Alabama is taking steps to address its low labor force participation rate by making childcare more affordable and accessible through a new bill. The bill, HB358, would provide tax credits and grants to employers and childcare providers to incentivize the creation of more affordable childcare options.
The bill aims to encourage employers to provide childcare for their employees and enable childcare providers to offer more readily available, affordable, and quality childcare through tax incentives. Alabama’s labor force participation rate is among the bottom of U.S. states, with a rate of 57.4 percent compared to the national rate of 62.7 percent in March.
Under the bill, employers could receive tax credits of up to $600,000 for providing or expanding on-site childcare facilities for employees. There would also be incentives for companies to partner with qualified childcare providers. The total amount of employer tax credits would be capped at $15 million in 2025, $17.5 million in 2026, and $20 million in 2027.
Childcare providers would be allowed to apply for tax credits of up to $25,000 per year, while non-profit childcare providers could apply for grants of up to $50,000 a year. The bill is estimated to provide childcare options for about 7,000 families during the first year and about 24,000 families over the three years of the program.
The bill has been championed by State Senator Garlan Gudger, who emphasized the need to address the lack of affordable and quality childcare in Alabama. He noted that about 85,000 Alabama families do not have access to such childcare. The bill unanimously passed the Alabama House and is now moving to the state Senate for consideration.
The cost of child care has been found to impact the number of mothers working, with a 10 percent increase in the price of childcare associated with a 1 percent drop in maternal employment rates, according to the Labor Department. Advocates believe that HB358 could help more women in Alabama enter the workforce, particularly in sectors like manufacturing, where the lack of childcare options has been a barrier to entry.
