WEST virginia legislature

2026 regular session

Committee Substitute

for

House Bill 4191

By Delegates Fehrenbacher, Hall, Funkhouser, Hott, and G. Howell

[Originating in the Committee on Finance, February 26, 2026]

A BILL amend and reenact §11-21-97, §§11-24-44 and §49-2-121 of the Code of West Virginia, 1931, as amended; and to amend the code by adding two new sections, designated §49-2-113a and §49-2-1101, all relating to providing child care generally; tax credits for employers providing child care for employees; defining “employer sponsored child-care facility”; providing a system for the electronic filing of all days of attendance billed by child care providers; requiring emergency rule; subsidizing child care; providing the Department of Human Services with duties and powers; and requiring reports.

Be it enacted by the Legislature of West Virginia:

CHAPTER 11. TAXATION.

ARTICLE 21. PERSONAL INCOME TAX.

§11-21-97. Tax credit for employers providing child care for employees.

(a) Definitions. — As used in this section, the term:

(1) “Commissioner” or “Tax Commissioner” are used interchangeably herein and mean the Tax Commissioner of the State of West Virginia, or his or her delegate;

(2) “Cost of operation” means reasonable direct operational costs incurred by an employer as a result of providing employer provided or employer sponsored child-care facilities: Provided, That the term cost of operation shall exclude the cost of any property that is qualified child-care property.

(3) “Department Division” or “Tax Department Division” means the West Virginia State Tax Department Division.

(4) “Employer” means any employer upon whom an income tax is imposed by this article.

(5) “Employer provided” refers to child care offered on the premises of the employer.

(6) “Employer sponsored child-care facility” refers to a third-party licensed child-care services facility whose operational costs are financially supported by one or more employers through direct payments, contracts, or subsidies. An employer sponsored child-care facility may be located anywhere within the state of West Virginia and shall not be subject to proximity or employee usage thresholds.

(6) (7)  “Premises of the employer” refers to any location within the State of West Virginia and located on the workplace premises of the employer providing the child care or one of the employers providing the child care in the event that the child care property is owned jointly or severally by the taxpayer and one or more unaffiliated employers: Provided, That if such workplace premises are impracticable or otherwise unsuitable for the on-site location of such child-care facility, as determined by the commissioner, such facility may be located within a reasonable distance of the premises of the employer.

(7) (8) “Qualified child-care property” means all real property, other than land, and tangible personal property purchased or acquired on or after July 1, 2022, or which property is first placed in service on or after July 1, 2022, for use exclusively in the construction, expansion, improvement, or operation of an employer provided child-care facility, but only if:

(A) The children who use the facility are primarily children of employees of:

(i) The taxpayer and other employers in the event that the child-care property is owned jointly or severally by the taxpayer and one or more employers; or

(ii) A corporation that is a member of the taxpayer’s “affiliated group” within the meaning of section 1504(a) of the Internal Revenue Code; and

(B) The taxpayer has not previously claimed any tax credit for the cost of operation for such qualified child-care property placed in service prior to taxable years beginning on or after January 1, 2022.

Qualified child-care property includes, but is not limited to, amounts expended on building, improvements, and building improvements and furniture, fixtures, and equipment directly related to the operation of child-care property as defined in this section.

(8) (9) “Recapture amount” means, with respect to property as to which a recapture event has occurred, an amount equal to the applicable recapture percentage of the aggregate credits claimed under subsection (d) of this section for all taxable years preceding the recapture year, whether or not such credits were used.

(9) (10) ”Recapture event” means any disposition of qualified child-care property by the taxpayer, or any other event or circumstance under which property ceases to be qualified child-care property with respect to the taxpayer, except for:

(A) Any transfer by reason of death;

(B) Any transfer between spouses or incident to divorce;

(C) Any transaction to which Section 381(a) of the Internal Revenue Code applies;

(D) Any change in the form of conducting the taxpayer’s trade or business so long as the property is retained in such trade or business as qualified child-care property and the taxpayer retains a substantial interest in such trade or business; or

(E) Any accident or casualty.

