State Innovation – Tax Credits

The Child Care Contribution Tax Credit in Colorado was enacted in 1998 and has been amended several times. Individuals and corporations can claim a credit for contributions made to qualifying child care organizations for eligible purposes. In- kind contributions such as labor, materials and other non-cash donations do not qualify for the credit.

When originally enacted, the credit was equal to 25 percent of the value of the donation. In 2000, the credit was amended to increase the value of the credit to 50 percent of the donation.

Households Claiming Tax Credit

Estimated Amount Claimed

Qualifying Organizations

Licensed child care centers, child placement agencies, family child care homes, foster care homes, youth shelters, residential child care facilities, secure residential treatment centers and registered child care programs (providing the same services as licensed providers and registered with the Colorado Department of Revenue).

Eligible Purposes

Contributions to promote child care in Colorado for the establishment or operation of a child care program to establish a grant or loan program for families who require financial assistance for child care, for the training of child care providers, for the provision of information and referral services to assist parents in obtaining child care.

Credits are limited to $100,000 per year for individuals and businesses and are not refundable (i.e., any credits that exceed tax liability are carried forward for up to five years). There is no limit on the amount of overall donations that can be claimed. The credit sunsets on January 1, 2020. In 2013, 11,720 households claimed an estimated $6.3 million in credits. In addition, 17 employers claimed the credit at an estimated value of $5,268.

Of Note

In 2008, the Colorado State Legislature passed a “revenue growth trigger” that was designed to prohibit the use of all state credits if general fund revenue projections were insufficient to allow operating appropriations to increase by at least six percent. Credits that otherwise could have been taken at the time, were deferred until the state was in a better financial position, at which time current and “back credits” would be allowed. The State Legislature repealed the trigger in 2011 for tax years 2013 and beyond.