What's happening
This bill creates the New York State Early Childcare Savings Program, allowing tax-advantaged savings accounts for qualified childcare expenses.
Why it matters
Addresses the affordability crisis in childcare. By allowing families to save pre-tax dollars specifically for childcare expenses, the bill aims to reduce the financial burden on working parents, potentially making quality childcare more accessible and improving workforce participation, especially among parents of young children.
Creates a structured, regulated system with consumer protections. The program establishes clear guidelines for account management, contribution limits (up to $100,000 per account), eligible uses, annual reporting, and oversight by the state comptroller. This reduces risk of misuse and ensures transparency, while penalties discourage nonqualified withdrawals.
Provides targeted tax benefits and incentives. Contributions are eligible for a state income tax deduction (up to $5,000 per individual/$10,000 per couple), and withdrawals for qualified expenses are state tax-free. This incentivizes savings for childcare in a way similar to 529 college savings plans, potentially encouraging long-term planning for early childhood needs.
Limits state liability while promoting private sector involvement. The bill explicitly does not guarantee account growth or admission to childcare programs, nor does it insure deposits—placing investment risk on individuals but also involving private financial institutions as account managers, which could foster innovation and competition in account offerings.
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Who cares
Parents and other childcare savers
The bill would offer account owners a state income tax deduction for eligible contributions of up to $5,000 individually or $10,000 for joint filers, with tax consequences and penalties for nonqualified withdrawals.
State comptroller and Department of Taxation and Finance
They would establish and regulate the savings program, including account rules, reporting requirements and tax treatment.
Banks, credit unions and insurers
Eligible financial organizations could compete to manage accounts, subject to recordkeeping, audit and state oversight requirements.
Licensed childcare centers, family daycare homes and school-age childcare providers
Their services could be paid for through qualified withdrawals that would not count as taxable income for state personal income tax purposes.
Headline styles
Create Childcare Savings Accounts
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to investigations and government operations
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Create Childcare Savings Accounts
In Assembly Committee · Ways And Means · Sponsor Michaelle C. Solages
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
7075
IN SENATE (Prefiled)
January 8, 2020
Introduced by Sen. MARTINEZ -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations
AN ACT to amend the tax law, in relation to establishing the New York state early childcare savings program
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The tax law is amended by adding a new article 24-A to read as follows:
ARTICLE 24-A
NEW YORK STATE EARLY CHILDCARE
SAVINGS PROGRAM Section 860. Program established.
861. Purposes.
862. Definitions.
863. Functions of the comptroller.
864. Powers of the comptroller.
865. Program requirements; early childcare savings account.
866. Program limitations; early childcare savings.
§ 860. Program established. There is hereby established the New York state early childcare savings program.
§ 861. Purposes. The purposes of the program shall be to authorize the establishment of early childcare savings accounts and to provide guidelines for the maintenance of such accounts to:
1. Enable residents of this state to benefit from the tax incentive provided for qualified early childcare savings accounts under section six hundred twelve of this chapter;
2. Allow more residents to stay in the workforce by providing a means to save and pay for childcare; and
3. Provide opportunities for all children to receive quality childcare.
§ 862. Definitions. As used in this article, the following terms shall have the following meanings:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14228-01-9
S. 7075 2
1. "Account" or "early childcare savings account" shall mean an individual savings account established in accordance with the provisions of this article.
2. "Account owner" shall mean a taxpayer who enters into an early childcare savings agreement pursuant to the provisions of this article, including a person who enters into such an agreement as a fiduciary or agent on behalf of a trust, estate, partnership, association, company or corporation.
3. "Designated beneficiary" shall mean, with respect to an account or accounts, the designated individual whose early childcare expenses are expected to be paid from the account or accounts.
4. "Financial organization" shall mean an organization authorized to do business in the state, and (a) which is an authorized fiduciary to act as a trustee pursuant to the provisions of an act of congress entitled "Employee Retirement Income Security Act of 1974", as such provisions may be amended from time to time, or an insurance company; and (b)(i) is licensed or chartered by the department of financial services, (ii) is chartered by an agency of the federal government, (iii) is subject to the jurisdiction and regulation of the securities and exchange commission of the federal government, (iv) is any other entity otherwise authorized to act in this state as a trustee pursuant to the provisions of an act of congress entitled "Employee Retirement Income Security Act of 1974", as such provisions may be amended from time to time, or (v) is any banking organization as defined in subdivision eleven of section two of the banking law, national banking association, state chartered credit union, federal mutual savings bank, federal savings and loan association or federal credit union.
