Part I.

Requires the Department of Health and Human Services, Division of Child Development and Early Education (Division) to increase the child care subsidy market rates to the 75th percentile for children in three-, four-, and five-star-rated child care centers and homes beginning October 1, 2026, as recommended by the 2023 Child Care Market Rate Study (2023 Study). Beginning October 1, 2026, payment rates for child care providers in counties that have a county rate below the State rate for center-based and home-based care are set at the 75th percentile statewide market rate as recommended by the 2023 Study for children birth through five years old for licensed centers and homes, unless it is demonstrated that statewide rate application to a county with less than 50 children in each age group is lower than the county market rate and would inhibit the county’s ability to purchase child care for low-income children. If that is the case, the county market rate may be applied. Appropriates $110 million in recurring funds for 2026-27 from the General Fund to the Division to implement the market rate increases and to establish a floor for child care subsidy as set forth above.

Part II.

Appropriates $50 million for 2026-27 from the General Fund to the Division to reinstitute the compensation grants portion of the child care stabilization grant.

Part III.

Appropriates $50 million for 2026-27 from the General Fund to the Division for grants to counties and private employers that provide assistance with capacity building in child care. Requires those seeking grants to provide documentation of 25% match and allows up to 9% of the grant funds to be used for administrative costs.

Part IV.

Appropriates $60 million for 2026-27 from the General Fund to the Division to establish a two-year pilot program for grants to child care providers who are employed providing direct care and employed full time by a licensed child care program to assist in recruiting and retaining more employees to expand the supply of licensed child care. Defines child care provider to include lead teachers, teachers, teacher assistants, and administrators.

Specifies that eligible child care providers must earn at or below 85% of the State median income and be employed full time at a licensed child care center or family child care home.

Allows any licensed child-care program to apply to the Division for a grant, but only when there is capacity at the program to serve an eligible employee's child without displacing other children already in care in the program. Mandates that the Division will pay 75% of the published child care tuition rate to the licensed program for each eligible staff member for up to two children, and the child care program employers will cover at least 25% of the published tuition rate for each child. Allows the Division discretion to distribute the grants quarterly or monthly. Requires employers to inform the Division within 30 days of an eligible employee’s departure.

Directs the Division to distribute the grants statewide, but prioritize counties with the highest unmet demand or longest wait lists for subsidized child care funded by the federal Child Care Assistance Program.

Requires the Division to provide a progress report to the specified NCGA committee and division by March 31, 2027, and a final report by December 31, 2028. Outlines the items to be included in the report, such as the number of licensed programs and providers participating in the pilot, the new child care slots created, and the additional children served by age, group, and county.

Part V.

Requires the Department of Administration (DOA) to report to the specified NCGA committee and commission by March 31, 2027, on the feasibility and advisability of using obsolete and underutilized state-owned buildings (available buildings) to house childcare facilities, giving priority to state employees. Specifies items that must be included in the report, including estimated costs for asbestos and lead remediation and barriers to the use of available buildings for childcare. Requires any state project to build or renovate property with a budget more than $5 million to include a child care center or adult day care center if more than 250 people would work in the building. Specifies that this includes current projects that have no broken ground by July 1, 2026, unless one of the specified exceptions apply.

Part VI.

Requires the Division to establish a pilot program for onsite childcare for state employees, that meets the specified parameters, including that (1) the childcare facility must operate an apprenticeship program in conjunction with a public or private university or community college who operates an early childcare education program; and (2) the State will provide the upfit cost of the space to meet the licensure requirements at reasonable levels that are customary at the operators' other facilities and those similarly situated and provide use of the space rent free. Tasks the Division with creating the apprenticeship program, and with pairing the childcare center with a university or community college early education program, under the described parameters.

Appropriates $5 million for in recurring funds for 2026-27 from the General Fund to the Department of Health and Human Services (DHHS) for the Division to use in establishing the childcare centers. Provides that if the state incurs any expenses for asbestos or lead remediation in establishing the childcare centers the state is eligible for reimbursement from the Asbestos and Lead Remediation Fund subject to the rules of the fund for up to $500,000. Effective July 1, 2026.

