[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 253 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 253
To amend the Internal Revenue Code of 1986 to expand alternatives for
families with children and to establish incentives to improve the
quality and supply of child care.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 30, 2001
Mr. Gilman (for himself and Mrs. McCarthy of New York) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to expand alternatives for
families with children and to establish incentives to improve the
quality and supply of child care.
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 ``Tax Relief For Families With
Children Act''.
TITLE I--TAX BENEFITS FOR FAMILIES WITH CHILDREN
SEC. 101. EXPANSION OF DEPENDENT CARE TAX CREDIT.
(a) Dollar Limit on Creditable Employment-Related Expenses
Increased.--Section 21(c) of the Internal Revenue Code of 1986
(relating to dollar limit on amount creditable) is amended--
(1) by striking ``$2,400'' in paragraph (1) and inserting
``$3,600'', and
(2) by striking ``$4,800'' in paragraph (2) and inserting
``$6,000''.
(b) Percentage of Employment-Related Expenses Increased.--Section
21(a)(2) of the Internal Revenue Code of 1986 (defining applicable
percentage) is amended to read as follows:
``(2) Applicable percentage defined.--For purposes of
paragraph (1), the term `applicable percentage' means 40
percent reduced (but not below 10 percent) by 1 percentage
point for each $2,000 (or fraction thereof) by which the
taxpayer's adjusted gross income for the taxable year exceeds
$50,000.''.
(c) Employment-Related Expenses Expanded To Include Transportation
Costs and Costs of Educational Programs.--Section 21(b)(2)(A) of the
Internal Revenue Code of 1986 (defining employment-related expenses) is
amended--
(1) by striking ``and'' at the end of clause (i),
(2) by striking the period at the end of clause (ii) and
inserting ``(including expenses for educational activities
provided during such care), and'', and
(3) by adding at the end the following:
``(iii) expenses for transportation--
``(I) related to such services or
care, and
``(II) provided by a person not
described in subsection (e)(6).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 102. INCREASE IN CHILD TAX CREDIT.
(a) In General.--Section 24(a) of the Internal Revenue Code of 1986
(relating to allowance of credit) is amended by striking ``$500 ($400
in the case of taxable years beginning in 1998)'' and inserting
``$900''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 103. EXPANSION OF DEPENDENT CARE ASSISTANCE PROGRAM.
(a) Dollar Limit Increased.--Section 129(a)(2)(A) of the Internal
Revenue Code of 1986 (relating to limitation of exclusion) is amended
to read as follows:
``(A) Dollar limitation.--
``(i) In general.--The amount which may be
excluded under paragraph (1) for dependent care
assistance with respect to dependent care
services provided during a taxable year shall
not exceed--
``(I) in the case of dependent care
services provided for 1 qualifying
individual described in section
21(b)(1), $5,000, and
``(II) in the case of dependent
care services provided for 2 or more
qualifying individuals so described,
$7,000.
``(ii) Amounts for married individuals
filing separate returns.--In the case of a
separate return by a married individual, the
amount applicable under clause (i) shall be
one-half of the amount specified.''.
(b) Payments for Infant Care, Including Stay-at-Home Care,
Allowed.--
(1) In general.--Section 129(e)(1) of the Internal Revenue
Code of 1986 (relating to definitions and special rules) is
amended to read as follows:
``(1) Dependent care assistance.--The term `dependent care
assistance' means--
``(A) the payment of, or provision of, those
services which if paid for by the employee would be
considered employment-related expenses under section
21(b)(2) (relating to expenses for household and
dependent care services necessary for gainful
employment), and
``(B) any payment to the employee or any individual
described in subsection (c)(2) from amounts contributed
to the employee's account during the 9-month period
ending with the birth of a qualifying individual
described in section 21(b)(1)(A), if paid during a
period ending 1 year after such birth.''.
(2) Conforming amendment.--Section 125 of such Code
(relating to cafeteria plans) is amended by redesignating
subsections (h) and (i) as subsections (i) and (j) and by
inserting after subsection (g) the following:
``(h) Allowance of Carryovers of Certain Unused Dependent Care
Assistance to Later Taxable Years.--For purposes of this title--
``(1) a plan or other arrangement shall not fail to be
treated as a cafeteria plan or flexible spending or similar
arrangement, and
``(2) no amount shall be required to be included in gross
income by reason of this section or any other provision of this
chapter,
solely because under such plan or other arrangement any dependent care
assistance described in section 129(e)(1)(B) which is unused as of the
close of a taxable year may be carried forward to the succeeding
taxable year.''.
