[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3292 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 3292

 To amend the Internal Revenue Code of 1986 to increase the credit for 
dependent care services necessary for gainful employment and to provide 
 an equivalent benefit for families where one parent stays at home to 
  provide child care for a child under the age of 4 and to amend the 
Social Security Act to provide grants to States to improve the quality 
        and availability of child care, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 26, 1998

 Mrs. Kennelly of Connecticut introduced the following bill; which was 
  referred to the Committee on Ways and Means, and in addition to the 
     Committee on Education and the Workforce, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to increase the credit for 
dependent care services necessary for gainful employment and to provide 
 an equivalent benefit for families where one parent stays at home to 
  provide child care for a child under the age of 4 and to amend the 
Social Security Act to provide grants to States to improve the quality 
        and availability of child care, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investment in Children Act of 
1998''.

SEC. 2. INCREASE IN DEPENDENT CARE CREDIT; EQUIVALENT BENEFIT WHERE ONE 
              PARENT STAYS AT HOME TO PROVIDE CHILD CARE FOR CHILD 
              UNDER AGE 4.

    (a) In General.--Paragraph (2) of section 21(a) of the Internal 
Revenue Code of 1986 (relating to expenses for household and dependent 
care services necessary for gainful employment) is amended to read as 
follows:
            ``(2) Applicable percentage defined.--For purposes of 
        paragraph (1), the term `applicable percentage' means 50 
        percent reduced (but not below 20 percent) by 1 percentage 
        point for each $1,000 (or fraction thereof) by which the 
        taxpayer's adjusted gross income for the taxable year exceeds 
        $30,000.''
    (b) Equivalent of Increased Benefit Where Parent Stays at Home To 
Provide Child Care for Child Under Age 4.--
            (1) In general.--Section 24 of such Code (relating to child 
        tax credit) is amended by redesignating subsections (e) and (f) 
        as subsections (f) and (g), respectively, and by inserting 
        after subsection (e) the following new subsection:
    ``(f) Additional Credit If Taxpayer Has Qualifying Child Under Age 
4.--
            ``(1) In general.--If any qualifying child of the taxpayer 
        is a young child, the credit allowed by subsection (a) shall be 
        increased by the increased dependent care credit equivalent 
        amount.
            ``(2) Increased dependent care credit equivalent amount.--
        For purposes of paragraph (1), the term `increased dependent 
        care credit equivalent amount' means, with respect to any 
        taxable year beginning in a calendar year, an amount equal to--
                    ``(A) the amount estimated by the Secretary (for 
                taxable years beginning in the preceding calendar year) 
                as being equal to the average employment-related 
                expenses which are taken into account under section 
                21(a) by taxpayers who have only one qualifying 
                individual and that qualifying individual is a young 
                child, multiplied by
                    ``(B) the percentage equal to the excess (if any) 
                of--
                            ``(i) the percentage applicable to the 
                        taxpayer under section 21(a)(2), over
                            ``(ii) the percentage which would be 
                        applicable to the taxpayer under section 
                        21(a)(2) as in effect on the day before the 
                        date of the enactment of this paragraph.
            ``(3) Young child.--For purposes of this subsection, the 
        term `young child' means any individual who has not attained 
        the age of 4 as of the close of the calendar year in which the 
        taxable year of the taxpayer begins.
            ``(4) Coordination with dependent care credit.--Credit 
        shall be allowed under this subsection to a taxpayer for a 
        taxable year only if the taxpayer elects not to have section 21 
        apply for such year.''
            (2) Conforming amendment.--Subparagraph (I) of section 
        6213(g)(2) of such Code is amended by striking ``section 
        24(e)'' and inserting ``section 24(f)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 3. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD CARE 
              ASSISTANCE.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

