All News & StoriesOn March 3, Governor Mike Braun signed House Bill 1177 into law, marking a win for Indiana businesses and families. This legislation modernizes the employer child care expenditure credit, providing the tools that Hoosier employers need to support their workforce.
As an active supporter of HEA 1177, we celebrate this milestone as a step toward solving Indiana’s child care crisis. Alongside other proponents, Executive Director Mollie Smith testified on behalf of the bill. During her testimony, Mollie shared the impact that employer child care supports can make for both businesses and working parents. This win also reflects our partnership with Representative Becky Cash through our work together in the Hendricks County Workforce Coalition. We thank Representative Cash for her collaboration and leadership.
What is the employer child care expenditure credit?
The employer child care expenditure credit delivers 50% of qualified expenditures, up to a maximum of $100,000 per year. These qualified expenses cover a broad range of investments:
- Acquisition and construction: Costs for the acquisition, rehabilitation, or expansion of property for a licensed child care facility that serves a business’s employees
- Operational support: Operating costs of a child care facility that serves its employees, including training and increased compensation for child care professionals
- Scholarship programs: To support child care facilities that serve employees
- Contractual services: Costs incurred under a contract with a child care facility or an intermediate entity to provide services to employees
- Resources and referrals: Expenditures for providing child care resource and referral services to employees
Local development commissions can also use tax increment finance (TIF) revenue to build or expand child care facilities. This provides a new way for communities to enhance child care capacity in areas that need it most.
What changes did HB1177 create for the credit?
The previous version of this credit was so restrictive that not a single employer in Indiana took advantage of it. House Bill 1177 changes that reality by expanding eligibility and flexibility. Previously limited to businesses with 100 or fewer employees, the credit now applies to employers with up to 500 staff members.
Beyond the size of the business, the scope of the credit now includes a much broader range of investments. Employers used to only be able to claim the credit for facilities that they built, acquired, or rehabilitated. Now, they can receive a credit for ongoing operating costs of onsite care, contracting with existing child care programs, or providing resource and referral services to their staff. Furthermore, the legislation authorizes local development commissions to use TIF revenue to build or expand child care capacity.
How do Indiana employers benefit implementing this credit and broader child care supports?
Indiana employers secure a competitive advantage and a stronger bottom line by implementing child care supports and using available tax credits. Research shows that business investments in child care pay for themselves, with some companies seeing a return on investment as high as 425%. By offering these benefits, employers significantly reduce costly turnover and absenteeism while boosting overall productivity and workforce diversity. These supports also serve as a powerful recruitment tool, as 81% of employers report that child care benefits positively influence talent acquisition. Ultimately, family-friendly policies create a more engaged and focused workforce that contributes to long-term business success. For detailed resources and specific strategies to support your employees, visit our Employer Help Guide.
What are the next steps for employers who qualify for the credit?
One of the best features of this expanded credit is its simplicity. Employers do not need to worry about complicated pre-approval paperwork or daunting applications. A business simply works with its CPA to claim the exemption on their tax returns using Schedule 6 or Schedule G. It is a straightforward process designed to reward businesses for investing in their employees.
We thank Governor Braun, Representative Cash, and the General Assembly for taking a small step in the right direction to improve the child care ecosystem in Indiana. As the backbone of the Indiana economy, making child care more accessible and affordable ensures that our workforce remains strong and our children receive the high-quality care they deserve.
