COLORADO TAX CREDIT
About the Colorado Childcare Contribution Tax Credit
The Colorado Childcare Contribution Tax Credit (CCTC) enables qualified childcare providers and intermediary organizations to receive financial donations directly from individuals and businesses. These funds can be used by the childcare program in a number of ways, including:
- Purchase enrichment materials
- Send staff to professional development
- Establish or operate a childcare facility
- Grant or loan programs for parents
- Training programs for childcare providers
- Information dissemination programs that assist parents with childcare information and referral services
Colorado leads the nation in providing a tax-advantaged tool for childcare through the Childcare Contribution Tax Credit. This unique public / private partnership allows individuals and businesses to claim a 50% state income tax credit for qualified contributions to childcare providers (up to $100,000). You can find a licensed childcare provider to donate to here.
Making a Financial Contribution
CCTC contributions are used to establish and operate licensed childcare facilities, fund grant programs (scholarships) for parents who need help paying for care and supplement professional development costs for individuals working in the childcare sector.
When receiving donations, childcare facilities must complete Colorado Department of Revenue Form DR 1317 and provide it to the donor for submission with their Colorado Income Tax Return.
Organizations providing similar services to a licensed childcare provider may be considered a qualified intermediary and must complete Colorado Department of Revenue Form DR 1318 to register to become a qualified organization for purposes of the CCTC. These organizations include:
- Child care services similar to those provided by a licensed childcare facility
- A grant or loan program for parents in Colorado requiring financial assistance for childcare
- Training of childcare providers in Colorado
- An information dissemination program in Colorado to provide information and referral services to assist parents in obtaining childcare
Organizations and facilities that received qualifying contributions prior to January 1, 2004 may qualify for exception from certain rules applicable to the credit. If this applies, please use the Childcare Contribution Tax Credit Grandfathered Organization Application DR 1319.
Frequently Asked Questions (FAQ)
What is the Colorado Childcare Contribution Tax Credit (CCTC)?
Under the CCTC, taxpayers may make a qualified monetary contribution to promote childcare in Colorado and claim a Colorado income tax credit up to $100,000 per year for 50% of the total contribution.
How is promoting childcare in Colorado defined?
Eligible purposes promoting childcare include:
- The establishment or operation of a childcare facility or program in Colorado
- A registered loan or grant program for parents in Colorado requiring financial assistance for childcare
- A registered training program for childcare providers in Colorado
- A registered information dissemination program that assists parents with childcare information and referral services
- A registered grandfathered childcare organization; grandfathered organizations may also accept contributions for the care of children ages 13-18
To be considered a qualified childcare facility, it must be licensed by the Colorado Department of Human Services. If the childcare facility is not licensed, how can it become a qualified childcare facility for purposes of the CCTC?
An unlicensed childcare facility must register with the Colorado Department of Revenue in order for contributions to qualify for the credit. It may also become licensed with the Department of Human Services.
How does a childcare facility register with the Colorado Department of Revenue in order to receive contributions that qualify for the tax credit?
The childcare facility must complete the Unlicensed Childcare Organization Registration Application (DR 1318) and specify the eligible programs for which the contributions will be utilized and include documentation regarding those specific programs.
Can the tax credit create a Colorado income tax refund?
No, the Colorado income tax credit may not exceed the tax liability for the year. Any credits that cannot be applied against the Colorado income tax in the year paid may be carried forward for up to five years.
What programs of an unlicensed childcare facility qualify for the Childcare Contribution Tax Credit?
Qualifying programs must provide:
- Child care services similar to those provided by a licensed childcare facility
- A grant or loan program for parents in Colorado requiring financial assistance for childcare
- Training of childcare providers in Colorado
- An information dissemination program in Colorado to provide information and referral services to assist parents in obtaining childcare
Does registration of unlicensed providers with the Colorado Department of Revenue assure that the organization is qualified to accept contributions that qualify for the Colorado Childcare Contribution Tax Credit?
No, the Colorado Childcare Contribution Tax Credit will be subject to review and/or audit to ascertain if the facility applies to the contribution to expenses that qualify for the credit.
To be considered a qualified childcare facility, does it need to be a nonprofit organization?
No, the childcare facility does not need to be a non-profit organization as defined by the Internal Revenue.
Will a contribution made to a for-profit business qualify for the Colorado Childcare Contribution Tax Credit?
Yes, however to qualify for the Colorado Childcare Contribution Tax credit the childcare facility must use the proceeds of the monetary contribution for (1) acquisition or improvement of the childcare facilities, (2) equipment or (3) services. Improving staff salaries, staff training and the quality of the childcare provided by the facility are qualified expenditures which are paid out of the contributed funds.
Where can I find a list of qualified childcare facilities?
A Colorado Licensed Childcare Facilities Report is available at the Colorado Information Marketplace.
After making a financial contribution to a qualified childcare facility, how do I report the Colorado Childcare Contribution on my Colorado income tax return and receive the tax credit?
When a taxpayer claims the Colorado Childcare Contribution Tax Credit, the DR 1317, “Childcare Contribution Tax Credit Certification” must be completed by the qualified childcare facility that receives the donation and provided to the donor/taxpayer. The form DR 1317 is then attached to the taxpayer’s Colorado Income Tax Return.
Can a business make a contribution to a childcare facility used by its employees?
The Colorado Childcare Contribution Tax Credit is designed to accommodate a monetary contribution without receiving any value in exchange for the contribution. If the donor receives consideration from the donee organization as part of the contribution, the Colorado Department of Revenue will categorized the transaction as a “sale” and will not be eligible for the Colorado Childcare Contribution tax credit. An example of a “sale” is when a business negotiates childcare fee discounts for its employees in exchange for a contribution to the childcare facility. However, if a business makes an otherwise qualified monetary contribution to a childcare facility that is not made in exchange for, but which allows the facility to reduce fees for all children who attend the facility, the Colorado Childcare Contribution tax credit applies to the contribution even though children of its employees also utilize the childcare facility.
The business is an owner of the childcare facility; will a qualified contribution to the facility be eligible for the Colorado Childcare Contribution Tax Credit?
No, a contribution in which the taxpayer or a person related to the taxpayer has a financial interest or ownership in the childcare facility will not qualify for the Colorado Childcare Contribution Tax Credit.