An Act To Support Child Care Providers and School Readiness through Tax Credits
Maine Legislature, Session 130, LD 1678
Committee: Taxation
Sponsors: MILLETT, CLAXTON, DOUDERA, MEYER, SACHS, TEPLER, BREEN, LIBBY
Amends: 22 MRSA §5308, 36 MRSA §5218, 36 MRSA §5218-B, 36 MRSA §5218-C, 36 MRSA §5403

Legislative Document
No. 1678
H.P. 1249
House of Representatives, May 5, 2021
An Act To Support Child Care Providers and School Readiness 
through Tax Credits
Received by the Clerk of the House on May 3, 2021.  Referred to the Committee on 
Taxation pursuant to Joint Rule 308.2 and ordered printed pursuant to Joint Rule 401.
ROBERT B. HUNT
Clerk
Presented by Representative MILLETT of Cape Elizabeth.
Cosponsored by Senator CLAXTON of Androscoggin and
Representatives: DOUDERA of Camden, MEYER of Eliot, SACHS of Freeport, TEPLER of 
Topsham, Senators: BREEN of Cumberland, LIBBY of Androscoggin.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  22 MRSA §5308, as amended by PL 2013, c. 368, Pt. CCCC, §6, is further 
amended by adding at the end a new paragraph to read:
The office shall notify the State Tax Assessor immediately of any changes made to 
grading or scoring systems of child care provider quality standards and career qualifications 
for administrators, educators and staff of child care providers developed by the office or in 
cooperation with an entity outside of the office and used to determine tax credits pursuant 
to Title 36, section 5218, 5218-B or 5218-C.  The office, in consultation with the State Tax 
Assessor, shall submit a report, including suggested legislation, to the joint standing 
committees of the Legislature having jurisdiction over health and human services matters 
and taxation matters implementing the changes necessary to the law to reflect the changes 
to the grading or scoring systems.  Either joint standing committee may submit a bill to the 
Legislature based on the report of the office.
Sec. 2.  36 MRSA §5218, sub-§3, as amended by PL 2003, c. 391, §10, is repealed 
and the following enacted in its place:
3.  Child care services provided at quality child care site.  For tax years beginning 
on or after January 1, 2022, the credit provided by subsections 1, 2 and 2-A is increased by 
a percentage of the federal tax credit based on the quality rating of the child care site as 
provided in this subsection.
A.  As used in this subsection, unless the context otherwise indicates, the following 
terms have the following meanings.
(1)  "Federal tax credit" means the federal tax credit allowable for child and 
dependent care expenses in the same tax year.
(2)  "Quality rating" means the rating, expressed as a star number in a series from 
to 5, given to a child care site pursuant to a quality rating and improvement 
system based on standards for family child care programs developed by the 
Department of Health and Human Services, Office of Child and Family Services 
and detailed in the September 2020 report "Rising Stars for ME Pilot Report."
B.  The percentage increase is determined as follows.
(1)  If the quality rating of the child care site is star 1, the credit is 50% of the 
federal tax credit.
(2)  If the quality rating of the child care site is star 2, the credit is 100% of the 
federal tax credit. 
(3)  If the quality rating of the child care site is star 3, the credit is 150% of the 
federal tax credit.
(4)  If the quality rating of the child care site is star 4 or 5, the credit is 200% of the 
federal tax credit.
C.  A taxpayer who has more than one child eligible for the credit under this section 
shall calculate the credit for each child separately.  If the child of a taxpayer receives 
child care services from more than one child care site in the same tax year, the taxpayer 
shall calculate the credit based on the highest-rated child care site.
D.  The credit calculated pursuant to this subsection is refundable.
Sec. 3.  36 MRSA §5218, sub-§5 is enacted to read:
5.  Evaluation; specific public policy objectives; performance measures.  
Beginning in 2025, the credit provided under subsection 3 is subject to ongoing legislative 
review in accordance with Title 3, chapter 37.  The Office of Program Evaluation and 
Government Accountability by January 15th annually shall submit an evaluation of the 
credit provided under subsection 3 to the joint legislative committee established to oversee 
program evaluation and government accountability matters and the joint standing 
committee of the Legislature having jurisdiction over taxation matters.  In developing 
evaluation parameters to perform the review, the office shall consider whether the specific 
public policy objectives and economic benefit of the credit provided under subsection 3 
outweigh the loss of revenue to the State.