    ``(a) In General.--For purposes of section 38, the employer-
provided child care credit determined under this section for the 
taxable year is an amount equal to 25 percent of the qualified child 
care expenditures of the taxpayer for such taxable year.
    ``(b) Dollar Limitation.--The credit allowable under subsection (a) 
for any taxable year shall not exceed $150,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified child care expenditure.--The term 
        `qualified child care expenditure' means any amount paid or 
        incurred--
                    ``(A) to acquire, construct, rehabilitate, or 
                expand property--
                            ``(i) which is to be used as part of a 
                        qualified child care facility of the taxpayer,
                            ``(ii) with respect to which a deduction 
                        for depreciation (or amortization in lieu of 
                        depreciation) is allowable, and
                            ``(iii) which does not constitute part of 
                        the principal residence (within the meaning of 
                        section 121) of the taxpayer or any employee of 
                        the taxpayer,
                    ``(B) for the operating costs of a qualified child 
                care facility of the taxpayer, including costs related 
                to the training of employees, to scholarship programs, 
                and to the providing of increased compensation to 
                employees with higher levels of child care training,
                    ``(C) under a contract with a qualified child care 
                facility to provide child care services to employees of 
                the taxpayer,
                    ``(D) under a contract to provide child care 
                resource and referral services to employees of the 
                taxpayer, or
                    ``(E) for the costs of seeking accreditation from a 
                child care credentialing or accreditation entity.
            ``(2) Qualified child care facility.--
                    ``(A) In general.--The term `qualified child care 
                facility' means a facility--
                            ``(i) the principal use of which is to 
                        provide child care assistance, and
                            ``(ii) which meets the requirements of all 
                        applicable laws and regulations of the State or 
                        local government in which it is located, 
                        including, but not limited to, the licensing of 
                        the facility as a child care facility.
                Clause (i) shall not apply to a facility which is the 
                principal residence (within the meaning of section 121) 
                of the operator of the facility.
                    ``(B) Special rules with respect to a taxpayer.--A 
                facility shall not be treated as a qualified child care 
                facility with respect to a taxpayer unless--
                            ``(i) enrollment in the facility is open to 
                        employees of the taxpayer during the taxable 
                        year,
                            ``(ii) the facility is not the principal 
                        trade or business of the taxpayer unless at 
                        least 30 percent of the enrollees of such 
                        facility are dependents of employees of the 
                        taxpayer, and
                            ``(iii) the use of such facility (or the 
                        eligibility to use such facility) does not 
                        discriminate in favor of employees of the 
                        taxpayer who are highly compensated employees 
                        (within the meaning of section 414(q)).
    ``(d) Recapture of Acquisition and Construction Credit.--
            ``(1) In general.--If, as of the close of any taxable year, 
        there is a recapture event with respect to any qualified child 
        care facility of the taxpayer, then the tax of the taxpayer 
        under this chapter for such taxable year shall be increased by 
        an amount equal to the product of--
                    ``(A) the applicable recapture percentage, and
                    ``(B) the aggregate decrease in the credits allowed 
                under section 38 for all prior taxable years which 
                would have resulted if the qualified child care 
                expenditures of the taxpayer described in subsection 
                (c)(1)(A) with respect to such facility had been zero.
            ``(2) Applicable recapture percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the applicable recapture percentage shall be determined 
                from the following table:

  
                                                         The applicable
  
                                                              recapture
            ``If the recapture event occurs in:
                                                         percentage is:
                Years 1-3............................          100     
                Year 4...............................           85     
                Year 5...............................           70     
                Year 6...............................           55     
                Year 7...............................           40     
                Year 8...............................           25     
                Years 9 and 10.......................           10     
                Years 11 and thereafter..............            0.    
                    ``(B) Years.--For purposes of subparagraph (A), 
                year 1 shall begin on the first day of the taxable year 
                in which the qualified child care facility is placed in 
                service by the taxpayer.
            ``(3) Recapture event defined.--For purposes of this 
        subsection, the term `recapture event' means--
                    ``(A) Cessation of operation.--The cessation of the 
                operation of the facility as a qualified child care 
                facility.
                    ``(B) Change in ownership.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the disposition of a taxpayer's 
                        interest in a qualified child care facility 
                        with respect to which the credit described in 
                        subsection (a) was allowable.
                            ``(ii) Agreement to assume recapture 
                        liability.--Clause (i) shall not apply if the 
                        person acquiring such interest in the facility 
                        agrees in writing to assume the recapture 
                        liability of the person disposing of such 
                        interest in effect immediately before such 
                        disposition. In the event of such an 
                        assumption, the person acquiring the interest 
                        in the facility shall be treated as the 
                        taxpayer for purposes of assessing any 
                        recapture liability (computed as if there had 
                        been no change in ownership).
            ``(4) Special rules.--
                    ``(A) Tax benefit rule.--The tax for the taxable 
                year shall be increased under paragraph (1) only with 
                respect to credits allowed by reason of this section 
                which were used to reduce tax liability. In the case of 
                credits not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 shall be 
                appropriately adjusted.
                    ``(B) No credits against tax.--Any increase in tax 
                under this subsection shall not be treated as a tax 
                imposed by this chapter for purposes of determining the 
                amount of any credit under subpart A, B, or D of this 
                part.
                    ``(C) No recapture by reason of casualty loss.--The 
                increase in tax under this subsection shall not apply 
                to a cessation of operation of the facility as a 
                qualified child care facility by reason of a casualty 
                loss to the extent such loss is restored by 
                reconstruction or replacement within a reasonable 
                period established by the Secretary.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons which are treated as 
        a single employer under subsections (a) and (b) of section 52 
        shall be treated as a single taxpayer.
            ``(2) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
            ``(3) Allocation in the case of partnerships.--In the case 
        of partnerships, the credit shall be allocated among partners 
        under regulations prescribed by the Secretary.
    ``(f) No Double Benefit.--
            ``(1) Reduction in basis.--For purposes of this subtitle--
                    ``(A) In general.--If a credit is determined under 
                this section with respect to any property by reason of 
                expenditures described in subsection (c)(1)(A), the 
                basis of such property shall be reduced by the amount 
                of the credit so determined.
                    ``(B) Certain dispositions.--If during any taxable 
                year there is a recapture amount determined with 
                respect to any property the basis of which was reduced 
                under subparagraph (A), the basis of such property 
                (immediately before the event resulting in such 
                recapture) shall be increased by an amount equal to 
                such recapture amount. For purposes of the preceding 
                sentence, the term `recapture amount' means any 
                increase in tax (or adjustment in carrybacks or 
                carryovers) determined under subsection (d).
            ``(2) Other deductions and credits.--No deduction or credit 
        shall be allowed under any other provision of this chapter with 
        respect to the amount of the credit determined under this 
        section.''
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended--
                    (A) by striking ``plus'' at the end of paragraph 
                (11),
                    (B) by striking the period at the end of paragraph 
                (12), and inserting a comma and ``plus'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(13) the employer-provided child care credit determined 
        under section 45D.''.
            (2) Subsection (d) of section 39 of such Code (relating to 
        carryback and carryforward of unused credits) is amended by 
        adding at the end the following new paragraph:
            ``(9) No carryback of section 45d credit before january 1, 
        1999.--No portion of the unused business credit for any taxable 
        year which is attributable to the credit determined under 
        section 45D may be carried back to a taxable year beginning 
        before January 1, 1999.''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45D. Employer-provided child care 
                                        credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 4. GRANTS TO STATES TO IMPROVE THE QUALITY AND SAFETY OF CHILD 
              CARE, TO PROVIDE CHILD CARE FOR LOW-INCOME WORKING 
              FAMILIES, AND FOR BEFORE AND AFTER SCHOOL CHILD CARE.

    Part A of title IV of the Social Security Act (42 U.S.C. 601-619) 
is amended by inserting after section 418 the following:

``SEC. 418A. GRANTS TO STATES TO IMPROVE THE QUALITY AND SAFETY OF 
              CHILD CARE, TO PROVIDE CHILD CARE FOR LOW-INCOME WORKING 
              FAMILIES, AND FOR BEFORE AND AFTER SCHOOL CHILD CARE.