Requires the Division to report to the specified NCGA committees and division, by April 1, 2028, on the implementation of the pilot program.

Part VII.

Appropriates $6 million for 2026-27 from the General Fund to DHHS for a pilot program giving counties grants to establish third-shift childcare for first responders, with priority to be given to third shift facilities operated in unused or underutilized county-owned buildings. Requires a report by April 1, 2028, to the specified NCGA committees and division on the implementation of the pilot program.

Part VIII.

Requires the State Board of Community Colleges (SBCC) to study and report to the specified NCGA committees and division by March 31, 2027, on implementation of a publicly available child care program on every community college campus with priority given to children of community college employees and students. Appropriates $100,000 from the General Fund to the Community College System Office (Office) for 2026-27 for the study.

Appropriates $30 million from the General Fund to the Office for 2026-27 for a competitive request for proposal (RFP) process for child care funding for community colleges with early childhood education (ECE) degrees on their campuses. Sets forth criteria for funding awards. Requires the funds to be used to establish a new child care program on a community college campus with 50 or more slots or expand an existing child care program on a community college campus to 50 slots, including subsidies for students, faculty and staff, or one-time capital expenditures to launch programs. Caps grants to each community college at $3 million. Appropriates $50,000 from the General Fund to the Office for 2026-27 to promote awareness about existing child care benefits and programs to faculty, staff, and students.

Requires the UNC Board of Governors to study and report to the specified NCGA committees and division by March 31, 2027, on implementation of a publicly available child care program on every constituent institution campus with priority given to children of university employees and students. Appropriates $100,000 from the General Fund to the UNC Board of Governors for 2026-27 for the study.

Part IX.

Enacts GS Chapter 122F, termed the NC Child Care Finance Agency Act. Declares five legislative findings and public purposes in GS 122A-2. Lists seven areas of priority for the new NC Child Care Finance Agency (Agency). Defines thirteen terms. Creates the Agency as a body politic and corporate to be considered a public agency and instrumentality of the State for the performance of essential public functions in GS 122F-4. Provides for a twelve-member Agency Board of Directors, appointed as described to serve four-year terms. Provides for vacancies, removal for the specified reasons, a chair and vice-chair, quorum, and Executive Director of the Agency, appointed by the Board of Directors, subject to approval by the Governor. Instructs that Agency employees are exempt from the State Human Resources Act and eligible to participate in the State Employees’ Retirement System. Provides for salary parameters, as described. Requires Agency to maintain its own books and records, subject to periodic review and audit by the State. Specifies duties of the Executive Director, including to administer, manage and direct the affairs and business of the Agency, subject to the policies, control and direction of the members of the Agency’s Board of Directors. Designate Secretary of the Agency its custodian of books, documents, and papers filed with the Agency.

Sets forth twenty-six general powers of the Agency in GS 122F-5, including (1) to make or participate in the making of mortgage loans, construction loans, and rehabilitation loans to licensed child care providers for rehabilitation and construction; provided, however, that such loans shall be made only upon the determination by the Agency that mortgage loans, construction loans, and rehabilitation loans are not otherwise available wholly or in part from private lenders upon reasonably equivalent terms and conditions; (2) to provide technical and advisory services to sponsors, builders and developers of child care facilities; and (3) to acquire, hold, rent, encumber, transfer, convey, and otherwise deal with real property and utilities in the same manner as a private person or  corporation, subject only to the approval of the Governor and Council of State. The Board of Directors may pledge or encumber income and assets of the Agency to secure financing for real property.