(10) (11) “Recapture percentage” refers to the applicable percentage set forth in the following table:

If the recapture event occurs within-The recapture percentage is:

Five full years after the qualified child-care property is

placed in service .......................................................100

The sixth full year after the qualified child-care property is

placed in service ........................................................90

The seventh full year after the qualified child-care property

is placed in service .....................................................80

The eighth full year after the qualified child-care property is

placed in service ........................................................70

The ninth full year after the qualified child-care property is

placed in service ........................................................60

The tenth full year after the qualified child-care property is

placed in service ........................................................50

The eleventh full year after the qualified child-care property

is placed in service .....................................................40

The twelfth full year after the qualified child-care property

is placed in service .....................................................30

The thirteenth full year after the qualified child-care

property is placed in service ............................................20

The fourteenth full year after the qualified child-care

property is placed in service ............................................10

Any period after the close of the fourteenth full year after

the qualified child-care property is placed in service ....................0

(11) (12) “Recapture year” means the taxable year in which a recapture event occurs with respect to qualified child-care property.

(b) Credit for capital investment in child-care property. — A taxpayer shall be allowed a credit against the tax imposed under this article for the taxable year in which the taxpayer first places in service qualified child-care property and for each of the ensuing four taxable years following such taxable year. The aggregate amount of the credit shall equal 50 percent of the cost of all qualified child-care property purchased or acquired by the taxpayer and first placed in service during a taxable year, and such credit may be claimed at a rate of 20 percent per year over a period of five taxable years.  In the case of a qualified child-care property jointly owned by two or more unaffiliated employers, each employer’s credit is limited to that employer’s respective investment in the qualified child-care property.  

(c) Limitations on Capital Investment Credit. — The tax credit allowable under subsection (b) of this section shall be subject to the following conditions and limitations:

(1) Any such credit claimed in any taxable year but not used in such taxable year may be carried forward for three years from the close of such taxable year. The sale, merger, acquisition, or bankruptcy of any taxpayer shall not create new eligibility for the credit in any succeeding taxpayer;

(2) In no event shall the amount of any such tax credit allowed under subsection (b) of this section, when combined with any such tax credit allowed under subsection (e) of this section, including any carryover of such credits from a prior taxable year, exceed 100 percent of the taxpayer’s income tax liability as determined without regard to any other credits; and

(3) For every year in which a taxpayer claims such credit, the taxpayer shall attach a schedule to the taxpayer’s West Virginia income tax return setting forth the following information with respect to such tax credit:

(A) A description of the child-care facility;

(B) The amount of qualified child-care property acquired during the taxable year and the cost of such property;

(C) The amount of tax credit claimed for the taxable year;

(D) The amount of qualified child-care property acquired in prior taxable years and the cost of such property;

(E) Any tax credit utilized by the taxpayer in prior taxable years;

(F) The amount of tax credit carried over from prior years;

(G) The amount of tax credit utilized by the taxpayer in the current taxable year;

(H) The amount of tax credit to be carried forward to subsequent tax years; and

(I) A description of any recapture event occurring during the taxable year, a calculation of the resulting reduction in tax credits allowable for the recapture year and future taxable years, and a calculation of the resulting increase in tax for the recapture year.

(d) Recapture of credit. — If a recapture event occurs with respect to qualified child-care property:

(1) The credit otherwise allowable under subsection (b) of this section with respect to such property for the recapture year and all subsequent taxable years shall be reduced by the applicable recapture percentage; and

(2) All credits previously claimed with respect to such property under subsection (b) of this section shall be recaptured as follows:

(A) Any carryover attributable to such credits pursuant to subdivision (1), subsection (c) of this section shall be reduced, but not below zero, by the recapture amount;

(B) The tax credit otherwise allowable pursuant to subsection (b) of this section for the recapture year, if any, as reduced pursuant to subdivision (1) of this subsection, shall be further reduced, but not below zero, by the excess of the recapture amount over the amount taken into account pursuant to paragraph (A) of this subdivision; and

(C) The tax imposed pursuant to this article for the recapture year shall be increased by the excess of the recapture amount over the amounts taken into account pursuant to paragraphs (A) and (B) of this subdivision, as applicable.

(e) Credit for operating costs. — In addition to the tax credit provided under subsection (b) of this section, a tax credit against the tax imposed under this article shall be granted to an employer who provides or sponsors child care for employees. The amount of the tax credit shall be equal to 50 percent of the cost of operation to the employer less any amounts paid for by employees during a taxable year.

(f) Limitations on credit for operating costs.— The tax credit allowed under subsection (e) of this section shall be subject to the following conditions and limitations:

(1) Such credit shall when combined with the credit allowed under subsection (b) of this section shall not exceed 100 percent of the amount of the taxpayer’s income tax liability for the taxable year as determined without regard to any other credits;

(2) Any such credit claimed but not used in any taxable year may be carried forward for five years from the close of the taxable year in which the cost of operation was incurred; and

(3) The employer shall certify to the department division the names of the employees, the name of the child-care provider, and such other information as may be required by the department division to ensure that credits are granted only to employers who provide or sponsor approved child care pursuant to this section.

