License-Exempt Child Care in California: Exemptions and Penalties

License-exempt child care in California covers a defined set of arrangements that do not require a state license: care by a relative, care for the children of only one outside family in the provider’s home, qualifying parent cooperatives, care given in the child’s own home, and certain public recreation and school-based programs. Everything outside those categories needs a license. And exempt does not mean unregulated: providers paid through state subsidies face background checks and safety self-certification, all caregivers remain subject to child abuse reporting laws, and income from care is taxable regardless of license status.

The exemptions live in Health and Safety Code Section 1596.792, and each one has its own conditions.¹

Care by a Relative

The broadest exemption applies to relatives. Under Section 1596.792(f), care of children by a relative is exempt with no cap on the number of children and no restriction on whether the relative is paid.¹ The statute does not define “relative,” so the term carries its ordinary meaning: grandparents, aunts, uncles, cousins, siblings, and extended family generally qualify.

A grandmother caring for six grandchildren full-time for pay is still exempt. Her home is not subject to the inspections or regulations that apply to licensed family child care homes.

The One-Family Rule for Home Providers

If you are not related to the children and want to provide care from your home without a license, California draws the line at one outside family. Section 1596.792(d) exempts a family child care home that provides care for the children of only one family in addition to the operator’s own children.¹

This is the threshold that matters most for informal home-based care. Your own children and any related children do not count toward the limit. The moment you take on children from a second unrelated family, you have crossed into territory that requires a licensed Family Child Care Home. There is no grace period or provisional status for that transition.

Parent Cooperatives

Parents who want to share child care responsibilities without hiring anyone can form a cooperative that is exempt from licensing, but only if it satisfies every condition in Section 1596.792(e):¹

Parents rotate as the responsible caregiver for all the children in the group on a roughly equal basis.
Anyone watching the children must be a parent, legal guardian, stepparent, grandparent, aunt, uncle, or adult sibling of at least one child in the group.
No money or in-kind income changes hands for providing the care itself. Parents can still chip in for snacks, toys, blankets, and the actual cost of outside activities such as field trips.
No more than 12 children can be receiving care in the same place at the same time.

The eligible-caregiver rule is where cooperatives most often go wrong. A close family friend who is not related to any child in the group cannot serve as the rotating caregiver, even if no money is involved. Miss any single condition and the arrangement is not exempt, meaning the person providing care would need a license.

Care in the Child’s Own Home

When a caregiver comes to the child’s home rather than watching children in the caregiver’s home, the arrangement is license-exempt. This covers nannies, au pairs, and babysitters who provide care in the family’s residence.² The exemption exists because the licensing framework targets the provider’s premises, not the child’s home.

Parents hiring an in-home caregiver should know the caregiver is generally a household employee, not an independent contractor, because the family controls where, when, and how the work is done. Paying a household employee $3,000 or more in cash wages during 2026 triggers Social Security and Medicare tax obligations, along with Schedule H filing and an employer identification number.³ California adds its own payroll obligations through the Employment Development Department. These duties apply whether or not the caregiver is license-exempt.

Public Recreation and School-Based Programs

Programs run by a city, county, school district, or other government entity can qualify for a separate exemption, but the rules turn on the ages of the children and the program’s hours. For school-age children in kindergarten through 12th grade, a public recreation program is exempt if it operates only outside normal school hours or during school breaks, and runs either under 20 hours per week or for 14 weeks or fewer in a 12-month period.¹

For children over four years and nine months who are not yet in school, the limit is under 16 hours per week or 12 weeks or fewer in a 12-month period. For children under four years and nine months, sessions cannot exceed 12 hours per week and 12 weeks in duration, though consecutive sessions across the year are allowed as long as no individual child exceeds 12 hours per week total.¹ Summer camp operators and after-school program directors need to watch these limits, because exceeding them triggers licensing even for a government-run program.