(c) Payments to Certain Related Individuals for Routine Care
Allowed.--Section 129(c) of the Internal Revenue Code of 1986 (relating
to payments to related individuals) is amended by adding at the end the
following flush sentence:
``The preceding sentence shall not apply to any amount paid or incurred
to any individual otherwise described in paragraph (1) if such amount
is paid or incurred for care of a qualifying individual during the
period ending with the first day of State mandatory schooling of such
qualifying individual.''.
(d) Effective Date.--The amendments made by this section apply to
taxable years beginning after December 31, 2000.
SEC. 104. MUTUALLY EXCLUSIVE USE OF DEPENDENT CARE TAX CREDIT, CHILD
TAX CREDIT, AND DEPENDENT CARE ASSISTANCE PROGRAM FOR
EACH DEPENDENT.
(a) Election To Apply Dependent Care Tax Credit.--
(1) In general.--Section 21 of the Internal Revenue Code of
1986 (relating to expenses for household and dependent care
services necessary for gainful employment) is amended by
redesignating subsection (f) as subsection (g) and by inserting
after subsection (e) the following:
``(f) Election To Have Section Apply.--
``(1) In general.--No credit shall be allowed under
subsection (a) for a taxable year with respect to any
qualifying individual unless the taxpayer elects to have this
section apply with respect to such individual for such year.
``(2) Coordination with child tax credit and dependent care
assistance exclusion.--If the taxpayer elects to apply this
section with respect to a qualifying individual for the taxable
year, such individual may not be considered--
``(A) a qualifying child for purposes of section 24
for such year, or
``(B) a qualifying individual for purposes of
section 129 for such year.''.
(2) Conforming amendment.--Section 21(c) of such Code, as
amended by section 101(a), is amended by striking the last
sentence.
(b) Election To Apply Child Tax Credit.--Section 24 of the Internal
Revenue Code of 1986 (relating to child tax credit) is amended by
adding at the end the following:
``(g) Election To Have Section Apply.--
``(1) In general.--No credit shall be allowed under
subsection (a) for a taxable year with respect to any
qualifying child unless the taxpayer elects to have this
section apply with respect to such child for such year.
``(2) Coordination with dependent care tax credit and
dependent care assistance exclusion.--If the taxpayer elects to
apply this section with respect to a qualifying child for the
taxable year, such child may not be considered a qualifying
individual for purposes of section 21 or 129 for such year.''.
(c) Election To Apply Dependent Care Assistance Exclusion.--Section
129 of the Internal Revenue Code of 1986 (dependent care assistance
programs) is amended by adding at the end the following:
``(f) Election To Have Section Apply.--
``(1) In general.--No exclusion shall be allowed under
subsection (a) for a taxable year with respect to any
qualifying individual unless the taxpayer elects to have this
section apply with respect to such individual for such year.
``(2) Coordination with dependent care tax credit and child
tax credit.--If the taxpayer elects to apply this section with
respect to a qualifying individual for the taxable year, such
individual may not be considered--
``(A) a qualifying individual for purposes of
section 21 for such year, or
``(B) a qualifying child for purposes of section 24
for such year.''.
(d) Effective Date.--The amendments made by this section apply to
taxable years beginning after December 31, 2000.
SEC. 105. EXPANSION OF HOME OFFICE DEDUCTION TO INCLUDE USE OF OFFICE
FOR DEPENDENT CARE.
(a) In General.--Section 280A(c)(1) of the Internal Revenue Code of
1986 (relating to certain business use) is amended by adding at the end
the following: ``A portion of a dwelling unit and the exclusive use of
such portion otherwise described in this paragraph shall not fail to be
so described if such portion is also used by the taxpayer during such
exclusive use to care for a dependent of the taxpayer.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 106. INCLUSION OF CHILD CARE COSTS IN CHILD SUPPORT ORDERS.
(a) In General.--Section 466(a) of the Social Security Act (42
U.S.C. 666(a)) is amended by inserting after paragraph (19) the
following:
``(20) Child care costs.--Procedures under which any child
support order enforced under this part shall include an
equitable division between the custodial and noncustodial
parents of any costs of providing child care services in any
case where the custodial parent is employed or is actively
seeking employment.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to child support orders enforced or otherwise modified by a court
on and after the date of enactment of this Act.
