TKW Consulting

Last year Louisiana enacted an innovative tax credit package designed to address these concerns by offering financial rewards for those who participate in Quality Start, the state's new QRIS. While quite a few states have included financial incentives in their QRIS, what makes the Louisiana approach unique is its use of the state tax code to
provide these incentives.

Here is how it is supposed to work:

• Families with a child under 6 who is enrolled in a child care program that participates in Quality Start will be eligible for a refundable tax credit based on the star rating of the program. The value of the credit increases with higher ratings.
  
• Child care providers that participate in Quality Start are eligible to receive a refundable tax credit based on the number of stars they earn and on the number of children they serve in the Child Care Assistance Program or in foster care. The value of the credit rages from $750 per target child served in a center with two stars to $1,500 per child for a center with five stars.
  
• Child care teachers and directors are eligible for a refundable tax credit if they teach in a center that participates in Quality Start. The credit is based on the level of education the individual has attained, rather than the star level of the program in which she teaches. The value of the credit ranges from $1,500 for a teacher or director at Level I of the Louisiana career ladder to $3,000 for a teacher or director at Level IV of the career ladder.
  
• Businesses that provide financial support to centers that participate in Quality Start are eligible for a credit based on the star rating of the center. Businesses may also receive a tax credit for donations up to $5,000 made to child care resource and referral agencies.

An important strength of the system is that most of the tax credits -- including those available to teachers and early care and education programs -- are refundable. A refundable tax credit is one that is available to taxpayers even if it is greater than their tax liability or if they owe no taxes at all. This means that child care teachers who earn low wages (and therefore pay little or no tax) will receive a wage subsidy each year in the form of a tax refund. The provider tax credit is also refundable, which means that non-profit child care centers may receive what is essentially an annual grant based on their star level and the number of eligible children they serve.

Some national early childhood advocates are concerned that tax credits would be paid for out of the same pool of money used to pay providers directly, leading to a zero sum game. But the Louisiana SRTC is supported by state general fund dollars and thereby actually increases the funds flowing into the child care sector. It does not tap federal Child Care and Development Block grant funds or state education or social service allocations.

// posted by Tammy Wachter @ 4:35 AM