Requires the Agency to periodically adopt, modify or repeal rules and regulations governing the purchase of federally insured securities by the Agency and the purchase and sale of mortgage loans, construction loans, and rehabilitation loans and the application of the proceeds thereof, including rules and regulations on the six matters specified in GS 122F-6. Requires that those rules effectuate the following objectives: (1) the construction of decent, safe and sanitary full day child care facilities; (2) the rehabilitation of present child care facilities; (3) increasing the supply and access to affordable child care for all families, regardless of income level; (4) the encouraging of private enterprise and investment to sponsor, build and rehabilitate child care facilities; and (5) the restriction of the financial return and benefit to that necessary to protect against the realization by lenders of an excessive financial return or benefit as determined by prevailing market conditions. Provides for interest rates to be at least sufficient to assure the payment of the described bond. Allows for mortgages, construction loans, and rehabilitation loans to be forgivable in full after fifteen years if the licensed child care provider (1) serves at least 25% more children than when the loan was received, and (2) at least 50% of the children served by the child care facility receive a child care subsidy. Requires the Agency to require from any mortgage lender from whom it purchases federally insured securities to proceed as promptly as practicable to make from the sale proceeds, new mortgage loans with respect to child care facilities in the State having a stated maturity of not less than 20 years from the date thereof in an aggregate principal amount equal to the amount of such sale proceeds.  

Authorizes the Agency to provide mortgage insurance as described in GS 122F-7 so long as the underlying mortgage loan (1) is made and held by a mortgagee approved by the Agency as responsible and able to properly service the mortgage; (2) do not exceed 90% of the estimated cost of the proposed child care facility; (3) has a maturity satisfactory to the Agency as specified; (4) contains amortization provisions satisfactory to the Agency as specified; and (5) is in such form and contain such terms and provisions with respect to maturity, property insurance, repairs, alterations, payment of taxes and assessments, default reserves, delinquency charges, default remedies, anticipation of maturity, additional and secondary liens, equitable and legal redemption rights, prepayment privileges and other matters as the Agency may prescribe. Provides for fees, premiums, default, and child care mortgage insurance fund.

Authorizes the Agency to periodically adopt, modify, amend or repeal rules and regulations governing the making of loans to lenders and the application of the proceeds thereof, as specified in GS 122F-8. Requires that the rules and regulations serve the same five purposes as set forth in GS 122F-6, except the rehabilitation of present child care facilities. Sets out additional requirements for the loans.

Clarifies, in GS 122F-9 that the obligations issued under GS Chapter 122F are not deemed to constitute a debt, liability or obligation of the State or of any political subdivision thereof or a pledge of the faith and credit of the State or of any such political subdivision, but shall be payable solely from the revenues or assets of the Agency.

Authorizes the Agency in GS 122F-10 to provide for the issuance, at one time or from time to time, (1) of bonds and notes of the Agency to carry out and effectuate its corporate purposes; (2) bond anticipation notes in anticipation of the issuance of such bonds and (3) construction loan notes to finance the making or purchase of mortgage loans, construction loans, and rehabilitation loans, for the construction, rehabilitation or improvement of child care facilities. Caps the total amount of bonds, bond anticipation notes, and construction loan notes outstanding at any one time at $12 billion. Provides for interest rates, processes for the sale of such bonds, and temporary bonds. Specifies that the proceeds of any bonds or notes must be used solely for the purposes for which issued and disbursed in such manner and under such restrictions, if any, as the Agency may provide as specified. Authorizes, at the discretion of the Agency, any obligations issued under the provisions of GS Chapter 122F to be secured by a trust agreement by and between the Agency and a corporate trustee, as described, in GS 122F-11. Confirms the validity of the Agency’s pledge of any its assets or revenues to the payment of the principal of or the interest on any obligations of the from the time when the pledge is made, as specified, in GS 122F-12.

Deems all money received under the authority of GS Chapter 122F to be held and provided solely as provided in GS Chapter 122F, in GS 122F-13. Provides for temporary investments, as described. List three ways money available to the Agency may be invested. Provides for remedies in GS 122F-14 by holders or obligations or coupons appertaining to those obligations under GS Chapter 122F, as described. Makes all obligations and interest coupons appertaining made negotiable instruments under State law in GS 122F-15. Makes, in GS 122F-16, obligations issued under the provisions of GS Chapter 122F securities in which all public officers and public bodies of the State and its political subdivisions, and other specified persons may properly and legally invest funds, including capital in their control or belonging to them. Authorizes the Agency to provide for the issuance of refunding obligations for the purpose of refunding any obligations then outstanding which shall have been issued under GS Chapter 122F, including the payment of any redemption premium thereon and any interest, as specified, in GS 122F-17. Allows for refunding obligations to be sold or exchanged for outstanding obligations, as described.

