Donors could claim tax credits for young children's care scholarships

Taxpayers could claim a credit against state taxes worth 50% of a qualifying donation. It applies to taxpayers who give directly to a child care scholarship group for its scholarship program. The donor must mark the gift for the scholarship program in writing by the donation date, or the group must confirm in writing that it will use the gift only for that program. The state could award no more than $100 million in these credits each fiscal year. Unused credit could lower taxes for up to nine later tax years, but taxpayers could not get it as a refund. The credit provisions would start January 1, 2027, and apply in the tax year of the gift.

Scholarships would pay only attendance costs at qualifying child care providers. Under the school scholarship rules, children must live in Indiana and be no older than six. Eligible providers include licensed child care programs with a high quality rating and accredited schools. For the tax-credit program, no more than 25% of a group's annual program donations could fund scholarships at one provider. The school scholarship rules would start July 1, 2026. The tax-credit program would start January 1, 2027.

The Department of Education would certify programs that meet the scholarship rules. These rules cover groups seeking certification for early childhood scholarship programs. A group must apply and sign an agreement with the department. The agreement must limit running costs to 10% of donations and keep scholarships available across providers. It must bar awards for care a child can attend tuition-free and for providers that share paid staff, board members, or their relatives with the group. These rules would start July 1, 2026. Agreements made before then would have to add the rule against limiting scholarships to children at one provider.

School districts would have to consider children from outside their boundaries for early childhood programs. It applies to school districts that operate early childhood education programs. The rule requires consideration for participation; it does not guarantee admission. This requirement would start July 1, 2026.