Utah Employer Child Care Tax Credits

Utah House Bill 190 (H.B. 190), officially titled the Child Care Business Tax Credit, is legislation from the 2026 General Session of the Utah State Legislature. The bill modifies corporate and individual income tax credits for employer-provided child care by allowing employers to claim credits even if they contract with off-site child care centers or use middle-man organizations to secure spots for their employees’ children. This includes requirements ensuring that employers who utilize these tax credits provide a genuine employee benefit at no cost to the employee.

Governor Cox signed the bill on March 26, 2026, and it took effect on May 6, 2026, with its tax provisions applying retroactively to January 1, 2026.

Have questions? Email program manager Anju Thapaliya at [email protected].

Key Highlights

Expands to Off-Site Facilities: It expands the nonrefundable income tax credit so that employers can claim it for contracts with off-site child care facilities, rather than just on-site facilities.
Employee Payment Disqualification: An employer is disqualified from receiving the tax credit if they charge employees or deduct child care costs from their wages.
Increased Credits for Small Businesses: It increases the tax credit amount for eligible small business employers based on their child care expenditures. This allows small businesses to claim a 30% credit, whereas other employers claim a 10% credit.
Removes Construction Prerequisite: It repeals a prior requirement that forced employers to first claim a tax credit for construction expenditures in order to be eligible to claim the tax credit for child care expenditures.
New Informational Webpage: It requires GOED to develop and maintain a dedicated webpage to help employers understand the credits, check their eligibility, and access the necessary forms to claim them.

Qualifications

Must be an employer
Must be an "eligible small business" as defined in 26 U.S.C. § 45F
Must claim the federal employer-provided child care credit (IRC Section 45F)
Must NOT charge employees for child care services
(no fees, payroll deductions, or reimbursements from employees)
- Contracting with an off-site qualified child care facility
- Contracting with an intermediate entity that contracts with off-site facilities
- For on-site facilities, it also includes training and increased compensation for employees with more advanced child care training

Additional Information

Off-site qualified child care facility: Qualified child care facility not employer-owned, controlled, operated, or managed.
On-site qualified child care facility: A qualified child care facility, employer-owned, controlled, operated, or managed for the benefit of their employees.
Qualified child care expenditure covers costs an employer pays for:
- Operating an on-site qualified child care facility (operated by the employer or a third party).
Qualified child care facility means a center-based child care facility, as defined in Section 26B-2-401, located in the state.
Qualified construction expenditure is an amount an employer pays or incurs to acquire, construct, rehabilitate, or expand property for their on-site qualified child care facility, for which they can claim a depreciation or amortization deduction.
Qualifying taxpayer means an employer that claims the federal Section 45F child care tax credit and does not charge employees or deduct from their salary for services at the facility for which the credit is claimed.
Recapture event occurs if an employer stops operating the on-site child care facility (for which the credit was claimed) as a child care facility for at least five consecutive taxable years after the credit was first claimed.
Third-party provider is defined as either a new child care provider or an existing provider that can perform the contract without reducing existing services.
A qualifying taxpayer can claim a nonrefundable tax credit equal to 20% of qualified construction expenditures incurred that year. Any excess credit may be carried forward for the next five taxable years.

Category	Description
On-Site Facility	A facility that the employer owns, controls, operates, or manages specifically for the benefit of their employees
Off-Site Facility	A facility that the employer does not own, control, operate, or manage. One of the key provisions of HB0190 was expanding the tax credit so employers can now claim expenditures for contracts with these off-site facilities
Third-Party Provider	An employer can claim a tax credit for the operating costs of an on-site facility, even if the employer does not run it themselves and instead contracts with a third-party provider to supply child care services at the on-site location. Under the bill, a qualifying third-party provider must be either a new child care provider or an existing provider that can fulfill the employer's contract without reducing the child care services they already provide.
Intermediary Entities	An employer can also qualify by contracting with an intermediate entity that, in turn, contracts with one or more off-site child care facilities to supply the child care services for the employer's staff