Designates the specified NCGA committees as those having oversight over the Agency in GS 122F-18. Requires the Agency to submit a comprehensive annual report of its activities to the specified NCGA committees and the Fiscal Research Division, as specified. Requires the Agency to be audited annually. Specifies that no member or other officer of the Agency is subject to any personal liability or accountability by reason of his execution of any obligations or the issuance thereof in GS 122F-19. Authorizes the Agency to accept appropriated moneys as specified, in GS 122F-20. Specifies, in GS 122F-21, that the Agency is not required to pay any tax or assessments on its property and that any obligations issued by the Agency under GS Chapter 122F are also free from taxation. Prevents conflicts of interest, as described, in GS 122F-22. Specifies, in GS 122F-23, that the provisions of GS Chapter 122F are in addition to existing powers conferred by other laws, except that the issuance of bonds or notes need not comply with the requirements of any other law applicable to the issuance of bonds or notes. Provides for liberal construction of GS Chapter 122F and that the chapter prevails over any inconsistent general or special laws.

Provides for the initial appointments to the Agency, with the terms to begin on October 1, 2026. Provides for end dates of either June 30, 2028, or June 30, 2030, to stagger reappointments. Requires the State Treasurer to invest 3.5% of the corpus of the NC Innovation Fund with the Agency. Appropriates $20 million from the General Fund to the Department of Administration for 2026-27 for the Agency to use as directed by the act.

Appropriates $20 million for 2026-27 from the General Fund to the Department of Administration for the Agency and requires the Agency to use the funds as provided in GS 122F-20.

Part X.

Removes the individual income rates for taxable years beginning in 2022 through 2025 and beyond, in GS 105-153.7 and instead requires those taxes to be computed at the following percentages of the taxpayer’s income for taxable year 2026 and computed at the specified percentages reduced by .26% for taxable years after 2026. Sets rates based on income and filing status (i.e., married individuals filing jointly, heads of household, unmarried individuals other than surviving spouses and heads of household, and married individuals that do not file a joint return). Applies those amounts to the withholding tables established under GS 105-153.7(b). Expands the other deductions that a taxpayer may deduct from their adjusted gross income under GS 105-153.5 to include income for work performed as either a firefighter, emergency service services personnel, emergency management worker, 911 call center workers, sworn law enforcement officers with the power of arrest, child care workers, public school unit employees, probation or parole officers, and corrections officers. Effective for taxable years beginning on or after January 1, 2026.

Appropriates $165 million from the General Fund to the Division in recurring funds for each year of the 2026-27 fiscal biennium to provide subsidized child care services to a family that includes an individual employed as a qualifying caregiver worker (defined). Requires the Division to give priority to child care workers in award of these subsidies.

Part XI.

Contains whereas clauses.

Adds new Part 10D, Child and Adult Care Food Program (CACFP) for Child Care Providers, to Article 3 of GS Chapter 143B.

New GS 143B-168.40 (a) defines CACFP as authorized by specified federal law and as administered by the Division. Defines family, friend, and neighbor (FFN) child care provider as an individual who is legally operating under applicable State law providing child care in specified settings and inclusive of individuals providing (i) child care that falls below the threshold requiring licensure under GS 110-86(3)b., (ii) arrangements excluded from the definition of child care under GS 110-86(2), and (iii) child care holding a license-exempt status recognized by DHHS.

