Child Care Tax Credit Act

Neb. Rev. Stat. §§ 77-7201 to 77-7205

*LB 754 (Sections 1 through 5, Operative for taxable years beginning on or after January 1, 2024.)

This Act establishes two separate tax credits for tax years beginning on or after January 1, 2024, that require taxpayers to submit an application to DOR.

Nonrefundable Tax Credit

This Act provides nonrefundable tax credits to taxpayers who make qualifying contributions during the tax year and submit an application to DOR. Under this Act, taxpayer means any person subject to the income tax imposed by the Nebraska Revenue Act of 1967. The term includes resident and nonresident individuals, estates, trusts, and corporations. The credit can be distributed to beneficiaries. Partnerships and S corporations electing to be subject to Nebraska income tax may also claim the credit.

The credit will equal 75% or 100% of the qualifying contribution, not to exceed $100,000 for any single year. A qualifying contribution means a contribution in the form of cash, check, cash equivalent, agricultural commodity, livestock, or publicly traded security that is made:

• For the establishment or operation of an eligible program;
• For the establishment of a grant or loan program for parents requiring financial assistance for an eligible program;
• To an early childhood collaborative or another intermediary to provide training, technical assistance, or mentorship to child care providers;
• For the establishment or ongoing costs of an information dissemination program that assists parents with information and referral services for child care;
• To a for-profit child care business, including family home providers. The for-profit child care business must use the proceeds of a qualifying contribution for:
  • The acquisition or improvement of child care facilities,
  • The acquisition of equipment,
  • Providing services, or
  • Employee retention; or
• To an intermediary for the establishment or operation of an eligible program or for the establishment of a grant or loan program for parents requiring financial assistance for an eligible program.

A contribution will not qualify for a credit if the contribution is made to a child care provider in which the taxpayer or a person related to the taxpayer has a financial interest, unless the contribution is part of a bona fide arm's length transaction.

For the nonrefundable tax credit to equal 100% of the contribution, the taxpayer must make a qualifying contribution to:

• An eligible program with a physical presence in an opportunity zone in Nebraska designated pursuant to the federal Tax Cuts and Jobs Act, Public Law 115-97; or
• An eligible program with at least one child enrolled in the child care subsidy program established pursuant to Neb. Rev. Stat. §§ 68-1202 and 68-1206, and the child care provider is actively caring and billing for the child.

If the above is not met, the nonrefundable tax credit will equal 75% of the contribution. Any unused credit may be carried forward for the next five years after the credit was first granted but must be used in the earliest year possible. A taxpayer may only claim a credit on the portion of the contribution that was not claimed as a charitable contribution on their federal return. 

Instructions to Apply for the Nonrefundable Tax Credit
The taxpayer is required to apply for the credit by submitting the Child Care Tax Credit Contribution Application, CCTC-A, along with the Child Care Tax Credit Contribution Receipt, CCTC-R, to DOR with documentation supporting that a qualifying contribution was made. DOR will process the applications in the order received until the amount of the certified credits reaches the annual limit of $2.5 million.

• Child Care Tax Credit Contribution Application, Form CCTC-A
• Child Care Tax Credit Contribution Receipt, Form CCTC-R

Upload Both Forms CCTC-A and CCTC-R

Instructions to Upload Forms

After you submit the Forms CCTC-A and CCTC-R you will receive an e-mail confirmation from noreply@sf-notifications.com to the email address entered on the Form CCTC-A that shows the upload was successful. If you do not see an email in your inbox, please check your spam/trash/junk folder. The email confirmation will display the name of the uploaded file(s). Please verify that the correct file(s) are included in the list. If the correct file(s) aren’t uploaded, please upload the correct documentation on the DOR website using the same link you used to upload the Forms CCTC-A and CCTC-R. DOR will also receive notification that the files were uploaded.

DOR will review your submission and contact you if additional information is needed. The e-mail confirmation lets you know that DOR received your filing, please do not contact DOR for a status update as all files will be reviewed in the order received. If the Forms CCTC-A and CCTC-R has been properly completed, please allow 90 days for DOR to complete the review of your Forms CCTC-A and CCTC-R.

Refundable Tax Credit

The application for the refundable tax credit allowed to parents or legal guardians of children 5 years old or younger will be available at the end of the year. The upload link will be available when the applications can be submitted.

Parents or legal guardians of children 5 years old or younger may apply to DOR to receive a refundable tax credit. The parent or legal guardian must claim the child as a dependent for federal income tax purposes. The parent or legal guardian is eligible for the refundable tax credit if:

• The child is enrolled in a child care program licensed pursuant to the Child Care Licensing Act;
• The child receives care from an approved license-exempt provider enrolled in the child care subsidy program pursuant to Neb. Rev. Stat. §§ 68-1202 and 68-1206; or
• The parent’s or legal guardian’s total household income is less than or equal to 100% of the federal poverty level.

Total household income means federal modified adjusted gross income.
The refundable tax credit amount is based on the parent’s or legal guardian’s total household income. The credit will equal:

• $2,000 per child, if the total household income is no more than $75,000; or
• $1,000 per child, if the total household income is more than $75,000 but no more than $150,000.
• Zero, if the total household income is more than $150,000.

The parent’s or legal guardian’s application and supporting documentation will be used to certify the refundable tax credit.  The applications will be used to reserve the tax credits for the individual to claim on their Nebraska individual income tax return. The applications will be processed in the order received until the annual limit reaches $15 million.