Five States Enact Employer Childcare Tax Credits

Between December 9, 2025 and April 27, 2026, five states, Wisconsin, Indiana, Utah, Nebraska, and Kansas, enacted or expanded tax credits that pay employers to solve childcare, and the federal Section 45F credit that employers can claim alongside them more than tripled, from a $150,000 annual cap to $500,000, effective for expenditures after December 31, 2025. On April 16, 2026, Nebraska Gov. Jim Pillen signed LB 1165, the Grow the Good Life Act, letting companies apply ImagiNE Nebraska credits to up to 50% of their employees' childcare costs. The most recent state to act was Kansas, where Gov. Laura Kelly signed SB 82 on April 27, 2026, with a 75% employer credit.

Missouri's package cleared the House 97-44 on April 2, 2026 and is pending in the Senate. We see childcare moving into the same negotiated package as the abatement and the training grant.

Each of the five new laws gives employers a credit for childcare spending, and the designs differ in ways that change site economics. This article covers what each state enacted, how the federal credit works alongside them, a worked example for a hypothetical plant, and Missouri's pending bill.

What Each State Enacted

The five statutes use five different designs. Wisconsin placed its credit inside a discretionary program, Indiana and Kansas wrote stand-alone statutory credits with hard caps, Utah extended an existing credit to contracted care, and Nebraska let companies apply credits they had already earned to childcare costs. Exhibit 1 summarizes each measure.

Wisconsin expands a discretionary credit. The 15% Business Development Credit category covers childcare and workforce housing investment. 2025 Wisconsin Act 78, signed December 9, 2025 and published the next day, lets the investment take the form of contributions to third parties, including nonprofit developers, regional funds, and local revolving loan funds, and drops the requirement that the program serve only the company's own employees. The Assembly passed AB 280 92-4 and the Senate 33-0. Because the credit is discretionary and awarded by the Wisconsin Economic Development Corporation (WEDC), a childcare component can be negotiated inside a larger Business Development Credit package rather than claimed as of right.

Indiana widened an existing credit. HEA 1177, sponsored by Rep. Becky Cash, passed the House 80-0 and the Senate 48-0 and was signed by Gov. Mike Braun on March 3, 2026 as Public Law 58-2026. Per Indiana Department of Revenue Information Bulletin #126, the Employer Child Care Expenditure Credit under IC 6-3.1-39.5 now equals 50% of qualified expenditures up to $100,000 per employer, for employers with 500 or fewer employees (previously 100 or fewer), and qualified expenditures expand from capital costs to operating costs, compensation increases for certified childcare workers, referral services, and contracts with licensed Indiana facilities. The statewide cap is $2.5 million per state fiscal year, awarded in the order returns are filed, and unused credit carries forward three years. The bill also lets tax increment financing districts support childcare facility construction.

Utah extended its credit to contracted care. HB 190, sponsored by Rep. Jason Thompson, passed the House 48-21 and the Senate 20-6 and was signed by Gov. Spencer Cox on March 26, 2026. Per the Governor's Office of Economic Opportunity, the state credit is 30% of qualified expenditures for eligible small businesses (using the federal 45F definition) and 10% for other employers, a separate 20% credit covers depreciable construction costs, and employers may now claim for contracts with off-site centers or intermediary organizations that secure slots. Employers must claim the federal 45F credit to take the state credit, may not charge employees for the benefit, and an on-site facility must operate at least five consecutive years to avoid recapture.

Nebraska lets companies use earned ImagiNE credits for childcare. LB 1165 passed the Legislature 42-7 and was approved by Gov. Pillen on April 16, 2026. Within a broader modernization of the ImagiNE Nebraska Act, including a wage retention credit for employers undergoing a change in ownership or control, capped at $50 million in total across all employers, it lets a taxpayer use earned ImagiNE credits to obtain a payment from the state equal to taxpayer-sponsored dependent childcare costs incurred by employees at the qualified location, up to 50% of those costs. The credits are earned on jobs and investment, and the bill adds childcare as a new use.

Kansas set a 75% credit rate. SB 82 passed the Senate in February 2025 and the House in March 2025, then sat until a conference committee in April 2026 combined the childcare expansion with unrelated credits for E15 fuel sales and lockable gun storage. The conference report cleared the Senate 36-2 and the House 76-45, and Gov. Kelly signed it April 27, 2026. Employers get a 75% credit for paying employees' childcare costs, establishing or expanding a childcare program, or buying referral services, up to $100,000 per year, nonrefundable, with a three-year carryforward, plus a separate credit for donations to organizations expanding community childcare capacity.

Exhibit 2 compares the enacted state rates and caps with the federal 45F credit.

Federal Section 45F Credit Changes for 2026

The One Big Beautiful Bill Act (OBBBA) rewrote Section 45F. For amounts paid or incurred after December 31, 2025, 45F equals 40% of qualified childcare expenditures (acquisition, construction, rehabilitation, or expansion of a facility; operating costs including staff training and scholarships; or contract payments to a qualified facility) plus 10% of resource-and-referral expenditures, capped at $500,000 per year. Eligible small businesses, those with average annual gross receipts of $32 million or less over the preceding five years for tax years beginning in 2026, get 50% and a $600,000 cap, with both caps inflation-indexed after 2026. Before 2026, the credit was 25% of facility costs plus 10% of referral costs, capped at $150,000, and the Congressional Research Service documented that it was claimed by a tiny number of firms.