5. "Eligible childcare facilities" shall mean any licensed full-day childcare and early education program and centers, licensed part time childcare and early education program and centers; family childcare homes; and afterschool programs for children aged five through twelve.
6. "Program" shall mean the New York early childcare savings program established pursuant to this article.
7. "Qualified early childcare expenses" shall mean monies applied for the services of a licensed child day care center, group family day care home, family day care home and school age child care as such terms are defined in section three hundred ninety of the social services law.
8. "Qualified withdrawal" shall mean a withdrawal from an account to pay the qualified early childcare expense of the designated beneficiary of the account.
9. "Nonqualified withdrawal" shall mean a withdrawal from an account including but not limited to expenses for primary, secondary, or postsecondary education, but shall not include:
(a) a qualified withdrawal;
(b) a withdrawal made as the result of death;
(c) an unforeseeable emergency; or
(d) need based upon qualifying for military service in the armed forces of the United States as determined by rules and regulations promulgated by the comptroller.
10. "Management contract" shall mean the contract executed by the comptroller and a financial organization selected to act as a depository and manager of the program.
11. "Early childcare savings agreement" shall mean an agreement between the comptroller or a financial organization and the account owner.
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12. "Program manager" shall mean a financial organization selected by the comptroller to act as a depository and manager of the program.
§ 863. Functions of the comptroller. 1. The comptroller shall implement the program under the terms and conditions established by this article and a memorandum of understanding with the commissioner relating to any terms or conditions not otherwise expressly provided for in this article.
2. In furtherance of such implementation the comptroller shall:
(a) develop and implement the program in a manner consistent with the provisions of this article through rules and regulations established in accordance with the state administrative procedure act;
(b) engage the services of consultants on a contract basis for rendering professional and technical assistance and advice;
(c) make changes to the program required for the participants in the program to obtain the state income tax benefits or treatment provided by this article;
(d) charge, impose and collect administrative fees and service charges in connection with any agreement, contract or transaction relating to the program;
(e) develop marketing plans and promotion materials;
(f) establish the methods by which the funds held in such accounts be dispersed;
(g) establish the method by which funds shall be allocated to pay for administrative costs; and
(h) do all things necessary and proper to carry out the purposes of this article.
§ 864. Powers of the comptroller. 1. The comptroller may implement the program through use of financial organizations as account depositories and managers. Under the program, an account owner may establish accounts directly with an account depository.
2. The comptroller may solicit proposals from financial organizations to act as depositories and managers of the program. Financial organizations submitting proposals shall describe the investment instrument which will be held in accounts. The comptroller shall select as program depositories and managers the financial organization, from among the bidding financial organizations that demonstrates the most advantageous combination, both to potential program participants and this state, of the following factors:
(a) financial stability and integrity of the financial organization;
(b) the safety of the investment instrument being offered;
(c) the ability of the financial organization to satisfy recordkeeping and reporting requirements;
(d) the financial organization's plan for promoting the program and the investment it is willing to make to promote the program;
(e) the fees, if any, proposed to be charged to persons for opening accounts;
(f) the minimum initial deposit and minimum contributions that the financial organization will require;
(g) the ability of banking organizations to accept electronic withdrawals, including payroll deduction plans; and
(h) other benefits to the state or its residents included in the proposal, including fees payable to the state to cover expenses of operation of the program.
3. The comptroller may enter into a contract with a financial organization. Such financial organization management may provide one or more types of investment instrument.
S. 7075 4
4. The comptroller may select more than one financial organization for the program.
5. A management contract shall include, at a minimum, terms requiring the financial organization to:
(a) take any action required to keep the program in compliance with requirements of section eight hundred sixty-five of this article and any actions not contrary to its contract to manage the program to qualify as an "early childcare savings account" under this article;
(b) keep adequate records of each account, keep each account segregated from each other account, and provide the comptroller with the information necessary to prepare the statements required by section eight hundred sixty-five of this article;
(c) compile and total information contained in statements required to be prepared under subsection fifteen of section eight hundred sixty-five of this article and provide such compilations to the comptroller;
(d) if there is more than one program manager, provide the comptroller with such information necessary to determine compliance with section eight hundred sixty-five of this article;
(e) provide the comptroller or his or her designee access to the books and records of the program manager to the extent needed to determine compliance with the contract;
(f) hold all accounts for the benefit of the account owner;
(g) be audited at least annually by a firm of certified public accountants selected by the program manager and that the results of such audit be provided to the comptroller;
(h) provide the comptroller with copies of all regulatory filings and reports made by it during the term of the management contract or while it is holding any accounts, other than confidential filings or reports that will not become part of the program. The program manager shall make available for review by the comptroller the results of any periodic examination of such manager by any state or federal banking, insurance or securities commission, except to the extent that such report or reports may not be disclosed under applicable law or the rules of such commission; and
(i) ensure that any description of the program, whether in writing or through the use of any media, is consistent with the marketing plan as developed pursuant to the provisions of section eight hundred sixtythree of this article.
