Louisiana's 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.
The School Readiness Tax 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, and advance to higher star-levels, in the quality rating and improvement system administered by the Louisiana Department of Children and Family Services (DCFS). Each of the four tax credits is refundable, which means the credit can be greater than an individual’s tax liability and may be received as a payment even if an individual does not owe any taxes.
The tax credit to parents is available to families with a child under the age of six enrolled in child care. It is based upon the quality rating of the child care center that the child attends. The credit amounts to between 50% and 200% of the Louisiana Child Care Credit, based on the star rating of the center. The credit is refundable for families with incomes less than $25,000. Over 13,000 families claimed the tax credit in 2016.
The tax credit to businesses is available to employers that support quality care in three ways: by constructing, renovating or expanding a facility; making payments to an eligible child care center; or by subsidizing child care for their employees. Additionally, the tax credit is available to businesses that support quality child care or make donations to Child Care Resource and Referral Agencies-. Over 250 businesses claimed the credit in 2016.
Additionally, the tax package helps child care providers offset the costs of improving their services, such as higher wages for trained staff. The tax credit to providers is designed to increase access to quality care for low income children. This credit is based on the quality rating of a provider’s center and on the number of children served by the center that are in Louisiana’s child care subsidy program. The credit ranges from $750 per eligible child at a two-star center to $1,500 per eligible child at a five-star center. Over 450 child care providers claimed this tax credit in 2016.
Finally, the tax credit to child care professionals is available to child care directors and staff based on increased levels of education attainment to help address the issue of retaining quality staff. Over 4,000 teachers claimed the credit in 2016. Staff must work in the qualifying center for at least six months to be eligible.
The tax credit legislation was enacted largely due to a strong joint advocacy effort led by BrightStart, the state’s Early Childhood Comprehensive System grant initiative, along with the Louisiana Partnership for Children and Families and the Tulane Institute of Infant and Early Childhood Mental Health. In all, a large and diverse group of more than 24 children’s organizations, foundations, government watchdog entities, and lobbyists worked together to move the bill towards passage. The tax credit package has been used as the state match for over $80,000,000 in federal Child Care and Development Block Grant dollars.
A report released in 2016 examined the benefits of the School Readiness Tax Credits. Some of the findings it highlighted include:
• More vulnerable children are participating in high-quality child care. Between 2009 and 2016, the percentage of children under age six who receive child care subsidy or foster care services and were enrolled in centers with ratings of 3 stars or above increased from 20% to 46%. Teachers are increasing their skills. Between 2008 and 2015, teachers achieving a Teacher Level 1 credential increased from 963 to 3,598, an increase of 374%, and the number of staff that attained higher credentials (at Pathway Levels 2, 3 and 4) increased almost eight-fold, from 284 to 2,156.
Updated July 2019
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