TITLE II--ENCOURAGING BUSINESS INVOLVEMENT IN CHILD CARE
SEC. 201. 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. 45E. EMPLOYER-PROVIDED CHILD CARE CREDIT.
``(a) Allowance of Credit.--For purposes of section 38, the
employer-provided child care credit determined under this section for
the taxable year is an amount equal to 40 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 ($250,000 in the case of
qualified child care expenditures with respect to 3 or more qualified
child care facilities each located in a different jurisdiction of State
or local government).
``(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 with
respect to a qualified child care facility.
``(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)).
``(3) Child care credentialing or accreditation entity.--
The term `child care credentialing or accreditation entity'
means a nonprofit private organization or public agency that--
(A) is recognized by a State agency, a tribal
organization, or a national organization that serves as
a peer review panel on the standards and procedures of
public and private child care or school accrediting
bodies; and
(B) accredits a facility or credentials an
individual to provide child care on the basis of--
(i) an accreditation or credentialing
instrument based on peer-validated research;
(ii) compliance with applicable State and
local licensing requirements, or standards
described in section 658E(c)(2)(E)(ii) of the
Child Care and Development Block Grant Act (42
U.S.C. 9858c(c)(2)(E)(ii)), as appropriate, for
the facility or individual;
(iii) outside monitoring of the facility or
individual; and
(iv) criteria that provide assurances of--
(I) compliance with age-appropriate
health and safety standards at the
facility or by the individual;
(II) use of developmentally
appropriate educational activities, as
an integral part of the child care
program carried out at the facility or
by the individual; and
(III) use of ongoing staff
development or training activities for
the staff of the facility or the
individual, including related skills-based testing.
``(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 or joint
ventures.--In the case of partnerships or joint ventures, the
credit shall be allocated among partners or members of the
joint venture 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.
``(g) Termination.--This section shall not apply to taxable years
beginning after December 31, 2003.''
(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 (12),
(B) by striking out the period at the end of
paragraph (13), and inserting a comma and ``plus'', and
(C) by adding at the end the following new
paragraph:
``(14) the employer-provided child care credit determined
under section 45E.''
(2) 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. 45E. Employer-provided child care
credit.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 202. CHARITABLE CONTRIBUTIONS OF SCIENTIFIC EQUIPMENT, COMPUTER
TECHNOLOGY AND EQUIPMENT, AND OTHER SERVICES TO CHILD
CARE PROVIDERS AND TO ELEMENTARY AND SECONDARY SCHOOLS.
(a) Scientific Equipment.--
(1) In general.--Subparagraph (B) of section 170(e)(4) of
the Internal Revenue Code of 1986 (relating to special rule for
contributions of scientific property used for research) is
amended to read as follows:
``(B) Qualified research, child care, or education
contribution.--For purposes of this paragraph, the term
`qualified research, child care, or education
contribution' means a charitable contribution by a
corporation of tangible personal property described in
paragraph (1) of section 1221, but only if--
``(i) the contribution is to--
``(I) an organization described in
section 501(c)(3) and exempt from
taxation under section 501(a) which is
a child care facility in compliance
with all applicable laws and
regulations of the State or unit of
local government in which such facility
is located on the date of such
contribution,
``(II) an organization described in
section 501(c)(3) and exempt from
taxation under section 501(a) which is
a professional or educational support
entity for such a child care facility,
``(III) an educational organization
described in subsection (b)(1)(A)(ii),
``(IV) a governmental unit
described in subsection (c)(1), or
``(V) an organization described in
section 41(e)(6)(B),
``(ii) the contribution is made not later
than 3 years after the date the taxpayer
acquired the property (or in the case of
property constructed by the taxpayer, the date
the construction of the property is
substantially completed),
``(iii) the property is scientific
equipment or apparatus substantially all of the
use of which by the donee is for--
``(I) research or experimentation
(within the meaning of section 174), or
for research training, in the United
States in physical or biological
sciences,
``(II) activities designed to
enhance or support the educational or
developmental achievement of children
or youth, or
``(III) in the case of an
organization described in subclause
(I), (II), (III), or (IV) of clause
(i), use within the United States for
educational purposes or support
activities related to the purpose or
function of the organization,
``(iv) the original use of the property is
by donor or the donee,
``(v) the property is not transferred by
the donee in exchange for money, other
property, or services, except for shipping,
installation, and transfer costs, and
``(vi) the taxpayer receives from the donee
a written statement representing that its use
and disposition of the property will be in
accordance with the provisions of clauses (iv)
and (v).''.