    ``(a) Child Care Quality and Safety Improvement Grants.--
            ``(1) Entitlement.--Each State shall be entitled to receive 
        from the Secretary a grant in an amount determined under 
        paragraph (2).
            ``(2) Amount of grant.--
                    ``(A) Allotments to states.--After making the 
                reservation described in paragraph (3) of this 
                subsection, the total amount available for grants under 
                this subsection for a fiscal year shall be allotted 
                among the States in the manner provided for in section 
                418(a)(2)(B).
                    ``(B) Federal matching of state expenditures 
                exceeding historical expenditures.--The Secretary shall 
                make payments under this subsection in the manner 
                provided for in section 418(a)(2)(C) as if `400 
                percent' were substituted for `the Federal medical 
                assistance percentage for the State for the fiscal year 
                (as defined in section 1905(b), as such section was in 
                effect on September 30, 1995)'.
                    ``(C) Redistribution.--Section 418(a)(2)(D) shall 
                apply to amounts allotted under subparagraph (A) of 
                this paragraph.
            ``(3) Indian tribes.--The Secretary shall reserve not less 
        than 1 percent, and not more than 2 percent, of the aggregate 
        amount appropriated to carry out this subsection for each 
        fiscal year for payments to Indian tribes and tribal 
        organizations.
            ``(4) Use of funds.--Amounts received by a State under this 
        subsection shall be used only to improve the quality and safety 
        of child care through such means as--
                    ``(A) reducing staff-to-child ratios;
                    ``(B) improving and expanding child care training 
                (including training in first aid and cardiopulmonary 
                resuscitation);
                    ``(C) improving enforcement of State health and 
                safety requirements (including increasing unannounced 
                inspections of child care settings);
                    ``(D) helping providers meet accreditation and 
                licensing requirements;
                    ``(E) promoting programs to improve early learning 
                for children who have not attained 6 years of age;
                    ``(F) providing increased payment rates for child 
                care services for infants or children with special 
                medical needs;
                    ``(G) connecting child care providers to centers 
                for education and health care professionals;
                    ``(H) conducting background checks on child care 
                providers;
                    ``(I) improving the compensation of child care 
                providers; and
                    ``(J) expanding activities to educate parents on 
                the availability and quality of child care, including 
                the development and operation of resource and referral 
                systems.
            ``(5) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated for grants under this subsection--
                    ``(A) $250,000,000 for fiscal year 1999;
                    ``(B) $500,000,000 for each of fiscal years 2000 
                and 2001;
                    ``(C) $750,000,000 for fiscal year 2002; and
                    ``(D) $1,000,000,000 for fiscal year 2003.
    ``(b) Grants for Child Care for Low-Income Working Families.--
            ``(1) Entitlement.--If a State has received from the 
        Secretary under section 418(a)(2) during a fiscal year an 
        amount equal to the State's allotment under section 
        418(a)(2)(B) for the fiscal year, the State shall be entitled 
        to receive from the Secretary a grant in an amount determined 
        under paragraph (2).
            ``(2) Amount of grant.--
                    ``(A) Allotments to states.--After making the 
                reservation described in paragraph (3) of this 
                subsection, the total amount available for grants under 
                this subsection for a fiscal year shall be allotted 
                among the States in the manner provided for in section 
                418(a)(2)(B).
                    ``(B) Federal matching of state expenditures 
                exceeding historical expenditures.--The Secretary shall 
                make payments under this subsection in the manner 
                provided for in section 418(a)(2)(C) as if `400 
                percent' were substituted for `the Federal medical 
                assistance percentage for the State for the fiscal year 
                (as defined in section 1905(b), as such section was in 
                effect on September 30, 1995)'.
                    ``(C) Redistribution.--Section 418(a)(2)(D) shall 
                apply to amounts allotted under subparagraph (A) of 
                this paragraph.
            ``(3) Indian tribes.--The Secretary shall reserve not less 
        than 1 percent, and not more than 2 percent, of the aggregate 
        amount appropriated to carry out this subsection for each 
        fiscal year for payments to Indian tribes and tribal 
        organizations.
            ``(4) Use of funds.--Not less than 70 percent of the 
        amounts received by a State under this subsection shall be used 
        for child care assistance to persons who are not recipients of 
        assistance under the State program funded under the provisions 
        of this part other than section 418 or this section.
            ``(5) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated for grants under this subsection--
                    ``(A) $1,000,000,000 for fiscal year 1999;
                    ``(B) $1,500,000,000 for each of fiscal years 2000 
                and 2001; and
                    ``(C) $2,000,000,000 for each of fiscal years 2002 
                and 2003.
    ``(c) Grants for Before and After School Child Care.--
            ``(1) Entitlement.--Each State shall be entitled to receive 
        from the Secretary a grant in an amount determined under 
        paragraph (2).
            ``(2) Amount of grant.--
                    ``(A) Allotments to states.--After making the 
                reservation described in paragraph (3) of this 
                subsection, the total amount available for grants under 
                this subsection for a fiscal year shall be allotted 
                among the States in the manner provided for in section 
                418(a)(2)(B).
                    ``(B) Federal matching of state expenditures 
                exceeding historical expenditures.--The Secretary shall 
                make payments under this subsection in the manner 
                provided for in section 418(a)(2)(C) as if `400 
                percent' were substituted for `the Federal medical 
                assistance percentage for the State for the fiscal year 
                (as defined in section 1905(b), as such section was in 
                effect on September 30, 1995)'.
                    ``(C) Redistribution.--Section 418(a)(2)(D) shall 
                apply to amounts allotted under subparagraph (A) of 
                this paragraph.
            ``(3) Indian tribes.--The Secretary shall reserve not less 
        than 1 percent, and not more than 2 percent, of the aggregate 
        amount appropriated to carry out this subsection for each 
        fiscal year for payments to Indian tribes and tribal 
        organizations.
            ``(4) Use of funds.--Amounts received by a State under this 
        subsection shall be used only for the provision of child care 
        services before and after regular school hours and during 
        months in which school is not in session.
            ``(5) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated for grants under this subsection--
                    ``(A) $250,000,000 for fiscal year 1999;
                    ``(B) $500,000,000 for each of fiscal years 2000 
                and 2001;
                    ``(C) $750,000,000 for fiscal year 2002; and
                    ``(D) $1,000,000,000 for fiscal year 2003.
    ``(d) Data Used To Determine State and Federal Shares of 
Expenditures.--Section 418(a)(5) shall apply to determinations 
concerning expenditures required under this section.
    ``(e) Availability of Funds.--The 2nd sentence of section 418(b)(1) 
shall apply to amounts provided to a State under this section.
    ``(f) Application of Child Care and Development Block Grant Act of 
1990.--Section 418(c) shall apply to amounts provided to a State under 
this section.
    ``(g) Definition.--As used in this section, the term `State' means 
each of the 50 States and the District of Columbia.''.