(g) Rules. — The Tax Commissioner may promulgate such interpretive, legislative and procedural rules as the commissioner deems to be useful or necessary to carry out the purpose of this section and to implement the intent of the Legislature. The Tax Commissioner may promulgate emergency rules pursuant to the provisions of §29A-3-15 of this code.

ARTICLE 24. CORPORATION NET INCOME TAX.

§11-24-44. Tax credit for employers providing child care for employees.

(a) Definition. —- As used in this section, the term:

(1) “Commissioner” or “Tax Commissioner” are used interchangeably herein and mean the Tax Commissioner of the State of West Virginia, or his or her delegate;

(2) “Cost of operation” means reasonable direct operational costs incurred by an employer as a result of providing employer provided or employer sponsored child-care facilities; provided, however, that the term cost of operation shall exclude the cost of any property that is qualified child-care property.

(3) “Department Division” or “Tax Department Division” means the West Virginia State Tax Department Division.

(4) “Employer” means any employer upon whom an income tax is imposed by this article or any employer organized as a nonprofit corporation under Internal Revenue Code § 501(c)(3) or § 501(c)(6) that is exempt from the tax imposed by this article pursuant to §11-24-5 of this code.

(5) “Employer provided” refers to child care offered on the premises of the employer.

(6) “Employer sponsored child-care facility” refers to a third-party licensed child-care services facility whose operational costs are financially supported by one or more employers through direct payments, contracts, or subsidies. An employer sponsored child-care facility may be located anywhere within the state of West Virginia and shall not be subject to proximity or employee usage thresholds.

(6) (7) “Premises of the employer” refers to any location within the State of West Virginia and located on the workplace premises of the employer providing the child care or one of the employers providing the child care in the event that the child-care property is owned jointly or severally by the taxpayer and one or more unaffiliated employers: Provided, That if such workplace premises are impracticable or otherwise unsuitable for the on-site location of such child-care facility, as determined by the commissioner, such facility may be located within a reasonable distance of the premises of the employer.

(7) (8) “Qualified child-care property” means all real property, other than land, and tangible personal property purchased or acquired on or after July 1, 2022, or which property is first placed in service on or after July 1, 2022, for use exclusively in the construction, expansion, improvement, or operation of an employer provided child-care facility, but only if:

(A) The children who use the facility are primarily children of employees of:

(i) The taxpayer and other employers in the event that the child-care property is owned jointly or severally by the taxpayer and one or more employers; or

(ii) A corporation that is a member of the taxpayer’s “affiliated group” within the meaning of Section 1504(a) of the Internal Revenue Code; and

(B) The taxpayer has not previously claimed any tax credit for the cost of operation for such qualified child-care property placed in service prior to taxable years beginning on or after January 1, 2022.

Qualified child-care property includes, but is not limited to, amounts expended on building, improvements, and building improvements and furniture, fixtures, and equipment directly related to the operation of child-care property as defined in this section.

(8) (9) “Recapture amount” means, with respect to property as to which a recapture event has occurred, an amount equal to the applicable recapture percentage of the aggregate credits claimed under subsection (d) of this section for all taxable years preceding the recapture year, whether or not such credits were used.

(9) (10) ”Recapture event” refers to any disposition of qualified child-care property by the taxpayer, or any other event or circumstance under which property ceases to be qualified child-care property with respect to the taxpayer, except for:

(A) Any transfer by reason of death;

(B) Any transfer between spouses or incident to divorce;

(C) Any transaction to which Section 381(a) of the Internal Revenue Code applies;

(D) Any change in the form of conducting the taxpayer’s trade or business so long as the property is retained in such trade or business as qualified child-care property and the taxpayer retains a substantial interest in such trade or business; or

(E) Any accident or casualty.

(10) (11) “Recapture percentage” refers to the applicable percentage set forth in the following table:

If the recapture event occurs within-The recapture percentage is:

Five full years after the qualified child-care property is

placed in service .......................................................100

The sixth full year after the qualified child-care property is

placed in service ........................................................90

The seventh full year after the qualified child-care property

is placed in service .....................................................80

The eighth full year after the qualified child-care property is

placed in service ........................................................70

The ninth full year after the qualified child-care property is

placed in service ........................................................60

The tenth full year after the qualified child-care property is

placed in service ........................................................50

The eleventh full year after the qualified child-care property

is placed in service .....................................................40

The twelfth full year after the qualified child-care property

is placed in service .....................................................30

The thirteenth full year after the qualified child-care

property is placed in service ............................................20

The fourteenth full year after the qualified child-care

property is placed in service ............................................10

Any period after the close of the fourteenth full year after

the qualified child-care property is placed in service ....................0

(11) (12) “Recapture year” means the taxable year in which a recapture event occurs with respect to qualified child-care property.

