Few Companies Jump on Child-Care Tax Breaks

November 22, 2002 (PLANSPONSOR.com) - A tax credit given to companies for on-site child-care is going unused, prompting calls from The National Women's Law Center to give the tax break directly to families, according to a report in The Boston Globe.

Tax credits offered in 26 states are not being used, because companies have little need for the write-off. The resource center found 57% of state corporate filers had no tax liability and 93% did not have enough liability to take advantage of the tax credit.

The National Women’s Law Center in Washington DC published “The Little Engine That Hasn’t,” an examination of 20 out of the 26 states offering the tax break.   The report found 16 of the 20 had five or fewer corporations claiming the tax credit, including five states with no claims at all:   Arkansas, Oklahoma, South Carolina, Tennessee, and Virginia.


The states with the highest filers were:

  • California – 160
  • Oregon – 21
  • Connecticut – 20
  • Ohio – 8

Lost opportunity costs are high, the center said.   The millions of dollars appropriated for the state tax incentive go back into the state’s general fund if unused, instead of covering child-care costs.   Florida, Maryland and Montana were used as examples. Each state had allotted $2 million in state expenditures for the tax breaks.   The report found the actual amount used for the state tax credit last year to be $200,000 in Florida, $96,000 in Maryland and $36,000 in Montana.

The resource center estimates child-care costs in the US to range from $6,000 to $10,000 per child.   Christina Smith FitzPatrick, a senior policy analyst with the group, told the newspaper more direct subsidies to the parents would be more effective than tax breaks to companies that either don’t need them, or are not utilizing them.