HB 4056 would create the Michigan Child Care Savings Program Act and authorize child care savings accounts at financial institutions beginning January 1, 2026. An individual could open an account, designate all or part of it as a child care savings account, and use the funds to pay or reimburse eligible child care expenses for a qualified dependent under age 14. The bill also allows joint ownership for taxpayers filing a joint return, permits contributions from third parties, and lets account holders roll funds between institutions or make limited hardship withdrawals.
The bill provides a state income tax benefit for these accounts by exempting contributions, interest, and qualified withdrawals from taxation under the Income Tax Act. To claim the deduction and preserve the tax benefit, account holders must submit account statements, Form 1099 information, and receipts showing withdrawals were used for eligible child care costs, and they must keep records for at least four years. The Department of Treasury would administer the program, prescribe forms, and may issue rules and informational materials, while financial institutions are largely shielded from administrative burdens and liability.
If funds are withdrawn for nonqualified purposes, the bill imposes a 10% penalty paid to the state, with exceptions for death, bankruptcy, transfers between child care savings accounts, and hardship withdrawals. The bill also specifies that financial institutions do not have to track how funds are used, determine eligibility, or report information beyond what is otherwise required by law. The act would not take effect unless the tie-barred HB 4057 is also enacted.
The general sentiment reflected by the bill text is supportive of helping families save for child care and reducing the tax burden on those expenses, but no committee transcripts or votes were provided to show direct debate or recorded opposition. The structure of the bill suggests an effort to make the program optional for banks and administratively simple, which may indicate an attempt to balance family assistance with industry concerns about compliance costs.
The main points of potential contention are the tax expenditure created by exempting contributions and earnings, the 10% penalty for nonqualified withdrawals, and the requirement that taxpayers document eligible use of funds. Another possible issue is the bill’s dependence on HB 4057, meaning the program would not become effective unless the companion legislation is also enacted.
HB 4056 would add a new chapter to Michigan law creating a state-administered child care savings program and related tax treatment under the Income Tax Act of 1967. It would authorize child care savings accounts, define eligible child care expenses and qualified individuals, establish recordkeeping and reporting requirements for taxpayers, exempt qualified contributions and withdrawals from state income tax, and impose a penalty for nonqualified withdrawals. The bill also limits the duties and liability of financial institutions and gives the Department of Treasury authority to administer the program and issue rules.
No committee transcripts or votes were provided, so there is no recorded floor or committee sentiment to summarize. Based on the bill’s design, the measure appears generally pro-family and pro-savings, aiming to help parents and guardians pay for child care through tax-advantaged accounts. The absence of recorded opposition or amendments in the provided materials means there is no documented public controversy in the available record.
The likely areas of contention are fiscal and administrative rather than ideological. Critics could question the revenue impact of exempting contributions, earnings, and qualified withdrawals from taxation, while supporters would likely emphasize child care affordability and workforce participation. Another possible point of debate is compliance: account holders must document eligible expenses and maintain records, but financial institutions are expressly not required to track withdrawals or verify eligibility, which may raise concerns about enforcement and misuse. The bill’s tie-bar to HB 4057 is also notable because it makes enactment contingent on companion legislation.