Tax panel approves rent refund for child care centers

Homeowners and renters can apply to the state for partial property tax refunds.And if a child care center owns its own space, it can also get a property tax refund.

But a child care center or family-based day care operating in a rented space isn’t eligible for a refund.

Rep. Cheryl Youakim (DFL-Hopkins) says that is not fair.

Rep. Cheryl Youakim

She sponsors HF3605, which would allow nonprofit child care centers to receive an annual 10% refund of the rent they pay.

“Our child care centers across Minnesota are facing many challenges,” Youakim said. “This bill is just one little way we can level the playing field and provide them with some relief in their budgets.”

The House Taxes Committee laid over HF3605, as amended, Tuesday for possible inclusion in a larger bill.

The proposal would create a refund program for licensed child care facilities that:

• accept families participating in the child care assistance program;
• are operated by a 501(c)(3) nonprofit charitable organization; and
• pay rent for the property being used as a child care facility.

A fiscal analysis by the Department of Revenue estimates that $250,000 in state funds would be sent out to applicants in fiscal year 2025.

Marcy Dearking, director of Kid Zone Early Learning Center in Hopkins, said margins are very tight in her business and any relief from the state would be a great help.

A $138,000 property tax bill her center owes is much higher than she budgeted for. An appraisal doubled the value of the rental property her center occupies within just two years after moving in.

“Early childhood [education] is in a critical state right now. We barely are paying livable wages,” she said. “It’s becoming pretty cost-prohibitive for us to continue.”

Kylie Cooper, executive director of the Rise Early Learning Center in St. Louis Park, said the current system discriminates against centers that don’t have the up-front capital to purchase an operating space.

“This bill is correcting an inequity that already exists in the marketplace,” she said. “ … This bill is a step in the right direction that enables programs to allocate funds where they can be the most impactful: the pockets of parents and the pockets of the providers without adding an additional penalty to the property owner.”