HB 7240 — AN ACT ESTABLISHING A CREDIT AGAINST THE PERSONAL INCOME TAX FOR OWNERS OF FAMILY CHILD CARE HOMES.

House of Representatives General Assembly RaisedFile Bill No.

7240864 January Session, 2025 LCOSubstitute House Bill No.

63077240 ReferredHouse toof Representatives, May 8, 2025 The Committee on FINANCE,Finance, REVENUERevenue ANDand BONDINGBonding Introducedreported by:through REP.

(FIN)HORN ANof ACTthe ESTABLISHING64th ADist., CREDITChairperson AGAINSTof THEthe PERSONALCommittee INCOMEon TAXthe FORpart OWNERSof OFthe FAMILYHouse, CHILDthat CAREthe HOMES.substitute bill ought to pass.

AN ACT ESTABLISHING A CREDIT AGAINST THE PERSONAL INCOME TAX FOR OWNERS OF FAMILY CHILD CARE HOMES.

(NEW) (Effective January 1, 2026, and applicable to taxable years commencing on or after January 1, 2026) (a) There shall be allowed a credit against the tax imposed by chapter 229 of the general statutes, other than the liability imposed by section 12-707 of the general statutes, for a taxpayer who owns a family child care home, as described in section 19a-77 of the general statutesstatutes, and is licensed under section 19a- 87b of the general statutes, in the amount of five hundred dollars per family child care home,home. to a maximum of three such care homes.

If such taxpayer is a single member limited liability company that is disregarded as an entity separate from its owner, the credit may be claimed by such limited liabilitysHB7240 company's/ owner,File provided such owner is subject to the tax LCO No.

6307864 1 ofsHB7240 2File Raised Bill No.

7240864 liability company's owner, provided such owner is subject to the tax imposed underby chapter 229 of the general statutes.

(c)Iftheamountofthecreditallowedpursuanttothis(c)Iftheamountofthecreditallowedpursuanttothissectionexceeds sectionexceeds such taxpayer's tax liability for the tax imposed underby chapter 229 of the general statutes, the Commissioner of Revenue Services shall treat such excess as an overpayment and, except as provided in section 12-739 or 12-742 of the general statutes, shall refund the amount of such excess, without interest, to such taxpayer.

Section 1 January 1, 2026, and New section applicable to taxable years commencing on or after January 1, 2026 StatementFIN ofJoint Purpose:Favorable Subst.

TosHB7240 establish/ aFile creditNo. against the personal income tax for owners of family child care homes.

[Proposed864 deletions2 aresHB7240 enclosedFile inNo. brackets.

Proposed864 additionsThe following Fiscal Impact Statement and Bill Analysis are indicatedprepared byfor underline,the exceptbenefit thatof whenthe members of the entireGeneral textAssembly, solely for purposes of ainformation, billsummarization orand resolutionexplanation orand ado sectionnot ofrepresent athe billintent orof resolutionthe isGeneral new,Assembly itor iseither notchamber underlined.]thereof LCOfor No.any purpose.

6307In 2general, fiscal impacts are based upon a variety of 2informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 26 $ FY 27 $ Revenue Serv., Dept.

GF - Revenue None 0.9 million Loss Revenue Serv., Dept.

GF - Cost None Up to 75,000 Note:

GF=General Fund Municipal Impact:

None Explanation The bill, which establishes a $500 refundable personal income tax 1 credit for taxpayers who own a state-licensed family child care home, results in a (1) General Fund revenue loss of approximately $0.9 million annually beginning in FY 27 and (2) one-time cost of up to $75,000 in FY 27associatedwithprogrammingupdatestotheCTaxtaxadministration system and myconneCT online portal.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to fluctuation in the number of qualifying child care homes.

1If the taxpayer is an S corporation or treated as a partnership for federal income tax purposes, the taxpayer’s shareholders and partners may claim the credit.

If the taxpayer is a single member limited liability company (LLC) that is disregarded for federal tax purposes, the LLC’s owner may claim the credit as long as the owner is subject to the personal income tax.

sHB7240 / File No.

864 3 sHB7240 File No.

864 OLR Bill Analysis sHB 7240 AN ACT ESTABLISHING A CREDIT AGAINST THE PERSONAL INCOME TAX FOR OWNERS OF FAMILY CHILD CARE HOMES.

SUMMARY This bill establishes a refundable income tax credit for taxpayers who own a state-licensed family child care home.

The credit equals $500 and applies against the personal income tax, but not the withholding tax.

If the taxpayer is an S corporation or treated as a partnership for federal income tax purposes, the taxpayer’s shareholders and partners may claim the credit.

If the taxpayer is a single member limited liability company (LLC) that is disregarded for federal tax purposes, the LLC’s owner may claim the credit as long as the owner is subject to the personal income tax.

If the credit exceeds the taxpayer’s liability, the bill requires the Department of Revenue Services (DRS) commissioner to treat the excess as an overpayment and refund it without interest.

By law, and under the bill, the DRS commissioner may withhold tax refunds to pay outstanding liabilities for other taxes and to reimburse the state for certain debts.

EFFECTIVE DATE:

January 1, 2026, and applicable to tax years starting on or after that date.

BACKGROUND Family Child Care Homes Family child care homes are state-licensed, private family homes generally caring for up to six children (or nine children, if the provider employs an approved staff member), including the provider’s own children, who are not in school full-time.

During the school year, the sHB7240 / File No.

864 4 sHB7240 File No.

864 homes may take up to three additional children who are in school full- time.