The Business Case for Child Care
Absenteeism and turnover due to child care challenges Impact Arkansas Employers Annually
$865 million
The Arkansas state economy loses over $865 million in economic activity annually because of child care related absenteeism and turnover.
$665 million
Direct cost to employers in the private sector in Arkansas from absenteeism and turnover related to child care challenges.
$200 million
Child care challenges lead to an annual tax revenue loss for Arkansas of more than $200 million.
Source: Untapped Potential: How Childcare Impacts Arkansas's Workforce Productivity and the State Economy, U.S. Chamber Foundation, 2023.
Lack of Access to Child Care is a Recognized and Growing Threat to Workforce Recruitment & Retention in Arkansas
58.4%
AR workforce participation rate
is at near-historic lows
76%
AR moms who voluntarily left their jobs when their child(ren) were two years old or younger
34%
AR parents said they or someone in their household had left a job, not taken a job, or greatly changed jobs because of problems with child care in the last 12 months
Child Care Benefits are Essential to Attract & Retain Gen Z Parents
57%
Gen Z parents said they would take a pay cut to work for a company that provides child care benefits
52%
Gen Z parents said they would switch jobs for on-site child care
43%
Gen Z parents said they would switch jobs for financial assistance to cover child care costs
50%
Half of non-working moms say affordable child care is their prerequisite for returning to/entering the workforce
Cost of Staff Turnover
Turnover of staff is costly for employers. This turnover calculator provides an estimate of how much turnover costs your company.
Federal Tax Credit to Support Employee Child Care
On Site Child Care
Beginning in 2026, businesses can receive a federal tax credit equal to 40% of expenses for employee child care. The maximum credit allowed per year is capped at $500,000. (Small businesses are allowed 50% of expenses and the cap is $600,000 annually).
Contracting for Child Care
Beginning in 2026, businesses can contract with a child care program to provide child care for their employees or help make it more affordable. Similar to on-site child care, businesses can receive a tax credit of up to 40% of expenses, with an annual cap set at $500,000. (Small businesses are allowed 50% of expenses and the cap is $600,000 annually).
Help Families Find Child Care
Businesses can receive a 10% tax credit for contracting with Child Care Resource and Referral agencies. In Arkansas, contact Better Beginnings to help families find child care that works within their budget.
Arkansas Child Care Tax Credits
Employer-Provided Child Care Credits
Section 26-51-507
A business that qualifies for an exemption from the gross receipts tax is allowed a tax credit of 3.9% of the annual salary of employees employed exclusively in providing child care services. If two or more businesses participate in a child care program for their employees, then each business is allowed an income tax credit of 3.9% of the annual salary of only those employees who are on the respective business’ payroll and are employed exclusively for providing child care services. Learn more under Section 26-51-507.
Section 26-51-508
A business that qualifies for a refund of the gross receipts tax or compensating use tax is allowed a tax credit of 3.9% of the annual salary of its employees employed exclusively in providing child care services or a $5,000 tax credit for the first tax year the business provides its employees with a child care facility. If two or more businesses participate in a child care program for their employees, then each business is allowed a tax credit of 3.9% of the annual salary of only those employees who are on the respective business’ payroll and are employed exclusively for providing child care services. The first year’s $5,000 credit will be prorated among the businesses based on the percentage of the cost paid by each business for the initial construction and equipping of the child care facility. Learn more under Section 26-51-508.
Refund for Construction of Employer-Operated Child Care Program
Section 26-52-516
A business that operates, or contracts for the operation of, a child care facility for the primary purpose of providing child care services to its employees may obtain a refund of the gross receipts tax paid on the purchase of construction materials and furnishings after the facility is licensed. Learn more under Section 26-52-516.
Section 26-53-132
A business that operates, or contracts for the operation of, a child care facility for the primary purpose of providing child care services to its employees may obtain a refund of the compensating use tax paid on the purchase of construction materials and furnishings after the facility is licensed. Learn more under Section 26-53-132.
Federal & State Employee-based Options
Federal Tax-Free Payments
for Child Care
Businesses can set up Dependent Care Assistance Plans (DCAPs), which are flexible spending accounts, that enable employees to set aside up to $7,500 per year in pre-tax salary for child care expenses.
Federal Child and Dependent Care Tax Credit (CDCTC)
When employers send employees their W-2 at tax time, remind them if they have children for whom they pay for child care services, employees can claim the CDCTC.
Arkansas Parent Child Care
Tax Credit
For parents who utilize the federal CDCTC, Arkansas allows parents a tax credit of 20% of the amount claimed on their federal tax return. The state tax credit for parents is refundable.
Learn more Here
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