Texas Comptroller of Public Accounts    STAR System


200207746R



STAR SUPERSEDED WITHOUT SUMMARY 

Accession No.(s): 200207746R

Document superseded on: 08/15/2013 



STATE OF TEXAS
COMPTROLLER OF PUBLIC ACCOUNTS
FRANCHISE TAX

Section 3.579 Child Care Credits 

(a)  Effective date. A corporation may claim a day care credit or an after 
school credit only for expenditures made in Texas on or after January 1, 2000. 

(b)  Definitions. The following words and terms, when used in this section, 
shall have the following meanings, unless the context clearly indicates 
otherwise. 

(1)  "Day-care center" has the meaning assigned by Human Resources Code, sec. 
42.002. 

(2)  "Expenditure" means a direct contribution, donation, gift, or payment, but 
does not include an indirect contribution, donation, gift, or payment. 
Subsections (e) and (f) of this section set out qualifying expenditures. For 
example, a payment to an organization directly operating a qualifying program 
could be a qualifying expenditure, but a payment to a charitable organization 
who distributes the funds to another organization that actually operates the 
qualifying program will not be a qualifying expenditure. 

(3)  "Family home" has the meaning assigned by Human Resources Code, sec. 
42.002. 

(4)  "Primarily" means more than 50%. 

(5)  "School-age child care" means care provided before or after school and 
during the summer and holidays primarily for children who are at least five 
years of age but younger than 14 years of age. The program must provide care 
during school holidays, when most businesses are open and most parents are 
working, but need not provide care on universally-recognized holidays, such as 
Thanksgiving, Christmas, and New Year's Day. 

(c)  Information required. A corporation that claims the day care credit or 
after school credit under this section must submit all additional information 
required by the Comptroller necessary to complete the report required by Tax 
Code, sec. 171.707 and sec. 171.837. 

(d)  Limitations. A corporation may not convey, assign, or transfer the day 
care credit or after school credit to another entity, unless all of the assets 
of the corporation are conveyed, assigned, or transferred in the same 
transaction.  The total credits that a corporation claims for a report may not 
exceed the total amount of franchise tax due for the report.

(e)  Day care credit. 

(1)  A corporation may claim a credit under this subsection only for a 
qualifying expenditure relating to: 

(A)  the establishment or operation of a day-care center primarily to provide 
care for the children of employees of the corporation or for children of the 
employees of the corporation and one or more other entities sharing the costs 
of establishing and operating the center; or 

(B)  the purchase of child-care services that are actually provided to children 
of employees of the corporation at a: 

(i)  day-care center; or 

(ii)  family home that is registered or listed with the Department of 
Protective and Regulatory Services under Human Resources Code, Chapter 42. 

(2)  A qualifying expenditure means an expenditure for: 

(A)  planning the day-care center; 

(B)  preparing a site to be used for the day-care center; 

(C)  constructing the day-care center; 

(D)  renovating or remodeling a structure to be used for the day-care center; 

(E)  purchasing equipment necessary in the use of the day-care center and 
installed for permanent use in or immediately adjacent to the day-care center, 
including kitchen appliances and other food preparation equipment; 

(F)  expanding the day-care center; 

(G)  maintaining and operating the day-care center, including paying direct 
administration and staff costs; or 

(H)  purchasing all or part of child-care services that are actually provided 
to children of employees of the corporation at a day-care center or registered 
or listed family home. 

(3)  The amount of credit: 

(A)  is equal to the lesser of 50% of the corporation's qualifying expenditures 
or $50,000; and 

(B)  may not exceed 90% of the amount of tax due for the report on which the 
credit is claimed for reports that are originally due before January 1, 2002;  
for reports that are originally due on or after January 1, 2002, the credit may 
not exceed 90% of the amount of tax due for the report before any other 
applicable credits. 

(4)  If a corporation shares in the cost of establishing or operating a 
day-care center, the corporation is entitled to a credit for the qualifying 
expenditures made by that corporation, subject to the limitation prescribed by 
subsection (d) of this section. 

(5)  A corporation must apply for a credit under this subsection on or with the 
franchise tax report for the period for which the credit is claimed. 

(6)  If the corporation is claiming a credit for a qualifying expenditure for 
purchasing child-care services, the corporation must maintain proof that the 
services were actually provided to children of employees of the corporation at 
a day-care center or registered or listed family home. 

(7)  The comptroller shall adopt a form for corporations to use to apply for 
and claim the credit. A corporation must use this form to apply for and claim 
the credit. 

(8)  A corporation may claim a credit under this subsection for qualifying 
expenditures made during an accounting period only against the tax owed for the 
corresponding reporting period. 

(f)  After school care credit. 

(1)  A corporation may claim a credit under this subsection only for a 
qualifying expenditure relating primarily to the operation of a school-age 
child care program that is operated by: 

(A)  a nonprofit organization licensed under Human Resources Code, Chapter 42; 

(B)  a nonprofit, accredited educational facility, including: 

(i)  an organization whose standards of care are consistent with those set out 
by a recognized national accreditation body for school-age child care, or 

(ii)  an organization who is a charter member of a national organization that 
establishes school-age child care guidelines as a prerequisite for national 
affiliation or membership; 

(C)  another nonprofit entity under contract with the nonprofit, accredited 
educational facility, if the Texas Education Agency or Southern Association of 
Colleges and Schools has approved the curriculum content of the program 
operated under the contract; or 

(D)  a county or municipality, if the governing body of the county or 
municipality annually adopts standards of care by order or ordinance that 
include minimum child-to-staff ratios, staff qualifications, facility, health, 
and safety standards, and mechanisms for monitoring and enforcing the 
standards. 

(2)  A qualifying expenditure means an expenditure for: 

(A)  constructing, renovating, or remodeling a facility or structure to be used 
by the program; 

(B)  purchasing necessary equipment, supplies, or food to be used in the 
program; or 

(C)  operating the program, including administrative and staff costs. 

(3)  The amount of the credit is equal to 30% of a corporation's qualifying 
expenditures. 

(4)  A corporation may claim a credit under this subsection for a qualifying 
expenditure during an accounting period only against the tax owed for the 
corresponding reporting period. 

(5)  For reports that are originally due before January 1, 2002, a corporation 
may not claim a credit in an amount that exceeds 50% of the amount of net 
franchise tax due, after applying any other credits, for the reporting period.  
For reports that are originally due on or after January 1, 2002, a corporation 
may not claim a credit in an amount that exceeds 50% of the amount of franchise 
tax due, before application of any other credits for the reporting period.

(6)  A corporation must apply for a credit under this subsection on or with the 
tax report for the period for which the credit is claimed. 

(7)  The comptroller shall adopt a form for corporations to use to apply for 
and claim the credit. A corporation must use this form to apply for and claim a 
credit. 

(8)  A corporation is not eligible for the credit if the corporation cannot 
establish that the facilities, equipment, supplies, food, administrative 
services, and staff services are primarily used for the program. Therefore, a 
corporation must maintain proof, in the form of a written acknowledgement 
provided by the recipient operating the qualifying program. The written 
acknowledgement must set out the amount of the donation, contribution, gift, or 
payment and must specify that the donation, contribution, gift, or payment will 
be used for a qualifying expenditure, as set out in subsection (f)(2) of this 
section, primarily for the program.


Effective Date:  July 17, 2002 
Filed with Secretary of State:  June 27, 2002. 


 
Comptroller of Public Accounts




ACCESSION NUMBER: 200207746R   
SUPERSEDED: Y 
DOCUMENT TYPE: R 
DATE: 07/17/2002 
TAX TYPE: FRANCHISE