[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2593 Introduced in Senate (IS)]

  2d Session
                                S. 2593

To amend the Internal Revenue Code of 1986 to provide a credit against 
 tax for employers who provide child care assistance for dependents of 
                their employees, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

              October 8 (legislative day, October 2), 1998

 Mr. Graham introduced the following bill; which was read twice and 
        referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide a credit against 
 tax for employers who provide child care assistance for dependents of 
                their employees, 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 ``Worksite Child Care Development 
Center Act of 1998''.

SEC. 2. 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 the sum of--
            ``(1) 50 percent of the qualified child care facility 
        start-up expenses,
            ``(2) 50 percent of the qualified child care facility 
        expenses, and
            ``(3) 50 percent of the qualified child care expenses,
of the taxpayer during the taxable year.
    ``(b) Dollar Limitations.--
            ``(1) Qualified child care facility start-up expenses.--The 
        total amount of the credit determined under subsection (a)(1) 
        for all taxable years shall not exceed $100,000.
            ``(2) Qualified child care facility expenses.--The amount 
        of the credit determined under subsection (a)(2) for any 
        taxable year shall not exceed $25,000.
            ``(3) Qualified child care expenses.--The amount of the 
        credit determined under subsection (a)(3) for any taxable year 
        shall not exceed $50,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified child care expenses.--
                    ``(A) In general.--The term `qualified child care 
                expenses' means any amount paid or incurred to 
                reimburse an employee for expenses for child care which 
                enables the employee to be gainfully employed including 
                expenses related to--
                            ``(i) day care and before and after school 
                        care,
                            ``(ii) transportation associated with such 
                        care, and
                            ``(iii) before and after school and holiday 
                        programs including educational and recreational 
                        programs and camp programs.
                    ``(B) Fair market value.--The term `qualified child 
                care expenses' shall not include expenses in excess of 
                the fair market value of such care.
            ``(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 to dependents of 
                        employees, 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 or back-
                        up child care facility providing daily care for 
                        dependents who are mildly ill or need temporary 
                        care for other reasons that disrupt the normal 
                        care arrangements of employees.
                Clause (i) shall not apply to a facility which is the 
                principal residence (within the meaning of section 
                1034) 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, 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)).
                    ``(C) Child care facilities sponsored by more than 
                one taxpayer.--A facility that is sponsored by more 
                than 1 taxpayer shall be treated as a qualified child 
                care facility if it meets the requirements of this 
                paragraph.
            ``(3) Qualified child care facility expenses.--The term 
        `qualified child care facility expenses' means any amount paid 
        or incurred--
                    ``(A) for the operating costs of a qualified child 
                care facility of the taxpayer,
                    ``(B) under a contract with a qualified child care 
                facility to provide child care services to employees of 
                the taxpayer, or
                    ``(C) under a contract to provide child care 
                resource and referral coordination services to 
                employees of the taxpayer.
            ``(4) Qualified child care facility start-up expenses.--The 
        term `qualified child care facility start-up expenses' 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 1034) of the taxpayer or any employee 
                        of the taxpayer, or
                    ``(B) to acquire equipment and supplies necessary 
                for the operation of a qualified child care facility.
    ``(d) Child Care Facilities Sponsored by More Than One Taxpayer.--
In the case of a qualified child care facility that is sponsored by 
more than 1 taxpayer, the credit determined under paragraphs (1) and 
(2) of subsection (a) for each taxpayer for any taxable year may be 
apportioned among the taxpayers in any manner determined by the 
taxpayers.
    ``(e) 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 
                facility expenses of the taxpayer described in 
                subsection (c)(4) 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...............................           90     
                Year 5...............................           80     
                Year 6...............................           70     
                Year 7...............................           60     
                Year 8...............................           50     
                Year 9...............................           40     
                Year 10 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.
    ``(f) 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.
    ``(g) 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)(4), 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 (e).
            ``(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.
    ``(h) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2008.''
    (b) Conforming Amendments.--
            (1) Section 38(b) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking out ``plus'' at the end of 
                paragraph (11),
                    (B) by striking out 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) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 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.
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