when we see the application come up. Is. You know what needs to go into that and how can it be taken advantage?

Speaker 2: 15:52

of napkin math, right. So a million dollars. First, let's acknowledge what this is actually saying. Like if you are a business owner and you want to start a facility and you have 19 employees, you can get a million dollars as a tax credit. If you operate one and you have more than 250 employees, up to a million. If you have more than 250 employees, up to a. If you have more than 250 employees, up to a million in payments.

Speaker 2: 16:26

But let's do some reality check. A million dollars and let's say right now we believe the average is three thousand dollars a year that employers are contributing, that's 300, 333 employees that can get three thousand dollars a year that you can then offset with a million dollar tax liability. So that, just to put some numbers into perspective, like a million dollars is a lot. But then if you're an employer that has 15,000 employees, it's going to affect 333 employees, which then still leave the other X amount of employees with either nothing or you have to keep decreasing the amount. But the point is is that those dollars are there. It's not as expensive as you think. I was at a um CHRO conference two weeks ago and I think there was a common theme from several CHROs of like I thought it was going to be way more expensive to do something like to help with childcare, because they I think everybody thinks and rightly so that if they have a corporate program that they're going to have to contribute to the cost of care.

Speaker 2: 17:34

Like I think you can get to that point. But there are other programs that you can implement first that are significantly cheaper and more affordable, and so we always advocate like we, there's a lot of employers that they don't want to do nothing, they can't do everything, and so what can they do in the interim? So one example is helping employees find care, so a navigation program that tends to help. The next level up is some prepaid backup care, right, like they're not paying for everything, it's capped, there's a limited amount, it's a limited use. And then all the way to employers that are actually paying for care. And yes, when you start paying for care, the dollar's out up.

Speaker 2: 18:17

But let's take an example here. Let's say you're an employer in Florida, out of it. But let's take an example here. Let's say you're an employer in Florida. First, at the federal level, you qualify for up to $150,000 back. So if you pay for care, you get 25% already, and then, if you also pay for care, you can offset your Florida taxes with this new program, right? So now your amount has gone from you thinking you're paying a hundred percent to now you're paying maybe 50%, maybe less. Just depends on on where you, where you sit. So I think, um programs like these, again, it's an awareness thing. That's why we're here. Not many people know that they exist when the applications open. So I think in this one, um the applications open.

Speaker 1: 19:07

so I think in this one um the what was the date? I think there was it was october 1st, so it's technically live and that's um. You know, I think what um there hasn't been a lot out looks like there's a paper form at the moment that can be submitted. I think the interesting thing here, if you're going to pay for child care, kind of looking through the form, it's essentially outside of core information organization which taxes you want to apply right Credits towards.

Speaker 1: 19:42

If you're going to pay for childcare, it's going to ask for three things the total number of eligible children for whom childcare payments will be paid, based on the taxable or fiscal year. The estimated amount of care payments right that are going to be made during the fiscal year. So the number of kids, the estimated amount, right, and the requested credit. So essentially number of kids dollars right, they expect to expend. And then how much credit are you requesting?

Speaker 1: 20:16

And the reason why there's that third line is there's a line on the form that says do not request more than $3,600 per eligible child per taxable or fiscal year. So they are capping it not at the employee level but at the child level. So children supported and $3,600 per year which we're going to back out. Some math is about $300 a month per child, um which, coincidentally, I think if we go back to um, you know one of our earlier episodes we were talking about stipends, right, and starting to take right this off like that's actually kind of right around that point of diminishing returns from a utilization of corporate stipend program.

Speaker 2: 20:59

So maybe they listened, maybe they will see that a lot.

Speaker 1: 21:04

I just do that. I was like wait, that's, that is almost exactly what we said. So, um, it's a, it's a solid amount, especially on a per kit basis, not a per employee basis. Um, and it's there, so, uh, well, check out also some other things about it.

Speaker 2: 21:26

Can unused credits be carried forward? So, from reading it yes, so if you can't fully utilize the credit in the year it is earned, the unused portion can be carried forward for up to five years. Yep, holy cow, right, right, like that's crazy. And again it can't. You don't get a refund from it. So let's say year one um, your tax liability was 500 000 and you spent a million.

Speaker 2: 21:55

Yep carry that forward, offset by 500, 000 and right000, and then the rest would carry forward for five years. That's crazy, I think. As an employer, I would also want to know is it possible to transfer the tax credit to another entity. You can transfer all or part of the credit to members of your affiliated group. You have to apply, though and you can get approved. Approved. You can get denied um, but you can transfer it. So acquisitions or so forth, and if you want more information about this, visit the florida department of revenues.

Speaker 2: 22:31

Child care tax credits program website and there was also a number department revenue accounting section via phone 850-6, 1, 7, 8, 5, 8, 6 or email credit tracking group at floridarevenuecom. I wonder why it's notorg I meangov. I don't know, we'll never know um my guesses, but we'll leave that, but imagine.

Speaker 2: 22:57

I mean again imagine, imagine, imagine imagine um, when you start we've always advocated for this when you start layering these the federal one now you have this one right, like it it is, it is on its way, the pieces are there, you just need somebody in the middle, and I'm grateful that we work it upwards to help with this. Yep, um, because if you think about, like, how do you, if you're paying for care, um, one of the things too is that the the what constitutes an eligible child care facility. So if you are paying for care, it can't go to grandma, unfortunately. So unpaid caregivers are still not supported right now. Yeah, but the eligible child care that it's paid for has to be licensed by the Florida Department of Children and Families, primarily serve the children of your employees, meet health and safety standards. That's defined by Florida statutes. And so you're an employer, you have a thousand employees and you want to pay for care for a hundred of them. They all have different providers that they use. Some use child childcare facilities, some use friends and family, and so you need to be able to support all of them, but then you need to be able to track well which ones actually went to a childcare facility that's eligible. It would be way too hard for HR benefit teams to track this. We have built a really interesting way to think about it and to track it, so that's going to be very helpful for employers in the state.

Speaker 2: 24:32

And with that said, let's cue the music. And it was good talking to you, doug. Until next time. Goodbye, three months from now. You.