The Office of Program Evaluation and Government Accountability by January 15th 
annually shall provide a report of its evaluation under this subsection to the joint standing 
committee of the Legislature having jurisdiction over taxation matters.
Sec. 4.  36 MRSA §5218-B is enacted to read:
§5218-B.  Tax credit for child care providers and staff for certain Department of 
Health and Human Services program participants
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings.
A.  "Administrator" means, for an eligible child care provider, a director, administrator 
or lead staff person who is responsible for the day-to-day operation, supervision and 
administration of the eligible child care provider and includes a program director, 
supervisor, owner and education supervisor.
B.  "Department" means the Department of Health and Human Services.
C.  "Eligible child" means:
(1)  The child of a parent who is participating in the child care subsidy program in 
the Office of Child and Family Services within the department; or
(2)  A foster child who is in the custody of the department.
D.  "Eligible child care provider" means a child care center, a child care facility or a 
family child care provider, as those terms are defined in Title 22, section 8301-A, 
subsection 1-A, paragraphs A, B and C, respectively, that provides child care to an 
eligible child.
E.  "Individual qualification score" means the career lattice rating systems developed 
and established as of 2019 for family and center-based child care and administrators, 
educators and other support professionals through a collaborative partnership between 
the Cutler Institute of Health and Social Policy at the University of Southern Maine, 
the University of Maine Center for Community Inclusion and Disability Studies and 
the Department of Psychology at the University of Maine.
(1) For administrators, the career lattice is a series of levels from 1 to 6 as 
established in the "Administration Management/Coordination Career Lattice" for 
2019.
(2) For educators and other professional support staff, the career lattice is a series 
of levels from 1 to 8 as established in the "Center Based Family Child Care School 
Age Direct Care Lattice" for 2019.
F.  "Quality rating" means the rating, expressed as a star number in a series from 1 to 
5, given to a child care provider pursuant to a quality rating and improvement system 
based on standards for family child care developed by the Office of Child and Family 
Services within the department and detailed in the September 2020 report "Rising Stars 
for ME Pilot Report."
2.  Tax credit for eligible child care provider.  For tax years beginning on or after 
January 1, 2022, an eligible child care provider is allowed a refundable credit against the 
tax otherwise due under this Part as determined pursuant to this subsection.  The amount 
of the credit is based on the average of the number of eligible children who are cared for 
by that eligible child care provider each month and the quality rating of that eligible child 
care provider, as follows.
A.  If an eligible child care provider's quality rating is star 1, the tax credit per eligible 
child cared for is $0.
B.  If an eligible child care provider's quality rating is star 2, the tax credit per eligible 
child cared for is $1,000.
C.  If an eligible child care provider's quality rating is star 3, the tax credit per eligible 
child cared for is $1,500.
D.  If an eligible child care provider's quality rating is star 4, the tax credit per eligible 
child cared for is $1,750.
E.  If an eligible child care provider's quality rating is star 5, the tax credit per eligible 
child cared for is $2,000.
3.  Tax credit for administrators, educators and other staff of eligible child care 
providers.  For tax years beginning on or after January 1, 2022, an administrator, educator 
or other professional support staff member of an eligible child care provider is allowed a 
refundable credit against the tax otherwise due under this Part as determined pursuant to 
this subsection.
A.  For administrators, the amount of the credit is based on the individual qualification 
score as follows.
(1)  If the administrator is rated level 2, the tax credit is $1,000.
(2)  If the administrator is rated level 3, the tax credit is $1,500.
(3)  If the administrator is rated level 4, the tax credit is $3,000.
(4)  If the administrator is rated level 5, the tax credit is $3,500.
(5)  If the administrator is rated level 6, the tax credit is $5,000.
B.  For educators and other professional support staff, the amount of the credit is based 
on the individual qualification score as follows.
(1) If the educator or other professional support staff member is rated level 2, the 
tax credit is $1,000.
(2)  If the educator or other professional support staff member is rated level 3, the 
tax credit is $1,500. 
(3)  If the educator or other professional support staff member is rated level 4, the 
tax credit is $3,000. 
(4)  If the educator or other professional support staff member is rated level 5, the 
tax credit is $3,500. 
(5)  If the educator or other professional support staff member is rated level 6 or 
higher, the tax credit is $5,000.
