A BILL to amend the Code of Virginia by adding in Article 3 of Chapter 3 of Title 58.1 a section numbered 58.1-339.15 and by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:13, relating to income tax credits; child care-related expenses.
HB403 would create two new refundable Virginia income tax credits related to child care, both available for taxable years beginning on or after January 1, 2026, and before January 1, 2031. The first credit would be for individual taxpayers who are eligible for the federal child and dependent care credit under Internal Revenue Code § 21 and whose family Virginia adjusted gross income does not exceed 400% of the federal poverty guideline. Eligible taxpayers could claim a Virginia credit equal to 20% of the federal credit they claim, subject to a statewide cap of $10 million per year. Any excess credit over tax liability would be refundable, and the Tax Commissioner would be required to issue guidelines for claiming it.
The second credit would be for employers that make qualified child care expenditures, such as building, expanding, operating, or contracting with licensed child day centers that participate in Virginia’s VQB5 quality system. Employers could claim a refundable credit equal to 50% of qualified expenditures, up to $500,000 per taxpayer per year, with annual inflation adjustments beginning in 2027. This credit would also be capped statewide at $10 million per year and would require documentation of expenditures with the tax return. Both credits would be administered by the Tax Commissioner, and the implementing guidelines would be exempt from the Administrative Process Act.
If enacted, HB403 would add two new sections to Title 58.1 of the Code of Virginia and expand the state income tax code to subsidize child care costs for both families and employers. It would directly affect individual taxpayers with qualifying child care expenses, employers investing in child care facilities or services, and licensed child day centers participating in VQB5. The bill would also create new administrative duties for the Tax Commissioner and impose annual statewide credit caps that limit the fiscal exposure to the Commonwealth.
The available record shows no committee transcript or vote data, so there is no documented debate or recorded floor sentiment to assess. Based on the bill’s structure, it appears designed as a child care affordability and workforce-support measure, with a policy emphasis on helping families and encouraging employer investment in child care infrastructure. The bill was referred to the House Committee on Finance and was left in Finance, indicating it did not advance out of committee in the available legislative history.
The main points of potential contention are fiscal cost, eligibility limits, and the use of refundable tax credits. Critics could question whether the credits are an efficient use of state revenue, especially given the $10 million annual cap for each credit and the fact that the credits are refundable even when they exceed tax liability. There could also be debate over the income threshold for individual eligibility, the requirement that employer-supported centers participate in VQB5, and whether the bill favors taxpayers and employers already able to make child care expenditures over other forms of child care assistance.