HB 1564
In CommitteeHouse
Child care assist./B&O tax
Supporting employers providing child care assistance to employees by establishing a business and occupation and public utility tax credit.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a full tax credit for employers in Washington who provide child care assistance to their employees—either by paying part of their child care costs or running on-site child care programs. The credit applies to both the Business and Occupation (B&O) tax and the Public Utility tax, and is designed to encourage more employers to offer such benefits.
- Starts January 1, 2026: Employers can claim a 100% tax credit against their Business and Occupation (B&O) tax or Public Utility tax for costs spent on child care assistance for employees.
- Credit cap: The credit cannot exceed the employer’s tax liability for the year, and unused credits can be carried forward for one year only.
- Eligible costs include: (1) wage supplements paid to employees for child care (e.g., tuition, daycare fees), and (2) direct costs of running in-house child care facilities for employees’ children.
- No double-dipping: The same child care costs cannot be used to claim credits under both the B&O and Public Utility tax chapters.
- Electronic filing required: Employers must apply for the credit using electronic systems approved by the Washington Department of Revenue, and the department must respond to applications within 60 days.
- Sunset clause: Credits can be earned through January 1, 2037, and the program expires on January 1, 2038, unless the legislature extends it based on a performance review.
Who is affected
- Employers (especially small and mid-sized businesses) — Businesses that pay for part of their employees' child care costs (e.g., through direct payments, subsidies, or in-house child care centers) can reduce their business and occupation (B&O) or public utility tax liability by claiming a credit equal to 100% of those costs.
- Working parents and caregivers — Employees may benefit indirectly if their employers use the tax savings to expand or improve child care benefits, such as higher wage subsidies or better on-site care options.
- Washington Department of Revenue — The Washington Department of Revenue will be responsible for reviewing and processing credit claims, issuing guidance, and reporting on program outcomes.
- Washington State Legislature (specifically CLARC) — The Joint Legislative Audit and Review Committee (CLARC) will track whether the program increases the number of employers offering child care assistance, to decide if the program should be extended.
Pro/Con Analysis
Potential Benefits (5)
By reimbursing 100% of eligible child care costs through tax credits, the bill lowers the net cost for employers to offer child care benefits—potentially encouraging more employers (especially small and mid-sized) to adopt or expand such benefits, increasing workforce stability and retention.
Business & EmploymentPeopleRef: Sec. 1(1), Sec. 1(6), Sec. 2(1), Sec. 2(6)Wage supplements for child care directly increase disposable income for working parents—especially low- and middle-income households—helping offset one of the largest household expenses, thereby improving housing affordability and reducing financial stress.
HousingPeopleRef: Sec. 1(6)(a) and Sec. 2(6)(a)Support for in-house child care facilities may enable employers to attract and retain talent, particularly in sectors with high turnover (e.g., retail, hospitality, tech), and may reduce absenteeism and presenteeism, improving productivity.
Business & EmploymentPeopleRef: Sec. 1(6)(b) and Sec. 2(6)(b)Mandating a 60-day review window for credit applications improves predictability for small businesses seeking tax relief, reducing administrative burden and uncertainty—though this benefit is modest given the cap and carry-forward limitations.
Local GovernmentLean peopleRef: Sec. 1(4) and Sec. 2(4)If the program succeeds in increasing employer-provided child care access, it may reduce stress-related incidents and improve child well-being—though the causal pathway is indirect and evidence of downstream public safety gains is speculative.
Public SafetyLean peopleRef: Sec. 3(4)
Potential Concerns (5)
The 100% tax credit is capped at the employer’s tax liability, meaning only employers with sufficient tax liability (typically profitable, larger businesses) can fully utilize the credit; small businesses with low or no tax liability may only claim a partial credit or none at all, limiting real-world benefit.
FinancialLean industryRef: Sec. 1(2) and Sec. 2(2)Unused credits can only be carried forward for one year, which disproportionately harms small or seasonal businesses that may not generate enough tax liability in a single year to fully benefit, while larger, more stable firms can smooth cash flow and maximize savings.
FinancialIndustryRef: Sec. 1(2) and Sec. 2(2)The program’s continuation depends on a 15% increase in employer participation—a metric that may be difficult to achieve without significant state investment in outreach or incentives—risking program expiration and wasted administrative setup costs, ultimately shifting costs to local governments that provide fallback child care services.
Local GovernmentIndustryRef: Sec. 3(4)The credit applies only to wage supplements for child care (e.g., direct payments to employees), not to employer-paid direct subsidies to licensed child care providers—limiting the ability of small employers to offset actual market costs of high-quality care, and potentially disincentivizing participation among employers in high-cost regions like King County.
Business & EmploymentIndustryRef: Sec. 1(6)(a) and Sec. 2(6)(a)The legislature categorizes this as “tax relief for certain businesses,” and the fiscal impact will reduce state revenue without clear offsets—potentially leading to future cuts in public services (e.g., K–12, higher ed, transportation) that disproportionately affect low- and middle-income Washingtonians who rely most on those services.
FinancialIndustryRef: Sec. 3(2)
Who Is Most Affected
Small and mid-sized employers with moderate tax liability may benefit modestly, but those with low or negative tax liability (e.g., startups, seasonal businesses) may not fully utilize the credit—limiting real savings. Employers in high-cost urban areas may find the wage supplement model insufficient to offset actual child care costs.
Working parents—especially those earning under $75K—may benefit indirectly if employers expand or improve benefits, but the wage-supplement model means the actual benefit depends on employer discretion and may not cover full market costs of care.
Large employers with high tax liability and stable profits can fully utilize the credit and may see meaningful tax savings—potentially increasing their ability to fund expanded benefits. This group is best positioned to take advantage of the credit structure.
The state will lose revenue without clear offsets, potentially leading to future budget pressures. However, the Department of Revenue gains new administrative responsibilities and data-gathering authority, which may improve future policy evaluation capacity.
Child care providers may see increased demand if more employers offer subsidies, but the bill does not require use of licensed providers—so some funds may flow to informal or unregulated arrangements, potentially undermining quality standards.