4.  Certification.  Upon application by an eligible child care provider or an 
administrator, educator or other professional support staff member of an eligible child care 
provider, the Office of Child and Family Services within the department shall certify the 
quality rating achieved by that eligible child care provider or the individual qualification 
score achieved by the administrator, educator or other professional support staff member 
of an eligible child care provider.  The Office of Child and Family Services shall provide a 
certificate of quality rating to the eligible child care provider and a certificate of individual 
qualification score to the administrator, educator or other professional support staff 
member of the eligible child care provider, as appropriate.
5.  Application for credit.  In order to receive the tax credit specified in subsection 2, 
for an eligible child care provider, or in subsection 3, for the administrator, educator or 
other professional support staff member of an eligible child care provider, the taxpayer 
taking the credit must include with that taxpayer's return the certificate provided to that 
taxpayer pursuant to subsection 4.
6.  Evaluation; specific public policy objectives; performance measures.  
Beginning in 2025, the credit provided under this section is subject to ongoing legislative 
review in accordance with Title 3, chapter 37.  The Office of Program Evaluation and 
Government Accountability by January 15th annually shall submit an evaluation of the 
credit provided under this section to the joint legislative committee established to oversee 
program evaluation and government accountability matters and the joint standing 
committee of the Legislature having jurisdiction over taxation matters.  In developing 
evaluation parameters to perform the review, the office shall consider whether the specific 
public policy objectives and economic benefit of the credit provided under this section 
outweigh the loss of revenue to the State.
The Office of Program Evaluation and Government Accountability by January 15th 
annually shall provide a report of its evaluation under this subsection to the joint standing 
committee of the Legislature having jurisdiction over taxation matters.
Sec. 5.  36 MRSA §5218-C is enacted to read:
§5218-C.  Business-supported quality child care
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings.
A.  "Employing unit" has the same meaning as in Title 26, section 1043.
B.  "Providing child care services" means expending funds to build, furnish, license, 
staff, operate or subsidize a child care center licensed by the Department of Health and 
Human Services to provide early care and education services to children of employees 
of the taxpayer at no profit to the taxpayer or to contract with a child care facility 
licensed by or registered with the department to provide early care and education 
services to children of the employees of the taxpayer.  "Providing child care services" 
also includes the provision of child care resource and referral services to employees 
and the provision of vouchers by an employer to an employee for purposes of paying 
for early care and education services for children of the employee.
C.  "Quality rating" means the rating, expressed as a step in a series of steps from 1 to 
4, given to a child care site pursuant to a quality rating and improvement system based 
on standards for center-based child care programs developed by the Department of 
Health and Human Services, Office of Child and Family Services and in place as of 
January 1, 2021.
2.  Credit allowed for quality child care site expenses.  For tax years beginning on 
or after January 1, 2022, a taxpayer constituting an employing unit is allowed a credit 
against the tax imposed by this Part for each taxable year equal to a percentage of the costs 
incurred by the taxpayer in providing child care services at child care sites as follows.
A.  If the quality rating of the child care site is step 1, the credit is 5% of the costs of 
providing child care services.
B.  If the quality rating of the child care site is step 2, the credit is 10% of the costs of 
providing child care services.
C.  If the quality rating of the child care site is step 3, the credit is 15% of the costs of 
providing child care services.
D.  If the quality rating of the child care site is step 4, the credit is 20% of the costs of 
providing child care services.
3.  Evaluation; specific public policy objectives; performance measures.  
Beginning in 2025, the credit provided under this section is subject to ongoing legislative 
review in accordance with Title 3, chapter 37.  The Office of Program Evaluation and 
Government Accountability by January 15th annually shall submit an evaluation of the 
credit provided under this section to the joint legislative committee established to oversee 
program evaluation and government accountability matters and the joint standing 
committee of the Legislature having jurisdiction over taxation matters.  In developing 
evaluation parameters to perform the review, the office shall consider whether the specific 
public policy objectives and economic benefit of the credit provided under this section 
outweigh the loss of revenue to the State.
The Office of Program Evaluation and Government Accountability by January 15th 
annually shall provide a report of its evaluation under this subsection to the joint standing 
committee of the Legislature having jurisdiction over taxation matters.
