Industries back business-oriented child care tax credits

By Natanya Friedheim, Missouri News Network 

JEFFERSON CITY — Rep. Brenda Shields, R-St. Joseph, has introduced child care tax credit bills for three years, but her interest in pre-K education started more than two decades ago.
Around 2002, at a United Way of Greater St. Joseph conference, Shields attended a session called “Why does the Federal Reserve care about child care?” She learned about the Perry Preschool Project, a decades-long study into the long-term positive effects of quality preschool education.
She continued to learn more about the intersection of child care and business. As the primary breadwinner, who sought child care for her two sons, Shields has firsthand experience with the issue.
When she became the CEO of United Way of Greater St. Joseph, Shields strengthened the organization’s “Success by 6” program, which provides resources to preschools and parents.
“We raised a significant endowment to help our child care in our community,” she said. “But the pandemic really hurt us.”
Child care center closures and layoffs during the COVID-19 pandemic led to a 30% decrease in availability, Shields said, and the industry has still not recovered.
The state’s child care shortage was the focus of a 2023 investigation by the Missouri Independent. Nearly half of all Missouri children 5 and under live in a child care desert.
Child care issues cost Missouri $1.35 billion annually, according to a report by the U.S. Chamber of Commerce Foundation and the Missouri Chamber of Commerce. That includes $280 million in lost tax revenue.
Rather than offer direct tax credits to parents paying for child care, Shields’ proposal aims to help businesses.
“Many people are watching,” Shields said. “It’s a model that other states are interested in.”
About a dozen supporters, mostly representing industry groups in Missouri, testified at a Senate Committee on Emerging Issues and Professional Registration hearing Tuesday.
“I’ve never had a bill this popular,” Committee Chair Sen. Justin Brown, R-Rolla, said. Supporters moved swiftly in and out of the witness chair.
“It’s like working cattle. Just herd ‘em through,” he added.
Similar bills failed for the last two years. Raising its odds this year is a companion measure, Senate Bill 455, introduced by Sen. Lincoln Hough, R-Springfield. Hough chairs the Senate Appropriations Committee.
Under the first of three tax credits proposed, a person or business can donate at least $100 to a child care provider, then claim a tax credit of up to 75% of that contribution.
An employer could make a contribution on behalf of its employees who need child care, but a parent can’t make a tax-refundable donation to a child care center in exchange for their care.
“It’s a hefty tax credit, but what it really says is: the state is willing to get involved, but businesses have to put their money where their mouth is,” Shields said.
Under the second scheme, employers qualify for a credit on 30% of any contribution they make toward their employees’ child care costs. Shields gave the example of employer contributions to a cafeteria plan for child care expenses. Cafeteria plans are employer-sponsored benefits plans.
The final tax credit proposal allows qualifying child care providers to claim a tax credit worth up to 30% of expenses related to construction projects. The credit also grants tax relief equal to the provider’s employer withholding tax.
“The aim is to raise salaries for those that work in the child care industry,” Shields said.
Together, the credits would cost the state $759,288 in 2026, and then about $69.7 million annually the following two years, according to the bill’s fiscal note.