Special Tax Credits More Widely Available to Child Care Programs and Teachers

In 2016, Nebraska became just the second state (after Louisiana paved the way) to create tax credits for early childhood education programs and teachers.

“I’ve traveled all over the country to conferences and have visited with experts in the early childhood education field from all over, and I can tell you we are fortunate in Nebraska to have such broad support for early childhood education in our state,” said First Five Nebraska Deputy Director and Public Policy Manager Elizabeth Lopez Everett. First Five Nebraska is an advocacy organization focused on changing public policy by changing the public conversation about the importance of quality early childhood education.

Making the Law More Inclusive

School Readiness Tax Credits give Nebraska child care and preschool programs incentives based on their Step Up to Quality rating, and give teachers personal tax credits based on their education levels, training and experience. The tax credits are determined based on different levels. For individuals, this means anywhere from $2,300 to $3,500 that can be credited back on state taxes, depending on the amount of points achieved.

“It’s hard to deliver quality child care services while making ends meet,” Elizabeth said. “The revised tax credits are intended to make that a little easier for providers.”When LB 889, the School Readiness Tax Credit Act, became law and was implemented in 2017, it was found that the bill was written in a way that unintentionally excluded some child care providers, most commonly certain kinds of family home child care business owners. Nebraska’s tax code is complex, and the bill didn’t account for a specific classification of businesses. In its first year of being implemented, just $500,000 of these tax credits were used out of a $5 million cap.

First Five Nebraska and other early childhood education advocacy groups recognized this oversight and got to work to make the law more inclusive. They collaborated with the Nebraska Department of Revenue to make the wording align with the tax code, and partnered with State Senator Brett Lindstrom to introduce a “clean up bill” to make it law.

Three days before the legislature adjourned in August, LB 266 was passed, which clarifies the language of the School Readiness Tax Credit Act and makes it possible for all programs and providers to benefit, as long as they meet the basic requirements, which are now completely in their control.