(b) Credit for capital investment in child-care property. — A taxpayer shall be allowed a credit against the tax imposed under this article for the taxable year in which the taxpayer first places in service qualified child-care property and for each of the ensuing four taxable years following such taxable year. The aggregate amount of the credit shall equal 50 percent of the cost of all qualified child-care property purchased or acquired by the taxpayer and first placed in service during a taxable year, and such credit may be claimed at a rate of 20 percent per year over a period of five taxable years. In the case of a qualified child-care property jointly owned by two or more unaffiliated employers, each employer’s credit is limited to that employer’s respective investment in the qualified child-care property.

(c) Limitations on capital investment credit. — The tax credit allowable under subsection (b) of this section shall be subject to the following conditions and limitations:

(1) Any such credit claimed in any taxable year but not used in such taxable year may be carried forward for three years from the close of such taxable year. The sale, merger, acquisition, or bankruptcy of any taxpayer shall not create new eligibility for the credit in any succeeding taxpayer;

(2) In no event shall the amount of any such tax credit allowed under subsection (b) of this section, when combined with any such tax credit allowed under subsection (e) of this section, including any carryover of such credits from a prior taxable year, exceed 100 percent of the taxpayer’s income tax liability as determined without regard to any other credits; and

(3) For every year in which a taxpayer claims such credit, the taxpayer shall attach a schedule to the taxpayer’s West Virginia income tax return setting forth the following information with respect to such tax credit:

(A) A description of the child-care facility;

(B) The amount of qualified child-care property acquired during the taxable year and the cost of such property;

(C) The amount of tax credit claimed for the taxable year;

(D) The amount of qualified child-care property acquired in prior taxable years and the cost of such property;

(E) Any tax credit utilized by the taxpayer in prior taxable years;

(F) The amount of tax credit carried over from prior years;

(G) The amount of tax credit utilized by the taxpayer in the current taxable year;

(H) The amount of tax credit to be carried forward to subsequent tax years; and

(I) A description of any recapture event occurring during the taxable year, a calculation of the resulting reduction in tax credits allowable for the recapture year and future taxable years, and a calculation of the resulting increase in tax for the recapture year.

(d) Recapture of credit. — If a recapture event occurs with respect to qualified child-care property:

(1) The credit otherwise allowable under subsection (b) of this section with respect to such property for the recapture year and all subsequent taxable years shall be reduced by the applicable recapture percentage; and

(2) All credits previously claimed with respect to such property under subsection (b) of this section shall be recaptured as follows:

(A) Any carryover attributable to such credits pursuant to subdivision (1) of subsection (c) of this section shall be reduced, but not below zero, by the recapture amount;

(B) The tax credit otherwise allowable pursuant to subsection (b) of this section for the recapture year, if any, as reduced pursuant to subdivision (1) of this subsection, shall be further reduced, but not below zero, by the excess of the recapture amount over the amount taken into account pursuant to paragraph (A) of this subdivision; and

(C) The tax imposed pursuant to this article for the recapture year shall be increased by the excess of the recapture amount over the amounts taken into account pursuant to paragraphs (A) and (B) of this subdivision, as applicable.

(e) Credit for operating costs. — In addition to the tax credit provided under subsection (b) of this section, a tax credit against the tax imposed under this article shall be granted to an employer who provides or sponsors child care for employees. The amount of the tax credit shall be equal to 50 percent of the cost of operation to the employer less any amounts paid for by employees during a taxable year.

(f) Limitations on credit for operating costs. — The tax credit allowed under subsection (e) of this section shall be subject to the following conditions and limitations:

(1) Such credit shall when combined with the credit allowed under subsection (b) of this section shall not exceed 100 percent of the amount of the taxpayer’s income tax liability for the taxable year as determined without regard to any other credits;

(2) Any such credit claimed but not used in any taxable year may be carried forward for five years from the close of the taxable year in which the cost of operation was incurred; and

(3) The employer shall certify to the department division the names of the employees, the name of the child-care provider, and such other information as may be required by the department division to ensure that credits are granted only to employers who provide or sponsor approved child care pursuant to this section.