New GS 143B-168.40(b) directs DHHS to take all feasible administrative action to extend CACFP access to FFN child care providers, which may include but is not limited to identifying sponsoring organizations capable of administering CACFP reimbursements to FFN providers, developing or modifying application/training/record-keeping requirements, applying for available federal programs, establishing tiered compliance mechanisms, and coordinating with USDA’s Food and Nutrition Services to ensure State plan amendments, as necessary, reflect expanded eligibility for FFN providers

New GS 143B-168.40(c) directs DHHS to report annually to the specified NCGA committee and division by July 1 and specifies four report requirements.

New GS 143B-168.40(d) provides that nothing in this statute should be construed to require an FFN provider to participate in CACFP, alter license requirements of GS Chapter 110, or conflict with federal law or regulations governing CACFP.

Directs the Division to publish an implementation plan including timelines, required rule changes, any necessary federal approvals, and resource requirements within 180 days of the act’s effective date.

Directs the Division to submit initial report required by new GS 143B-168.40(c) within 12 months of the act’s effective date.

Appropriates $150,000 for 2025-26 from the General Fund to the Division to develop the required implementation plan, including identifying feasible administrative approaches, piloting application/training/record-keeping procedures, and applying for available federal USDA flexibilities as described. Appropriates $500,000 in recurring funds for 2025-26 for administrative costs and lists some included costs. Provides that funding will continue until federal CACFP reimbursements can cover these costs, at which point the Division must notify the Office of State Budget and Management (OSBM) and the Fiscal Research Division so appropriations can be reduced accordingly. Specifies that funds do not revert until expended or until June 30 of the second fiscal year following appropriation, whichever is first.

Adds new Article 7A, Protection of Family Child Care Home Operations, to GS Chapter 110. Defines four terms, including HOA governing document (any declaration, covenant, condition, restriction, bylaw, rule, or regulation of a homeowners association, condominium association, planned community, or similar entity that governs the use of residential property).

Voids any provision of an HOA governing document that prohibits, restricts, conditions, or penalizes the operation of a licensed family childcare home by an appropriately licensed member or resident. Prohibits a homeowners association (HOA) or condominium association (COA) from (1) denying, suspending, revoking, or conditioning membership rights or community privileges based solely on operation of a licensed family child care home; (2) imposing fees, assessments, fines, or penalties based solely on operation of a licensed family child care home; or (3) requiring HOA or COA approval to operate a licensed family child care home. States that nothing in this section prohibits an HOA or COA from enforcing rules of general applicability to the extent such roles do not impose more burdensome requirements on licensed family child care homes than on other residential uses.

Prohibits landlords from including lease provisions that prohibit, restrict, or penalize tenants for operating a licensed family child care home at the leased premises and voids any such provision. Prohibits landlords from taking adverse action against tenants based solely on operation or intent to operate a licensed family child care home. Provides that a tenant operating a licensed family child care home must comply with other applicable lease terms and carry sufficient liability insurance. Authorizes landlords to require tenant’s written notice of intent to operate a licensed family child care home, copy of license issued pursuant to GS 110-88, and maintenance of liability insurance coverage.

Provides that a licensed family child care home is a residential use of property for the purposes of local land use and zoning regulation and is permitted in any zoning district where single-family or multi-family residential uses are permitted. Prohibits local governments from adopting or enforcing a zoning ordinance, development regulation, or land use restriction that (1) unfairly burdens a licensed family child care home relative to other residential dwellings in the zoning district, (2) imposes discretionary approval processes applicable to licensed family child care homes but not to other residential uses, (3) limits the number of licensed family child care homes in a zoning district based solely on the child care use, or (4) requires compliance with commercial or institutional zoning standards. Allows a local government to impose only development standards that would apply to the residential use of the property generally. Provides that nothing in this section limits Child Care Commission or Department of Health and Human Services (DHHS) standards regarding the health, safety, and physical environment of licensed child care facilities.

Permits a licensed operator to bring a civil action in superior court for violations of this Article seeking declaratory and injunctive relief, actual damages, and (if prevailing party) attorneys' fees and costs. Permits Attorney General to bring an enforcement action on State’s behalf.

Specifies that Article applies to all HOA governing documents, lease agreements, and local zoning ordinances adopted before, on, or after the effective date of this act and any conflicting document provisions are void and unenforceable to the extent of the conflict.

