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DFA outlines Arkansas childcare tax credits and low utilization of employer credit
Summary
State revenue officials outlined three Arkansas tax credits related to childcare — a 20% nonrefundable childcare credit, a refundable 20% early‑childhood program credit for approved providers, and an employer‑provided childcare credit under 26‑51‑508 — and reported modest utilization of the refundable credit and none found for the employer credit in 2018–2019 returns reviewed.
Officials from the Division of Finance and Administration explained how three Arkansas tax credits intersect with federal rules and reported recent utilization rates.
Charlie Collins (Commissioner of Revenue, DFA) and Paul Gehring (Assistant Revenue Commissioner) said the state’s childcare income tax credit (Ark. Code 26‑51‑502 a & b as cited) piggybacks on the federal dependent care credit (26 U.S.C. 21) and provides a 20% credit on line 35 of the state return; it is nonrefundable. They said roughly 54,007 returns claimed the credit in 2018 totaling about $6.3 million and about 51,254 returns (processing still under way for 2019 returns at the time) claimed roughly $6.0 million.
Gehring described an early‑childhood program credit (also 20% tied to the federal credit) that is refundable but requires payment to an approved early childhood program; DFA reported 1,076 returns claimed that refundable credit in 2019 for about $137,000 (915 returns claimed $114,000 in 2018). The presenters emphasized that taxpayers may not claim both the childcare credit and the early‑childhood program credit.
DFA also detailed an employer‑provided childcare credit (Ark. Code 26‑51‑508) that may be claimed by businesses operating or contracting to operate childcare facilities: the credit is 3.9% of the annual salary of employees providing childcare services, or a $5,000 first‑year credit pro‑rated for multi‑employer facilities; DFA said it could not locate any 2018–2019 returns claiming this employer credit.
Members raised a question about teacher relief funding (a separate $20 million set‑aside) for employees who miss work due to COVID‑19; the presenters deferred that question to the relevant agency and said staff would follow up.