(g) Transferrable credit available to non-profit corporations. — In the case of non-profit corporations organized under Internal Revenue Code §501(c)(3) or §501(c)(6), which are exempt from tax under this article pursuant to §11-24-5 of this code, a credit in the amount calculated under the provisions of this section shall be available as a transferrable credit that may be transferred, sold, or assigned to any other taxpayer to be applied against the tax owed under this article. Pursuant to rules promulgated by the Tax Department Division, a non-profit corporation applicant shall provide a schedule to the Tax Department Division with all information required under §11-24-44(c)(3) of this code. The Tax Department Division shall within 90 days certify the amount of transferrable credit available to be transferred, sold, or assigned to another taxpayer. Any transferee, purchaser, or assignee of non-profit corporation credits certified to a non-profit corporation under this section takes the transferred, purchased, or assigned credits subject to any limitations placed on the amount of credit taken in a given year by §11-24-44(b), §11-24-44(c), §11-24-44(e), and §11-24-44(f) of this code.

(h) Rules. — The Tax Commissioner may promulgate such interpretive, legislative and procedural rules as the commissioner deems to be useful or necessary to carry out the purpose of this section and to implement the intent of the Legislature. The Tax Commissioner may promulgate emergency rules pursuant to the provisions of §29A-3-15 of this code.

CHAPTER 49. CHILD WELFARE.

ARTICLE 2. STATE RESPONSIBILITIES FOR CHILDREN.

Part 1. General Authority and Duties of the Department of Health and Human Resources Services

§49-2-113a. Child care support.

(a) (1) A licensed child care program shall be paid subsidy payments based on monthly enrollment.

(2) The Department of Human Services shall review quarterly, and make ineligible for the subsidy a parent whose child does not attend a child care program on average of at least 8 days per month.

(3) For the purposes of this subsection, “day” means a child has attended a child care program for 4 hours, or an out of school time program for 2.5 hours.

(b) The department shall use a cost of care modeling tool to determine the amount the subsidy, and report to the Joint Committee on Health by December 1, 2026.

§49-2-121. Rule‑making.

(a) The secretary shall promulgate propose for legislative approval rules in accordance with §29A‑3‑1 et seq. of this code regarding the licensure, approval, certification, and registration of child care facilities and the implementation of this article.

(b) The secretary shall review the rules promulgated pursuant to this article at least once every five years, making revisions when necessary or convenient.

(c) The rules shall incorporate, by reference, the requirements of the Integrated Pest Management Program established by legislative rule by the Department of Agriculture under §19‑16A‑4 of this code.

(d) The rules shall provide a system for the electronic filing of all days of attendance billed by child care providers to the department. The department shall have the system in place no later than July 1, 2026, after which any child care provider seeking reimbursement from the department for child care services provided shall submit any and all supporting documents for the department’s review electronically.  The department shall promulgate emergency rules for this purpose.   

Part XI. Child Care Subsidies

§49-2-1101. Mitigation of child care subsidy cliff effect.

(a) The Legislature finds that abrupt loss of child care assistance due to modest increases in family income creates a benefits cliff that discourages wage growth, limits workforce participation, and destabilizes child care arrangements for children and families.

(b) The Department of Human Services may adopt policies that reduce the child care subsidy cliff effect by gradually phasing out assistance as family income increases. To implement the provisions of this section, the department may propose rules, consistent with state and federal law and with available funding, for legislative approval consistent with the provisions of §29A-3-1 et seq.

(c) In carrying out this section, the department may:

(1) Expand the sliding fee scale for family copayments so that contributions increase progressively with income;

(2) Establish higher exit eligibility thresholds that allow families to maintain access to assistance while transitioning toward self-sufficiency;

(3) Implement graduated phase-out structures that prevent sudden loss of benefits;

(4) Adjust copayment amounts based on household income as a percentage of income; and

(5) Establish transitional eligibility periods or other mechanisms to support continuity of care.

(d) Policies adopted pursuant to this section shall be designed to encourage employment, wage growth, and career advancement while promoting stability for children and child care providers.

(e) The department shall implement cliff mitigation policies pursuant to this section no later than January 1, 2027.

(f) The department shall submit an annual written report, in electronic format, to the Joint Committee on Government and Finance on or before the first day of each regular session of the Legislature regarding the implementation and impact of cliff mitigation strategies implemented under the provisions of this statute.