Adds new GS 47F-3-123 to prohibit HOAs from prohibiting, restricting, or penalizing the operation of a licensed family child care home by a lot owner or tenant with a valid license issued pursuant to GS 110-88.

States that nothing in this act is intended to abrogate reasonable health, safety, building code, or fire code requirements applicable to child care facilities.

Appropriates $75,000 for 2025-26 from the General Fund to the Division to (1) develop and disseminate plain-language guidance for licensed family child care home operators regarding their rights under Article 7A of GS Chapter 110; (2) create model response templates and informational materials for licensed operators in disputes with HOAs, landlords, and local governments; and (3) update specified DHHS materials to inform current and prospective licensees of this act’s protections.

Appropriates $100,000 for 2025-26 from the General Fund to the Department of Justice, Office of the Attorney General to (1) train attorneys and staff in the Consumer Protection or other appropriate division on the enforcement provisions of Article 7A of GS Chapter 110, (2) establish a complaint intake process for licensed operators alleging violations of specified Article provisions, and (3) prepare and publish an annual summary of complaints received and enforcement actions taken under this act for annual submission by October 1 to the specified NCGA committee.

Effective when the act becomes law and applies to all acts, ordinances, and agreements entered into on or after that date. Voids all contrary existing provisions of HOA governing documents and lease agreements as of the effective date.

Repeals GS 110-103(b) (creating Class 1 felonies relating to the operation of a child care facility). Adds GS 110-103.1(b1), creating a civil penalty capped at $5,000 per day for child care facility operators who either willfully violate GS 110-99(a) (operating without a license) or Article 7 of GS Chapter 110 (governing child care facilities) while providing child care for three or more children for more than four hours per day on two consecutive days.

Appropriates $50,000 for 2025-26 from the General Fund to the Division to implement the specified enforcement protocols, guidance to child care  facility operators and the public about the new civil penalties, and to coordinate with the named agencies to ensure consistent implementation of the revised penalty framework. Appropriates $25,000 for 2025-26 from the General Fund to the Administrative Office of the Courts (AOC) to implement updated charging instruments and other forms to reflect the repeal of GS 110-103 and to provide notice to DA’s clerks and other court personnel of the statutory changes.

Effective when it becomes law and applies to violations occurring on or after that date. Contains prosecutorial savings clause for offenses committed before the act becomes law.

Amends GS 110-86 by adding new subdivision (6a) defining a license-exempt family, friend, and neighbor (FFN) child care provider as an individual who (1) provides childcare to one or more children who are not the individual’s own biological, adopted, or step-children, or children the individual is a legal guardian of; (2) operates in a setting, including their home or the child's home, not required to be licensed as a child care facility due to the number of children served, nature of the arrangement, or an applicable exemption; (3) has a preexisting familial, social, or community relationship with the child or child’s family, including but not limited to a grandparent, aunt, uncle, sibling over 18 years old, family friend, or neighbor; and (4) is in compliance with all applicable requirements for legally operating a child care arrangement under State law. Provides that the term does not include individuals required to obtain a license under Article 7, Child Care Facilities. Clarifies that the subdivision must not be construed to require license-exempt FFN providers to obtain a license, register with the State, or comply with any requirement not otherwise applicable to unlicensed child care arrangements.

Appropriates $30,000 for 2025-26 from the General Fund to the Division to update public-facing materials to incorporate the definition of license-exempt FFN child care provider and to communicate to the public the legal status of FFN providers and the distinction between license-exempt FFN arrangements and licensed child care facilities, to revise internal legal guidance documents, policy manuals, and staff training materials to reflect the new statutory definition and its application, and to update the Division’s data collection and reporting systems to enable tracking of license-exempt FFN providers as a distinct provider category.

Provides that existing exemptions from child care facility licensing requirements under GS 110-86(2) are retained without modification and that new GS 110-86(6a) must be construed consistently with those exemptions.

Part XII.

Effective on July 1, 2026, except as otherwise provided.