SEC. 5. 21ST CENTURY LEARNING CENTERS.

    Part I of title X of the Elementary and Secondary Education Act of 
1965 (20 U.S.C. 8241 et seq.) is amended--
            (1) in section 10902 by striking ``inner city'' each place 
        it appears and inserting ``urban'';
            (2) in section 10903--
                    (A) in subsection (a)--
                            (i) by striking ``rural and inner-city''; 
                        and
                            (ii) by striking ``rural or inner-city'';
                    (B) by amending subsection (b) to read as follows:
    ``(b) Equitable Distribution.--
            ``(1) In general.--In awarding grants under this part, the 
        Secretary shall assure an equitable distribution of assistance 
        among the States and among areas within a State.
            ``(2) Priority.-- The Secretary shall give priority to 
        urban and rural areas in the United States, and among such 
        areas of a State.''; and
            (3) in section 10907, by amending the text to read as 
        follows:
    ``There are authorized to be appropriated $200,000,000 for each of 
the fiscal years 1999 through 2003 to carry out this part.''

SEC. 6. NONREFUNDABLE PERSONAL CREDITS ALLOWED IN DETERMINING 
              ALTERNATIVE MINIMUM TAX LIABILITY.

    (a) Allowance of Nonrefundable Personal Credits.--Subsection (a) of 
section 26 of the Internal Revenue Code of 1986 (relating to limitation 
based on tax liability; definition of tax liability) is amended to read 
as follows:
    ``(a) Limitation Based on Amount of Tax.--The aggregate amount of 
credits allowed by this subpart for the taxable year shall not exceed 
the sum of--
            ``(1) the taxpayer's regular tax liability for the taxable 
        year, plus
            ``(2) the tax imposed by section 55 for such taxable 
        year.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1997.
                                 <all>