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Louisiana’s School Readiness Tax Credits

Geoffrey Nagle, PhD Tulane University Institute of Infant and Early Childhood Mental Health

September 23, 2013

Why Tax Credits?Tax policies can support the ends we want to achieve…

School ReadinessQuality Child Care

Tax Credits, Tax Credits, Tax Credits

Economic Development

Existing State Tax CreditsCapital Companies Credit Capital Credit Credit for Basic Training Skills Credit for Donation of Historic Property to State Credit for Donations to Qualified Playgrounds Credit for Hiring Eligible Re-entrants Credit for Insurance Company Premium Tax Credit for Investment in a Louisiana Film Credit for Property Tax Paid on Certain Vessels Credit for Qualifying Recycling Equipment Credit for the Employment of Previously Unemployed Credit for Utility Refunds Dedicated Research Investment Fund Credit Economic Development Bond Cost Credit Electric and Natural Gas Cost Increase Credit

Existing State Tax CreditsHistoric Rehabilitation Credit Inventory Tax Credit Motion Picture Employment Credit New Jobs Credit New Market Credit Quality Jobs Program Research Credit Tax Equalization Contracts Credits Technology Commercialization Credit Telephone Company Ad Valorem Credit University and Biomedical R&D Parks Credits Employment of Drug Offenders Credit

Economic Development

Summary of Direct Effects

There are 12,701 businesses,

employing 22,644 workers, serving

149,000 children and generating

approximately $657 million in gross

receipts.

Employment by Industry, Louisiana

Gross Receipts by Industry, Louisiana

Multiplier Effects

Direct Effects: Child care centers take in revenue. Total

Value of Local

Economic Linkages

Indirect Effects: Centers make purchases thereby stimulating other industries.

Induced Effects: Workers spend wages.

1

Type I

Input-Output analysis calculates the ripple effects of an industry’s spending in the local economy.

Type II

.33

.39

Output Multipliers by Industry, Louisiana

School Readiness Tax CreditsPackage of 4 Tax Credits

Credits to ProvidersCredits to Directors and TeachersCredits to Business for Supporting Child CareCredits to Parents/Consumers

TAX CREDITS TO CHILD CARE PROVIDERS

Tax Credits to ProvidersProviders receive a tax credit based on the number of children they serve in the Child Care Assistance Program (or in foster care)

Refundable credit

Both for-profit and non-profit centers are eligible

Tax Credits to ProvidersStar Rating Tax Credit

(per child in CCAP/foster care)$1,500

$1,250

$1,000

$750

1 Star (or not participating) No credit

Tax Credits to ProvidersIf you serve 10 CCAP children and you are a 2 star center, then you receive a $7,500 refundable tax credit!

10 children x $ 750 (2 star center) = $ 7,50010 children x $1,000 (3 star center) = $10,00010 children x $1,250 (4 star center) = $12,50010 children x $1,500 (5 star center) = $15,000

TAX CREDITS TO TEACHERS AND DIRECTORS

Tax Credits to Directors and Teachers

Refundable credits

Based on the level of educationMust be working at a center participating in the rating systemThe star rating of the center does not impact this creditMust work there at least 6 months

Tax Credits to Directors and Teachers

Child Care Director and

Teacher Qualification

Tax Credit

Level 4 $3,000

Level 3 $2,500

Level 2 $2,000

Level 1 $1,500

TAX CREDITS TOEMPLOYERS/BUSINESSES

Tax Credits to BusinessEmployers receive a credit for “eligible child care expenses” based on the quality rating of the center

Refundable credits

Tax Credits to BusinessStar Rating Tax Credit

(of eligible expenses)20%

15%

10%

5%

1 Star (or not participating) No credit

Tax Credits to BusinessEligible ExpensesEmployers may claim a tax credit for up to $5,000 in grants to child care resource and referral agencies.

This credit is dollar for dollarMaximum is $5,000

TAX CREDITS TO PARENTS/CONSUMER

Tax Credits to ParentsBuilds on the existing state child care tax credit.

Families are eligible for an increased tax credit based upon the quality rating of the center.

Tax Credits to BusinessStar Rating Increase to Existing

Tax Credit200%

150%

100%

50%

1 Star (or not participating) No change

5 Years2008-2012

SRTC IMPACT

Tax Credits to Parents

2008 2009 2011 2012

$870,689$1,068,363

$2,368,614

$2,856,286

4,6647,035

12,956

14,695

Tax Credits to Providers

2008 2009 2011

$1,631,129

$3,281,385

$5,421,509

123259

516

Tax Credits to Teachers

2008 2009 2011 2012

$1,503,902

$3,294,524

$5,949,614

$6,722,040

3,082

1,743

874

3,351

Tax Credits to Businesses

2008 2009 2012

$30,396

$303,007

$370,465

$118,340

$332,175

$365,831

91

337

141

209

3041

Total Impact

2008 2009 2011 2012

5832

9415

16833

18878

Total Impact

2008 2009 2012

$4,154,456

$8,279,454

$14,379,329

74%

99%

Licensed Centers Participating

1-2 Stars3-5 Stars

0%10%20%30%40%50%60%70%80%90%

100% 94%

6%

89%

11%

76%

24%

Dec. 2009 Dec. 2010 Dec. 2012

Subsidized Children by Star Level (under age 5)

0 stars1-2 Stars

3-5 Stars

0%

10%

20%

30%

40%

50%

60%52%

45%

2%

52%

43%

5%

33%

53%

14%

Nov. 2009 Nov. 2010 Nov. 2012

LessonsDiversify portfolio

Tax strategies should not replace direct funding We need both

ReferencesQuality Start Child Care Rating System

www.qrslouisiana.org

LA Department of Revenuehttp://revenue.louisiana.gov/ In Search bar, type in “School Readiness”

THANK YOUGeoffrey Nagle, PhD

gnagle@tulane.edu

(504) 988-8241