OBBBA also allows joint facilities and intermediary contracts. Facilities may now be jointly owned or operated with other employers, so a consortium of mid-size plants can share one center, and payments made under a contract with an intermediary entity count as qualified expenditures, which is the arrangement Utah's HB 190 supports at the state level. Construction credits reduce depreciable basis, the facility must remain in qualified operation through the tenth tax year after it is placed in service or the credit is recaptured, and enrollment cannot favor highly compensated employees. The credit is claimed on Form 8882.

Worked Example: The $2 Million Center at a 400-Employee Plant

Consider a hypothetical 400-employee components plant in Indiana, "Prairie Axle Manufacturing," that builds a $2.0 million onsite center in 2027 and subsidizes $250,000 of annual operating costs afterward. Its five-year average gross receipts exceed $32 million, so standard 45F rates apply. Its 400 employees fit under Indiana's 500-employee ceiling, so it can claim the state credit, which it could not under the prior 100-employee limit. Exhibit 3 shows the recovery in the build year, in each operating year, and over five years.

The same center elsewhere. In Kansas it would draw SB 82's 75% rate but hit the $100,000 state cap immediately. In Nebraska, an ImagiNE-qualified Prairie Axle could instead direct previously earned credits to cover half of employees' childcare bills, no new center required. In Utah, the plant could skip the build entirely and contract for slots at a 10% state credit on top of the 40% federal rate. The choice among building, buying slots, and subsidizing costs can be modeled with these credits.

Missouri HB 2409 Is Pending in the Senate

The Missouri House passed HB 2409, and the bill is pending in the Senate. Rep. Brenda Shields's HB 2409 would create a 75% Child Care Contribution Tax Credit, a 30% Employer-Provided Child Care Assistance Tax Credit, and a Child Care Providers Tax Credit worth 100% of payroll withholdings plus up to 30% of capital improvements, all effective for tax year 2027 with a six-year sunset. The House passed it 97-44 on April 2, 2026.

Missouri's House has passed the package four years in a row. According to the Missouri Independent, it previously stalled in the Senate. The credits enacted in 2026 either rode in a broader bill (Nebraska's economic development package, Kansas's conference report) or passed with no votes against (Indiana, 80-0 and 48-0).

What the Credits Mean for Site Selection

The federal credit supplies most of the recovery. In the Prairie Axle example, 45F provides $900,000 of the $1.4 million recovered over five years. We see the state credits mainly as a way for states to give a statutory answer to the workforce question in site-selection requests for proposals.

Nebraska's approach gives agencies a term-sheet item. We expect other states to consider letting earned performance credits pay for childcare, because it gives an economic development agency a workforce item it can include in an incentive offer.

Timing rules differ by state. Expenditures made in 2026 already count toward the 40% federal rate, Indiana's pool is awarded in filing order, and Wisconsin's and Nebraska's provisions sit inside discretionary programs. Exhibit 4 lists each date.

What to Do Now

This article is for employers and site selectors weighing projects in Indiana, Kansas, Utah, Nebraska, or Wisconsin, where 2026 expenditures already count toward the 40% federal credit. Indiana's $2.5 million pool is awarded in the order returns are filed. If you want a read on fit before the 2027 sessions, reach out to our team.

References

1. Internal Revenue Service, "Employer-provided child care credit: Tax year 2026 and later"; IRS, About Form 8882; Congressional Research Service, IF12379, "The 45F Tax Credit for Employer-Provided Child Care."
2. Nebraska Legislature, LB 1165 slip law (approved by the Governor April 16, 2026); Greater Omaha Chamber, "Legislative Update, April 17, 2026".
3. Office of the Kansas Governor, "Governor Kelly Signs Bipartisan Bill Expanding Child Care Tax Credits," April 27, 2026; Kansas Reflector, "New Kansas law expands tax credits for employers supporting child care services," April 28, 2026; LegiScan, Kansas SB 82.
4. Utah Legislature, HB 190, Child Care Business Tax Credit (2026 General Session); Governor's Office of Economic Opportunity, "Utah Employer Child Care Tax Credits"; Utah Business, HB 190 coverage, March 13, 2026; LegiScan, Utah HB 190.
5. Indiana FSSA, "Employer Child Care Expenditure Tax Credit" (HEA 1177 messaging); Indiana DOR, Information Bulletin #126; Building Indiana Business, "Braun Signs Legislation to Expand Employer-Supported Child Care Options"; LegiScan, Indiana HB 1177.
6. KCTV5, "Missouri House passes childcare bill," April 2, 2026; LegiScan, Missouri HB 2409; Missouri Independent, "Missouri House once again sends child care tax credit package to the Senate," April 2, 2026.
7. Wisconsin Legislature, 2025 Wisconsin Act 78 and Legislative Council Act Memo; Waukesha County Business Alliance, "New Law Expands Tax Credit for Workforce Housing & Childcare"; BDO, Wisconsin Business Development Tax Credit alert; LegiScan, Wisconsin AB 280.

© Copyright 2026 TC Policy Group, LLC (d/b/a Crawford Partners). The views expressed herein are those of the author(s) and not necessarily the views of Crawford Partners, its management, its subsidiaries, its affiliates, or its other professionals. Crawford Partners is not a law firm and cannot provide legal advice.