Facility Type	Eligible Tax Credit Expenditures	Specific Rules & Limitations
On-Site Facility	Operating Costs: Includes general operating expenses, whether run by the employer or contracted to a third-party provider. Staffing Costs: If the employer operates the facility, costs for employee training and increased compensation for higher levels of training qualify. Construction: Costs to acquire, construct, rehabilitate, or expand the property.	Construction Credit: Qualifies for a 20% nonrefundable tax credit for depreciable construction expenditures, which can be carried forward for up to 5 years. Recapture Event: The employer must operate the facility for at least five consecutive taxable years; failing to do so requires repayment of a percentage of the claimed tax credit, depending on when the facility closes.
Off-Site Facility	Contract Costs: The amount paid or incurred by entering into a direct contract with the off-site facility to provide child care services for the employer's employees.	Credit Amount: Qualifies for the standard child care expenditure tax credit, which is 10% (or 30% if the employer is an eligible small business). No Carry Forward: Because it only qualifies for child care expenditures (not construction), any excess credit beyond the employer's tax liability cannot be carried forward or backward.
Intermediate Entity (Intermediary)	Contract Costs: The amount an employer pays or incurs to enter into a contract with the intermediate entity.	Credit Amount: Like direct off-site contracts, this qualifies for the 10% (or 30% for small businesses) nonrefundable child care expenditure credit. No Carry Forward: Cannot be carried forward or backward.

A "recapture event" occurs if an employer claims a tax credit for an on-site qualified child care facility but fails to operate it as a child care facility for at least five consecutive taxable years following the year in which the credit was first claimed.

If a recapture event occurs, the employer must repay a percentage of the tax credit they received. The amount they must repay depends on how soon the facility closes.

If Recapture Event Occurs	Repayment Percentage
Within 2 years	100%
More than 2 years but fewer than 3 years	75%
More than 3 years but fewer than 4 years	50%
More than 4 years but fewer than 5 years	25%

If an employer stops operating an on-site facility too early, they must repay part of the credit. This applies if the facility is not maintained for at least 5 consecutive years.
Repayment is due in the year the facility ceases to qualify.

Preventing "Hidden" Deductions or Costs:

HB 190 ensures that employer-provided child care is a genuine, free benefit rather than a mechanism for employers to claim a tax write-off at the worker's expense. To qualify for the tax credit, an employer is strictly prohibited from obtaining payment from an employee or deducting the cost of child care services from the employee's salary or wages.

Impact on the Employee Compensation Package:

Because an employer cannot charge for child care services or deduct pay to cover them, the child care provided acts as a net positive addition to the employee's overall compensation package. The benefit must be funded entirely by the employer to remain eligible for the state tax credit.

Increased Compensation for Child Care Staff:

The bill also directly impacts the compensation of child care workers. If an employer operates an on-site child care facility, the "qualified child care expenditures" that qualify for the tax credit may include the costs of providing increased compensation to employees who achieve higher levels of child care training.

In short, the legislation prevents employers from using child care as a disguised payroll deduction, ensuring it remains a positive, employer-funded enhancement to the employees' overall compensation.

Instructions:

Include here Step-by-step guidance for employers on how to claim the employer-provided child care tax credit.

Deadlines:

Include a clear description of all applicable filing deadlines.

Forms:

Direct links to access any necessary forms or documentation required to claim the credit.

Assistance:

Contact information for relevant state or federal agencies, intermediaries, and stakeholders that can assist employers with the process.

Eligible Small Business: Defined under federal law (IRC Section 45F)
Qualified Employer/Claimant: Must claim the federal credit and not charge employees
Qualified Facility: Utah-based, center-based child care
Recapture Event: Stopping an on-site facility before 5 years
Simple Definitions of Key Terms
- Eligible Small Business: A business that meets the definition established by federal law (IRC Section 45F).
- Qualified Employer/Claimant: An employer who is claiming the federal tax credit and is not passing the cost on to their employees.
- Qualified Facility: A child care center that is located within the state of Utah.
- Recapture Event: Occurs if an on-site child care facility is discontinued before the end of a five-year period.

Utah is committed to assisting employers by providing essential information, links, and resources to help businesses:

Understand eligibility requirements
Learn the application process
Identify key deadlines
Access necessary forms and documents
Find contact information for direct assistance
Review clear examples of business qualifications

The state plans to collaborate with tax agencies and relevant partners to ensure this information is consistently updated.

Utah Employer Child Care Tax Credits

Key Highlights

Qualifications

Additional Information

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