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Working families set to benefit from Alabama childcare tax credit after approval from lawmakers

On Tuesday, the Alabama Legislature gave final approval to a proposal aimed at increasing workforce participation across the state through new tax credits for working families, employers and certain childcare centers in Alabama.

HB358 was introduced by State Rep. Anthony Daniels in the House and carried by State Sen. Garlan Gudger in the Senate.

Now headed to Governor Kay Ivey for her signature, the tax credit would offer credits to: Businesses that offset child care costs and provide support through stipends, onsite facilities, or reserved spots at licensed center; child care providers participating in quality improvement programs, encouraging them to improve their standards and enroll more children; nonprofit providers who expand capacity and improve quality.

“What this does is give working mother in particular a chance to get back to work,” Sen. Gudger (R-Cullman) said from the Senate floor. “I go all over the state meeting with businesses both large and small and the number one issue facing the state in all of our districts is the need for workers.”

RELATED: Working for Alabama: Lawmakers advance bills to position state workforce, economy for gains

Final passage of the childcare tax credit is part of Governor Kay Ivey and lawmakers seven-bill Working for Alabama legislative package to improve workforce participation in the state.

When passed by his chamber last month, Alabama Speaker of the House Nathaniel Ledbetter said, “The unfortunate reality is that many Alabamians must choose between raising their children and having a career, and for our state to continue growing, that has to change.”

“The childcare tax credit legislation has the power to give parents choices and help them provide better lives for their children. Alabama is not only the most pro-business state in the nation but also the most pro-family state,” Ledbetter (R-Rainsville) said.

Advocacy and business groups applauded lawmakers for advancing the bill, as they did during the legislative effort to ensure it was front and center during the 2024 Alabama legislative session, which is set to conclude this week.

The Women’s Foundation of Alabama’s 2022 Clearing the Path research report showed that an estimated 85,000 Alabama families needed access to quality, affordable childcare but could not readily access it either due to excessive cost or unavailability.

RELATED: State Sen. Gudger: Child care is the industry that keeps Alabama working – it’s time to invest in it

Melanie Bridgeforth is the President and CEO of Women’s Foundation of Alabama.

“Alabama ranks next to dead last in the American South in labor force participation for women,” said President Bridgeforth. “Increasing women’s workforce participation is one of the most remarkable economic developments of the past and current century and in our state, permanently removing structural barriers to work, such as childcare, is a critical vehicle.”

During the 2024 session, lawmakers took on the task of improving a major vulnerability in the state’s economy: Alabama has one of the worst labor force participation rates in the country.

As of Wednesday, all seven components of the Working for Alabama legislative package await Governor Ivey’s signature, and are expected to be signed together at a celebration event on Friday.

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