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Bill to incentivize giving to Colorado child care providers advances

A bill that would extend a state tax credit that incentivizes donations to Colorado child care providers passed the House Finance Committee on Monday and will now move to the House Appropriations Committee.

Under the bill, approved in a 9-4 vote, the Child Care Contribution Tax Credit would be extended five years, through 2024.

The tax credit, which first took effect in 1999 and has been reauthorized once since, allows donors to claim an income tax credit worth up to 50 percent of their contribution. In other words, a donation of $200 to a qualifying child care provider would yield a state tax credit of $100 for the donor.

The bill’s House sponsors include James Coleman, a Denver Democrat, and James Wilson, a Salida Republican.

A couple members of the House Finance Committee questioned the size of the credit during the discussion Tuesday, saying it was the most generous tax credit they’d seen. Others asked why donors to for-profit child care businesses are allowed to benefit from the credit. The skepticism came from members of both parties.

During testimony, witnesses noted that even for-profit child care businesses operate on tight margins and often need outside support.

“Nobody goes into child care to make a profit,” said Evie Hudak, who testified as a representative of the Colorado PTA. “It’s so expensive to provide child care.”

Advocates also said the size of the credit incentivizes donors to give more than they otherwise would to organizations that provide a critical and costly service to families.

Donations to a variety of organizations — including child care centers, programs offering before- and after-school care, residential treatment centers, and homeless youth shelters — are eligible for the credit.

During fiscal year 2016, Colorado taxpayers made about $52 million in donations that qualified for the tax credit, according to data from the Colorado Department of Revenue. Donations can cover costs such as child care scholarships, teacher salaries, and building improvements.

Colorado is one of only a handful of states that offer tax credits to individuals or businesses that donate to child care providers or related programs, according to the National Conference of State Legislatures.