Extended day care programs operated by public or private schools, including expanded learning opportunity programs, are exempt under Section 1596.792(h). School parenting programs and adult education child care programs operated by or under contract with a public school district are also exempt, as are California state preschool programs operated by local educational agencies in qualifying facilities.¹

Requirements for Providers Paid Through Subsidies

License-exempt status does not automatically entitle a provider to receive payments through California’s subsidized child care programs. If you are a license-exempt provider accepting state or federal subsidy payments and you are not a grandparent, aunt, or uncle of the children in your care, you must register with TrustLine, California’s background check registry for license-exempt providers.⁴ Registration involves fingerprinting and criminal background checks through both the California Department of Justice and the FBI.

Grandparents, aunts, and uncles caring for their own relatives are not required to register with TrustLine, even when receiving subsidy payments.⁴

Providers receiving subsidy payments must also complete a Health and Safety Self-Certification. It is not a state inspection; it is an attestation covering working smoke detectors and fire extinguishers meeting State Fire Marshal standards, no corporal or harsh punishment, unlimited parental access during care hours, provider health including a tuberculosis test within the last 12 months, a safe environment protecting children from pools, electrical outlets, stairs, toxic materials, medications, and firearms, and two local character references.⁵

A provider who needs TrustLine registration is not eligible for subsidy reimbursement until registration is complete, though retroactive reimbursement is available for up to 120 days from the date care was first provided if the provider later becomes registered.⁵

Taxes and Mandated Reporting Apply Regardless

Income from providing child care is taxable whether or not you hold a license. Payment for watching children in your home or another setting is self-employment income, reported on Schedule C, with self-employment tax on top of regular income tax. Parents claiming the federal Child and Dependent Care Credit must identify the provider by name, address, and taxpayer identification number on Form 2441.⁶ The IRS will have a record connecting your identity to child care payments even if no one sends you a 1099. Parents paying an individual provider generally do not need to issue Form 1099-NEC, because that form covers business-to-business payments, but the provider still has to report the income.

Being license-exempt does not shield anyone from child abuse reporting duties. A mandated reporter who fails to report known or reasonably suspected child abuse or neglect faces a misdemeanor carrying up to six months in county jail, a fine of up to $1,000, or both.⁷

Penalties for Operating Without a License

The most common way to slip into unlicensed operation is by exceeding the one-family limit. If you care for children from two or more unrelated families in your home, you need a Family Child Care Home license. Operate a child care center without a license and the state can issue a Notice of Operation in Violation of Law. Failing to stop operating or submit a completed license application within 15 calendar days of that notice triggers a civil penalty of $200 per day, which continues to accrue until you either cease operations or submit the application.⁸

If you submit an application and it is denied, the $200-per-day penalty starts again on the 10th day after the denial notice is mailed if you keep operating. The Department of Social Services can pursue collection through the courts and also seek injunctive relief to shut down any unlicensed operation.

Liability and Insurance

A common blind spot for exempt home providers is liability coverage. If a child is injured in your home during care, your homeowner’s insurance may or may not cover the claim. Many standard homeowner’s policies exclude or limit coverage for injuries arising from a business activity on the premises, and paid child care can qualify as a business activity even without a license. Before you take on someone else’s children, ask your insurance carrier whether your existing policy covers child care liability, whether it can be added by endorsement, or whether it is excluded outright. Separate child care liability insurance is available where the homeowner’s policy will not extend, with premiums varying based on the number of children in your care, claims history, and years of experience.

1
California Legislative Information. California Health and Safety Code 1596.792
2
California Department of Social Services. In-Home Care
3
Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
4
California Department of Social Services. TrustLine License-Exempt Provider Pamphlet
5
California Department of Social Services. Health and Safety Self-Certification
6
Internal Revenue Service. Child and Dependent Care Credit Information
7
California Legislative Information. California Penal Code PEN 11166
8
Legal Information Institute. California Code of Regulations Title 22 101198 – Unlicensed Facility Penalties