Sec. 6.  36 MRSA §5403, sub-§7, as enacted by PL 2017, c. 474, Pt. B, §24, is 
amended to read:
7.  Personal exemptions.  Beginning in 2018 and each year thereafter, by the dollar 
amounts contained in section 5126‑A, subsection 1, except that for the purposes of this 
subsection, notwithstanding section 5402, subsection 1-B, the "cost-of-living adjustment" 
is the Chained Consumer Price Index for the 12-month period ending June 30th of the 
preceding calendar year divided by the Chained Consumer Price Index for the 12-month 
period ending June 30, 2017; and
Sec. 7.  36 MRSA §5403, sub-§8, as enacted by PL 2017, c. 474, Pt. B, §24, is 
amended to read:
8.  Personal exemption phase-out.  Beginning in 2018 and each year thereafter, by 
the dollar amount of the applicable amounts specified in section 5126‑A, subsection 2, 
paragraphs A, B and C, except that for the purposes of this subsection, notwithstanding 
section 5402, subsection 1-B, the "cost-of-living adjustment" is the Chained Consumer 
Price Index for the 12-month period ending June 30th of the preceding calendar year 
divided by the Chained Consumer Price Index for the 12-month period ending June 30, 
2017.; and
Sec. 8.  36 MRSA §5403, sub-§9 is enacted to read:
9.  Eligible child care providers, administrators, educators and staff.  Beginning in 
2023 and each year thereafter, by the tax credit amounts specified in section 5218-B, 
subsection 2 for eligible child care providers and section 5218-B, subsection 3 for 
administrators, educators and other professional support staff of eligible child care 
providers, except that for the purposes of this subsection, notwithstanding section 5402, 
subsection 1-B, the "cost-of-living adjustment" is the Chained Consumer Price Index for 
the 12-month period ending June 30th of the preceding calendar year divided by the 
Chained Consumer Price Index for the 12-month period ending June 30, 2022.
SUMMARY
This bill does the following for quality child care services, beginning in 2022.
1.  It provides a refundable tax credit of $1,000 to $2,000 per eligible child to child 
care providers that provide services to children whose parents are participating in the child 
care subsidy program operated by the Department of Health and Human Services, Office 
of Child and Family Services or foster children in the custody of the Department of Health 
and Human Services.  The amount of the credit is based on the quality of the child care 
provider as determined pursuant to a quality rating and improvement system based on 
standards for center-based child care programs developed by the Department of Health and 
Human Services, Office of Child and Family Services.
2.  It provides a refundable tax credit of $1,000 to $5,000 to administrators, educators 
and other professional support staff of child care providers that provide services to children 
whose parents are participating in the child care subsidy program operated by the 
Department of Health and Human Services, Office of Child and Family Services or foster 
children in the custody of the Department of Health and Human Services.  The amount of 
the credit is based on individual qualification score lattices developed and established for 
administrators, management, owners and coordinators and educators and other support 
staff of child care facilities through a collaborative partnership between the Cutler Institute 
of Health and Social Policy at the University of Southern Maine, the University of Maine 
Center for Community Inclusion and Disability Studies and the Department of Psychology 
at the University of Maine.
3.  It amends the current income tax credit for child care expenses to allow a taxpayer 
to obtain a credit of between 50% and 200% of the federal tax credit, depending on the 
quality rating of the child care site providing child care services for the child of the 
taxpayer.  Current law allows up to 50% of the federal tax credit if the child care expenses 
are incurred through the use of quality child care services.
4.  It provides a tax credit of a percentage of expenses paid by an employer to provide 
child care and education services to the children of its employees, either on site, at a facility 
licensed or registered with the Department of Health and Human Services or through child 
care resource and referral services or vouchers for the purpose of paying for child care and 
education services.  The percentage of expenses that may be taken by the employer is 
determined by the quality rating of the child care facility.
5.  It indexes for inflation the dollar amounts of the tax credits beginning annually in 
2023.
6.  It requires the Office of Child and Family Services to notify the State Tax Assessor 
immediately of any changes to the grading and scoring systems used to determine child 
care-related tax credits and requires the office, after consultation with the assessor, to 
submit a report and suggested legislation to implement the changes to the grading and 
scoring systems.
7.  It requires the Office of Program Evaluation and Government Accountability, 
beginning in 2025, to review the tax credits provided by this legislation to determine 
whether the specific public policy objectives and economic benefit of the credits outweigh 
the loss of revenue to the State and annually report its findings to the joint standing 
committee of the Legislature having jurisdiction over taxation matters.