Gov. Jared Polis signed a bill Wednesday to exempt nonprofit child care centers from paying property taxes in Colorado.

Starting in August, House Bill 1006 modifies current law that allows property owned and operated by nonprofit child care centers to be exempt from property taxes. The bill removes the ownership requirement, adding to the tax exemption properties rented or leased for use as nonprofit child care centers.

Sponsors of the bill championed it as a way to reduce the price of child care by lowering operating costs for the centers.

“With these savings, we expect child care centers across the state to be able to lower prices, hire more employees and create more child care openings for families,” said Rep. Dylan Roberts, D-Avon, who sponsored the bill. “Cutting taxes for child care centers just makes sense, and I am so glad my bill to do just that has been signed into law.”

In Colorado, an average family with two young children spends $28,600 – or 14% of their income – on child care annually, according to federal data. Single parents fare even worse, paying on average 49.5% of their income on infant child care at Colorado centers, according to a Child Care Aware of America report.

Opponents to the bill argued that providing a tax break for landlords who own the properties rented or leased by nonprofit child care centers will not necessarily mean costs will decrease for the centers or for the customers. They pointed out that landlords are not required to pass along the savings.

Supporters said the tax exemption would also encourage landlords to rent to nonprofit child care centers, potentially helping reduce the state’s child care shortage.

“About half of Colorado now qualifies as a child care desert, meaning there’s three to four children for every one slot of child care,” said bill sponsor Sen. Kerry Donovan, D-Vail. “This bill, we hope, will increase the number of child care facilities throughout the state.”

In 2019, Colorado child care providers only had the capacity to serve 62% of the state’s 246,000 kids under 6 whose parents both work, according to a report. That meant a shortage of more than 90,000 child care slots statewide, even before the COVID-19 pandemic closed around 7% of licensed child care centers in Colorado.

The state estimate 56 existing child care centers across the state will be eligible for the property tax exemption under the bill, which will apply to nearly $40 million in total assessed property value and exempt just under $3 million in property taxes annually. 

The state Senate passed the bill in a bipartisan 33-2 vote last month, following the House’s 59-3 vote in April. In both chambers, Republican lawmakers voted against the bill.