February 7, 2023

Bill to eliminate GRT on early childcare centers passes first committee

Laura Paskus

The House Education Committee unanimously passed a bill that would eliminate the Gross Receipts Tax on small business owners operating early childcare centers.

HB 137, GRT Deductions for Child Care Assistance, will, if enacted, eliminate the 8 percent to 9 percent GRT that early childcare centers are required to pay on children who qualify for state assistance. State Rep. Micaela Lara Cadena, a Democrat from Mesilla, sponsored the bill and she called the bill an equity issue as most early childcare centers are operated by women of color.

Cadena said that early childcare centers that serve Children Youth and Families Department contracts “have to pay GRT on those same contracts and reimbursement rates.”

“We hold providers to really high standards. We expect them to meet those same outcomes, have the same quality of care and we expect them to meet that with 8 percent or more less revenue. If they’re privately operated, they do it with less money,” Cadena said.

Cadena’s expert witness, Angela Garcia, who runs an early childcare center in Las Cruces, said she eats that cost rather than pass it onto the families who are receiving childcare subsidies from the state because they are lower income. She said most early childcare centers also absorb the cost, but some do pass it onto the families.

“I have one family, they have three children under the age of three. That’s $300 to $400 a month. I’ve never been able to do that [pass on the cost to the family]. I put it in my budget as a cost to my business. I have 300 children. It’s very, very expensive to my business. It takes away from my ability to put supplies in the classroom, retain and hire staff,” she said.

Rep. T. Ryan Lane, a Republican from Aztec, said he appreciated the bill.

“They’re women who want to fill a need in this community,” he said of early childcare centers in his district. “The public infrastructure just isn’t there.”

Rep. Susan Herrerra, a Democrat from Embudo, said she doesn’t normally agree with “tax carve outs.”

“But on this, I do agree,” she said.

Cadena said she doesn’t see the bill as a “tax carve out.”

“My expert witness calls this parity. I call this equity,” Cadena said.

Cadena said this is not the first year this bill has come before the Legislature. She said that former State Sen. John Arthur Smith, a Democrat from Deming, carried the bill in previous sessions. Smith lost his primary bid in 2020. Cadena said she has carried the bill since.

Rep. Candy Spence Ezzell, a Republican from Artesia, asked about tax principles and asked if the bill had been vetted enough.

Cadena said that since the bill has been before the Legislature “for many years,” the bill “has been discussed at length.”

Rep. Raymundo Lara, D-Chamberino, said the bill is important because early childcare centers are also providing an education to young children and help to end poverty. Rep. Willie Madrid, D-Chaparral, spoke of the difficulties early childcare centers face.

“It’s amazing how they continue to operate in communities like mine that are underserved,” he said.

The bill heads to the House Taxation and Revenue Committee next.