(2) Conforming amendments.--
(A) Paragraph (4)(A) of section 170(e) of such Code
is amended by striking ``qualified research
contribution'' each place it appears and inserting
``qualified research, child care, or education
contribution''.
(B) The heading for section 170(e)(4) of such Code
is amended by inserting ``, child care, or education''
after ``research''.
(b) Expansion of Rules Relating to Contributions of Computer
Technology and Equipment to Certain Child Care Providers.--
(1) In general.--Section 170(e)(6)(B)(i) of the Internal
Revenue Code of 1986 (defining qualified elementary or
secondary educational contribution) is amended by striking
``or'' at the end of subclause (I), by adding ``or'' at the end
of subclause (II), and by inserting after subclause (II) the
following:
``(III) an entity described in
subclause (I) or (II) of paragraph
(4)(B)(i).''.
(2) Conforming amendments.--
(A) Section 170(e)(6)(B)(ii) of such Code is
amended by striking ``2 years'' and inserting ``3
years''.
(B) Section 170(e)(6)(B)(iv) of such Code is
amended by striking ``grades K-12'' and inserting
``grades preschool-12''.
(C) Section 170(e)(6) of such Code is amended by
striking ``qualified elementary or secondary'' each
place it appears and inserting ``qualified child care,
elementary, or secondary''.
(D) The heading for section 170(e)(6)(B) of such
Code is amended by striking ``qualified elementary or
secondary'' and inserting ``qualified child care,
elementary, or secondary''.
(E) The heading for section 170(e)(6) of such Code
is amended by striking ``elementary or secondary'' and
inserting ``child care or elementary or secondary''.
(c) Donations to Charity for Refurbishing.--
(1) Scientific equipment.--Section 170(e)(4) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following:
``(E) Donations to charity for refurbishing.--For
purposes of this paragraph, a charitable contribution
by a corporation shall be treated as a qualified
research, child care, or education contribution if--
``(i) such contribution is a contribution
of property described in subparagraph (B)(iii)
to an organization described in section
501(c)(3) and exempt from taxation under
section 501(a),
``(ii) such organization repairs and
refurbishes the property and donates
the property to an organization described in subparagraph (B)(i), and
``(iii) the taxpayer receives from the
organization to whom the taxpayer contributed
the property a written statement representing
that its use of the property (and any use by
the organization to which it donates the
property) meets the requirements of this
paragraph.''.
(2) Computer technology and equipment.--Section 170(e)(6)
of the Internal Revenue Code of 1986 is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph (D)
the following:
``(E) Donations to charity for refurbishing.--For
purposes of this paragraph, a charitable contribution
by a corporation shall be treated as a qualified child
care, elementary, or secondary educational contribution
if--
``(i) such contribution is a contribution
of computer technology or equipment to an
organization described in section 501(c)(3) and
exempt from taxation under section 501(a),
``(ii) such organization repairs and
refurbishes the property and donates the
property to an organization described in
subparagraph (B)(i), and
``(iii) the taxpayer receives from the
organization to whom the taxpayer contributed
the property a written statement representing
that its use of the property (and any use by
the organization to which it donates the
property) meets the requirements of this
paragraph.''.
(d) Corporate Donations of Services.--Section 170 of the Internal
Revenue Code of 1986 is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the following:
``(m) Treatment of the Donation of Certain Services.--
``(1) In general.--For purposes of this section, 50 percent
of the fair market value of charitable services contributed by
a corporation shall be treated as a charitable contribution.
``(2) Charitable services.--
``(A) In general.--For purposes of paragraph (1),
the term `charitable services' means transportation
services, qualified employee volunteer time, and the
use of facilities and equipment--
``(i) provided by the taxpayer to a donee
described in subsection (e)(6)(B)(i), and
``(ii) for which the taxpayer receives from
the donee a written statement representing that
the charitable services are not in exchange for
money, other property, or services.
``(B) Qualified employee volunteer time.--For the
purpose of this subsection, the term `qualified
employee volunteer time' means time--
``(i) volunteered to the donee by an
employee of the taxpayer during the employee's
normal working hours, and
``(ii) the value of which is based on the
usual wage rate of the employee.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
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