In 2007, the Louisiana Legislature passed Act 394, which enacted Revised Statutes 47:6101-6109 to provide a package of tax credits known as the School Readiness Tax Credits. These credits allow tax breaks to families, child care providers, child care directors and staff, and businesses that support child care in an effort to encourage child care facilities to voluntarily participate in the quality rating program administered by the Louisiana Department Education (LDE) under the name of Quality Start Child Care Rating System.
The School Readiness Tax Credits, which are effective for income tax years beginning on or after January 1, 2008, and franchise tax years beginning on or after January 1, 2009, are as follows:
- Child Care Expense Tax Credit — R.S. 47:6104
- Child Care Provider Tax Credit — R.S. 47:6105
- Credit for Child Care Directors and Staff — R.S. 47:6106
- Tax Credit for Business-supported Child Care — R.S. 47:6107
- Tax credit for Donations to Resource and Referral Agencies — R.S. 47:6107
Child Care Expense Tax Credit
A school readiness child care expense tax credit is allowed for taxpayers with qualified dependent(s) under the age of six who, during the year, attended a child care facility that participates in the quality rating program and has earned at least two stars. Use the Quality Start Child Care Rating System to determine the school's star rating.
Refundable credit - The school readiness child care expense tax credit is refundable for taxpayers whose federal adjusted gross income is $25,000 or less.
Nonrefundable credit - Taxpayers whose federal adjusted gross income is greater than $25,000 may apply the credit to their tax liability and if the credit is more than the taxpayer’s liability, the remaining credit can be carried forward and applied to later tax years. Excess credits can be carried forward for up to five years.
To enter this credit in the Louisiana individual tax return in TaxSlayer Pro, from the LA Resident Menu select:
- Net LA Tax minus credits
- School Readiness Credit
- Qualified Dependents Star Rating
Child Care Provider Tax Credit
Child care providers who own and operate a facility where care is given to foster children in the custody of the DCFS or to children who participate in the Child Care Assistance Program administered by the LDE are eligible for the refundable School Readiness Child Care Provider tax credit.
The LDE will provide certification to qualifying child care providers regarding the average number of children participating in the program. The certificates must be retained in the Child Care Provider’s records and be available to LDR on request.
The credit can be taken against individual income tax, corporation income tax, or corporation franchise tax depending on the child care facility’s entity type as follows:
Individual income tax credit - If the child care facility is owned by a sole proprietor, or a flow-through entity such as a Limited Liability Company (LLC), Partnership, or Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders should apportion the credit based on each partner's or shareholder’s percentage of ownership.
To enter this credit in the Individual return, from the LA Resident or Nonresident Menu select:
- Net LA Tax minus credits
- Priority 2 Credits
- Other Priority 2 Credits
- School Readiness Child Care Provider
Corporation income or franchise tax credits - If the child care facility is owned by a corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. To enter this credit in the Louisiana corporate return, from the LA CORP MENU select:
- Credits Claimed
- Refundable Tax Credits (Sch. RC-P2)
- School Readiness Child Care Provider
Nonprofit Organizations - If the child care facility is owned by a nonprofit organization, the tax credit will be taken on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit organizations that are not registered with LDR because they are exempt from tax must register with LDR for corporation income tax and obtain a Louisiana revenue account number to be able to claim the credit.
School Readiness Directors and Staff Tax Credit
Child care directors and eligible staff are eligible for a refundable tax credit if they work at least six months for a licensed child care facility that participate in the quality rating system and are enrolled in the Louisiana Pathways Child Care Career Development System.
LDE will provide certification to child care directors and staff indicating the educational level achieved.
The Louisiana School Readiness Tax Credit, for Child Care Director and Staff, Form R-10615 must be completed by the child care provider and given to the directors and staff. The LDE will also furnish the certification information to LDR as verification of the directors and staff’s eligibility for the tax credit.
To enter this credit in the Individual return, from the LA Resident or Nonresident Menu select:
- Net LA Tax minus credits
- Priority 2 Credits
- Other Priority 2 Credits
- School Readiness Child Care Directors and Staff
To enter this credit in the Louisiana corporate return, from the LA CORP MENU select:
- Credits Claimed
- Refundable Tax Credits (Sch. RC-P2)
- School Readiness Child Care Directors and Staff
Tax Credit For Business-Supported Child Care
Businesses that support quality child care are eligible for a refundable tax credit based on the quality rating of the center. Eligible support includes:
- Expenses to construct, renovate, expand, or repair an eligible child care center, purchase equipment for a center, maintain or operate a center, not to exceed $50,000 in expenses per tax year;
- Payments made to an eligible child care facility for child care services to support employees, not to exceed $5,000 per child per tax year; and/or
- The purchase of child care slots at eligible child care facilities actually provided or reserved for children of employees, not to exceed $50,000 per tax year
Individual income tax credit - If the business providing the support is owned by a sole proprietor or a flow-through entity such as a Limited Liability Company (LLC), Partnership, or Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return. To enter this credit in the Individual return, from the LA Resident or Nonresident Menu select:
- Net LA Tax minus credits
- Priority 2 Credits
- Other Priority 2 Credits
- School Readiness Business - Supported Child Care
Corporation income or franchise tax credits - If the business providing the support is a corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return. To enter this credit in the Louisiana corporate return, from the LA CORP MENU select:
- Credits Claimed
- Refundable Tax Credits (Sch. RC-P2)
- School Readiness Child Care Directors and Staff
Nonprofit Organizations - If the business providing the support is a nonprofit organization, the tax credit must be taken on the Corporation Income and Franchise Tax Return.
Tax Credit For Donations To Resource And Referral Agencies
Businesses may also receive a tax credit for donations made to Child Care Resource and Referral Agencies. These are private agencies that contract with the Department of Education to provide information and services to parents and child care providers. The credit is equal to the amount donated but cannot exceed $5,000 per tax year.
Individual income tax credit — If the business making the donation is owned by a sole proprietor or a flow-through entity such as a Limited Liability Company (LLC), Partnership, or Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return. To enter this credit in the Individual return, from the LA Resident or Nonresident Menu select:
- Net LA Tax minus credits
- Priority 2 Credits
- Other Priority 2 Credits
- School Readiness Fees and Grants to Resource and Referral Agencies
Corporation income or franchise tax credits — If the business making the donation is a corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC.
- Credits Claimed
- Refundable Tax Credits (Sch. RC-P2)
- School Readiness Fees and Grants to Resource and Referral Agencies
Nonprofit Organizations — If the business making the donation is a nonprofit organization, the tax credit must be taken on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit organizations that are not registered with LDR because they are exempt from tax must register with LDR for corporation income tax and obtain a Louisiana revenue account number to be able to claim the credit.
Additional Information:
Louisiana DOR: School Readiness Credit
Louisiana State Tax Information
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