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Dedicated to Integrating the Professional and Parental Responsibilities of Working Adults! |
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Kiddy Corporation Employer Sponsored |
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For Working Parents! By Working Parents! |
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Federal and State Tax Incentives |
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Federal Incentives
Start-up and investigatory expenses (e.g., advertising, need assessments, consultant services, and staff training) incurred in the development of a new child care center may be amortized over sixty months or more under 26 U.S.C. § 195.
Costs incurred for acquiring, constructing, and/or remodeling a building to be used as a child care center can be depreciated over a thirty-nine year period under the Modified Accelerated Cost Recovery System described in 26 U.S.C. § 168. Costs of equipping the building can be depreciated over varying recovery periods depending on the type of business in which the center is located and the type of equipment. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) allows businesses to receive a tax credit equal to 25% of qualified expenses for employee child care and 10% of qualified expenses for child care resource and referral services for employees. Qualified expenses include costs to acquire, construct, renovate, or expand property that is to be used as part of the child care facility; to operate the facility; to contract with a qualified facility to provide child care services to employees; and to contract to provide child care resource and referral services to the employees. The annual credit limit is $150,000, which means that qualified expenditures up to $600,000 annually will qualify.
Amounts paid by an employer to provide a child care service for employees may be deductible as ordinary business expenses under 26 U.S.C. § 162 as the services reduce absenteeism and turnover, aid in recruitment and retention of employees, and increase employee productivity.
Amounts paid by an employer to a Voluntary Employees’ Beneficiary Association (VEBA) may also be deductible.
Arizona Incentives
Arizona Revised Statutes 43-1163 -- Provides corporate tax credits for employers providing child care facilities or services for employees. Employers that purchase or remodel facilities can claim a credit of the lesser of $15,000 or 50 percent, in lieu of depreciation or amortization allowances. Employers who provide child care or resource and referral services are eligible for a credit of the lesser of $5,000 or 30 percent of the net costs. Arizona Revised Statutes 43-1130 -- Allows taxpayers who operate child care facilities primarily for their employees' children to depreciate the cost of the facility over 24 months, thereby lowering their taxes. Taxpayers operating child care facilities for profit may amortize, instead of depreciate, over a 60-month period any expenditure made to purchase, construct, renovate, or remodel the facilities or equipment. *Check with your tax advisor for how specifically to apply the benefits outlined above. |
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