Section 40-18-545 Rulemaking; Assignment of Credits; Refunds; Child Care Tax Credit Account.

(a) The Department of Human Resources and the Department of Revenue shall adopt rules as necessary, on or before January 1, 2025, for the implementation and administration of this article. Such rules shall ensure that: (1) At least 25 percent of the amounts specified in Section 40-18-542(b) are reserved for awards to small businesses or employers that are headquartered in rural areas and at least 25 percent of the amounts specified in Section 40-18-543(b) are reserved for awards to child care providers operating child care facilities exclusively in rural areas; and that at least 25 percent of the amounts specified in Section 40-18-544(f) are reserved for awards to nonprofit child care providers operating the applicable child care facility in a rural area; (2) In the event the Department of Revenue or the Department of Human Resources does not receive applications for and thereby does not allocate the reserved tax credits and grants by the close of the second quarter of the calendar year, the funds may revert for allocations to other applications; (3) Employer tax credits and facility tax credits shall be awarded based on the order in which they are requested by employers and child care providers, respectively; and (4) The employer tax credits shall not be awarded to employers who cannot demonstrate that they prioritize the payment of eligible expenses for the benefit of employees that are eligible for earned income tax credit under Title 26 of the United States Code, if any. (b) Employer tax credits and facility tax credits may only be claimed by an employer or child care provider, or a taxpayer who is an owner of a pass-through entity that is an employer or child care provider, but may not be otherwise assigned or transferred to any other taxpayer. A taxpayer who is an owner of a pass-through entity that is an employer or child care provider may only claim the pro rata share of the employer tax credit or facility tax credit, respectively, equal to their percentage ownership of the employer or child care provider. (c) Where the applicable taxes owed by the child care provider are less than the employer tax credit or facility tax credit received by such entities, the child care provider shall be entitled to claim a refund for the difference but may not carry the employer tax credit or facility tax credit forward for additional tax years. In the case of owners of pass-through entities where the taxes owed by such persons are less than their pro rata share of the employer tax credit or facility tax credit received, such persons shall be entitled to claim a refund for only the pro rata share of the employer tax credit or facility tax credit such persons receive in the tax year for which the employer tax credits or facility tax credits are awarded. (d) The Department of Revenue shall also prescribe the various methods by which employer tax credits or facility tax credits are to be issued to employers and child care providers. Refunds under subsection(c) of employer tax credits and facility tax credits that are awarded against the applicable taxes in Section 40-18-541 shall be paid out of sales tax collections made to the Education Trust Fund and set aside by the Comptroller in the Child Care Tax Credit Account created in subsection (e), in the same manner as refunds of such taxes otherwise provided by law, and there is hereby appropriated therefrom, for such purpose, so much as may be necessary to annually pay for such tax credits as provided by this article. (e) There is created within the Education Trust Fund a separate account named the Child Care Tax Credit Account for the payment of any refunds under subsection (c) of employer tax credits or facility tax credits awarded against the applicable taxes defined in Section 40-18-541. The Commissioner of Revenue shall certify to the Comptroller the amount of such tax credit refunds due to child care providers under this section and the Comptroller shall transfer into the Child Care Tax Credit Account only the amount from sales tax revenues within the Education Trust Fund that is sufficient for the Department of Revenue to use to cover the refunds for the applicable tax year. The Commissioner of Revenue shall distribute the funds in the Child Care Tax Credit Account to child care providers pursuant to this article. (f) The Alabama Department of Finance shall adopt rules to ensure that the employer tax credit and the facility tax credit, in any case, would not reduce the distribution for the Alabama Special Mental Health Trust Fund by using any unencumbered funds to ensure that the employer tax credit and the facility tax credit shall not be limited, prevented, or reduced.