6. The comptroller may provide that an audit shall be conducted of the operations and financial position of the program depository and manager at any time if the comptroller has any reason to be concerned about the financial position, the recordkeeping practices, or the status of accounts of such program depository and manager.
7. During the term of any contract with a program manager, the comptroller shall conduct an examination of such manager and its handling of accounts. Such examination shall be conducted at least biennially if such manager is not otherwise subject to periodic examination by the superintendent of financial services, the federal deposit insurance corporation or other similar entity.
8. (a) If selection of a financial organization as a program manager or depository is not renewed, after the end of its term:
(i) accounts previously established and held in investment instruments at such financial organization may be terminated;
(ii) additional contributions may be made to such accounts;
(iii) no new accounts may be placed with such financial organization; and
S. 7075 5
(iv) existing accounts held by such depository shall remain subject to all oversight and reporting requirements established by the comptroller.
(b) If the comptroller terminates a financial organization as a program manager or depository, he or she shall take custody of accounts held by such financial organization and shall seek to promptly transfer such accounts to another financial organization that is selected as a program manager or depository and into investment instruments as similar to the original instruments as possible.
9. The comptroller may enter into such contracts as it deems necessary and proper for the implementation of the program.
§ 865. Program requirements; early childcare savings account. 1. Early childcare savings accounts established pursuant to the provisions of this article shall be governed by the provisions of this section.
2. An early childcare savings account may be opened by any person who desires to save money for the payment of the qualified early childcare expenses of the designated beneficiary. An account owner may designate another person as successor owner of the account in the event of the death of the original account owner. Such person who opens an account or any successor owner shall be considered the account owner.
(a) An application for such account shall be in the form prescribed by the program and contain the following:
(i) the name, address and social security number or employer identification number of the account owner;
(ii) the designation of a designated beneficiary;
(iii) the name, address, and social security number of the designated beneficiary; and
(iv) such other information as the program may require.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to establishing the New York state early childcare savings program
Purpose
This legislation would create a tax advantaged savings account for the purpose of savings for early childcare for children ages 0 to 12.
Summary of provisions
Section 1. New Article in the tax law 0.Program established 1. Purpose 2. Definitions 3. Function of the Comptroller to implement the program with tax and finance 4. Power of the Comptroller to solicit and contract proposals to run the savings accounts; 5. Program Requirements: may be opened by anyone and must be used for the childcare expenses of the designated beneficiary. Set rules for deposits and withdrawal. Childcare expenses are 6. Limitations for the program
Section 2. Changes to the tax law regarding excess distributions of the childcare savings account
Section 3. Changes to the tax law necessary to implement the program maximum contribution of $5,000 per individual or $10,000 per couple.
Section 4. Effective Date
Justification
According to the Economic Policy Institute' at an average of $15,394, New York is the sixth most expensive state for infant care and costs $7,456 more per year than in state public school tuition. Infant care in particular is now one of the biggest costs for families - more than housing or college. Allowing for investment in early childcare is an investment in the child's future. Quality childcare stimulates strong socialization skills and creates educational opportunities for children.
In 2016, the U.S. Department of Health and Human Services stated that affordable childcare should cost no more than 7% of income2. With the median income of $69,651 and the average cost of childcare in New York being 1 https://www.epi.org/child-care-costs-in-the-united-states/ /NY 2 https://s3.amazonaws.com/public-inspectionlederalregister
$15,394, a full 21% of a median income, it is clear that childcare is not affordable for most New Yorkers.
A flexible savings account would allow expecting families and new fami- lies to save for childcare expenses and receive tax advantaged benefits - saving New Yorkers money on an ever increasing, necessary expense. When implemented, this program will be similar to the 529 college savings program that allows families to save for college costs, up to $5,000 per individual per year and $10,000 for couples.
Accessible childcare benefits the economy in many ways. It allows both parents to remain in the workforce, increases workplace productivity, and opens opportunities for childcare workers. While there are some free childcare programs, the demand often vastly exceeds supply for free or low cost childcare. The implementation of this savings program would emphasis the importance of financial planning for children and impor- tantly take steps towards making high quality childcare affordable.
Prior legislative history
None.
Fiscal implications
To be determined.
Effective date
180 days after it shall have become law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.