[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2030 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2030

 To amend the Internal Revenue Code of 1986 to make the dependent care 
                           credit refundable.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 26, 2004

   Ms. Snowe 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 make the dependent care 
                           credit refundable.

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

SECTION 1. DEPENDENT CARE TAX CREDIT.

    (a) Dependent Care Services.--Subpart C of part IV of subchapter A 
of chapter 1 of the Internal Revenue Code of 1986 (relating to 
refundable credits) is amended by redesignating section 36 as section 
37 and by inserting after section 35 the following new section:

``SEC. 36. DEPENDENT CARE SERVICES.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an individual who 
        maintains a household which includes as a member 1 or more 
        qualifying individuals, there shall be allowed as a credit 
        against the tax imposed by this subtitle for the taxable year 
        an amount equal to the applicable percentage of the sum of--
                    ``(A) the employment-related expenses paid by such 
                individual during the taxable year, plus
                    ``(B) the respite care expenses paid by such 
                individual during the taxable year.
            ``(2) Applicable percentage defined.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `applicable percentage' means 50 percent 
                reduced (but not below 20 percent) by 1 percentage 
                point for each full $1,000 amount by which the 
                taxpayer's adjusted gross income for the taxable year 
                exceeds $15,000.
                    ``(B) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a taxable 
                        year beginning in a calendar year after 2004, 
                        subparagraph (A) shall be applied by increasing 
                        the $15,000 amount contained therein by the 
                        cost-of-living adjustment (as defined in 
                        section 1(f)(3)) for such calendar year 
                        determined by substituting 2003 for 1992 in 
                        subparagraph (B) of section 1(f)(3).
                            ``(ii) Rounding.--If any increase 
                        determined under clause (i) is not a multiple 
                        of $10, such increase shall be rounded to the 
                        nearest multiple of $10 (or if such increase is 
                        a multiple of $5, such increase shall be 
                        increased to the next highest multiple of $10).
    ``(b) Employment-Related Expenses.--For purposes of this section--
            ``(1) Determination of eligible expenses.--
                    ``(A) In general.--The term `employment-related 
                expenses' means amounts paid for the following 
                expenses, but only if such expenses are incurred to 
                enable the taxpayer to be gainfully employed for any 
                period for which there are 1 or more qualifying 
                individuals with respect to the taxpayer:
                            ``(i) expenses for household services, and
                            ``(ii) expenses for the care of a 
                        qualifying individual.
                Such term shall not include any amount paid for 
                services outside the taxpayer's household at a camp 
                where the qualifying individual stays overnight and 
                shall not include any respite care expense taken into 
                account under subsection (a).
                    ``(B) Exception.--Employment-related expenses 
                described in subparagraph (A) which are incurred for 
                services outside the taxpayer's household shall be 
                taken into account only if incurred for the care of--
                            ``(i) a qualifying individual described in 
                        subsection (d)(1), or
                            ``(ii) a qualifying individual (not 
                        described in subsection (d)(1)) who regularly 
                        spends at least 8 hours each day in the 
                        taxpayer's household.
                    ``(C) Dependent care centers.--Employment-related 
                expenses described in subparagraph (A) which are 
                incurred for services provided outside the taxpayer's 
                household by a dependent care center (as defined in 
                subparagraph (D)) shall be taken into account only if--
                            ``(i) such center complies with all 
                        applicable laws and regulations of a State or 
                        unit of local government, and
                            ``(ii) the requirements of subparagraph (B) 
                        are met.
                    ``(D) Dependent care center defined.--For purposes 
                of this paragraph, the term `dependent care center' 
                means any facility which--
                            ``(i) provides care for more than 6 
                        individuals (other than individuals who reside 
                        at the facility), and
                            ``(ii) receives a fee, payment, or grant 
                        for providing services for any of the 
                        individuals (regardless of whether such 
                        facility is operated for profit).
            ``(2) Dollar limit on amount creditable.--
                    ``(A) In general.--The amount of the employment-
                related expenses incurred during any taxable year which 
                may be taken into account under subsection (a) shall 
                not exceed--
                            ``(i) $3,000 if there is 1 qualifying 
                        individual with respect to the taxpayer for 
                        such taxable year, or
                            ``(ii) $6,000 if there are 2 or more 
                        qualifying individuals with respect to the 
                        taxpayer for such taxable year.
                The amount determined under clause (i) or (ii) 
                (whichever is applicable) shall be reduced by the 
                aggregate amount excludable from gross income under 
                section 129 for the taxable year.
                    ``(B) Reduction in limit for amount of respite care 
                expenses.--The limitation of subparagraph (A) shall be 
                reduced by the amount of the respite care expenses 
                taken into account by the taxpayer under subsection (a) 
                for the taxable year.
            ``(3) Earned income limitation.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the amount of the employment-related 
                expenses incurred during any taxable year which may be 
                taken into account under subsection (a) shall not 
                exceed--
                            ``(i) in the case of an individual who is 
                        not married at the close of such year, such 
                        individual's earned income for such year, or
                            ``(ii) in the case of an individual who is 
                        married at the close of such year, the lesser 
                        of such individual's earned income or the 
                        earned income of his spouse for such year.
                    ``(B) Special rule for spouse who is a student or 
                incapable of caring for himself.--In the case of a 
                spouse who is a student or a qualified individual 
                described in subsection (d)(3), for purposes of 
                subparagraph (A), such spouse shall be deemed for each 
                month during which such spouse is a full-time student 
                at an educational institution, or is such a qualifying 
                individual, to be gainfully employed and to have earned 
                income of not less than--
                            ``(i) $250 if paragraph (2)(A)(i) applies 
                        for the taxable year, or
                            ``(ii) $500 if paragraph (2)(A)(ii) applies 
                        for the taxable year.
                In the case of any husband and wife, this subparagraph 
                shall apply with respect to only one spouse for any one 
                month.
    ``(c) Respite Care Expenses.--For purposes of this section--
            ``(1) In general.--The term `respite care expenses' means 
        expenses paid (whether or not to enable the taxpayer to be 
        gainfully employed) for--
                    ``(A) the care of a qualifying individual--
                            ``(i) who has attained the age of 13, or
                            ``(ii) who is under the age of 13 but has a 
                        physical or mental impairment which results in 
                        the individual being incapable of caring for 
                        himself,
                during any period when such individual regularly spends 
                at least 8 hours each day in the taxpayer's household, 
                or
                    ``(B) the care (for not more than 14 days during 
                the calendar year) of a qualifying individual described 
                in subparagraph (A) during any period during which the 
                individual does not regularly spend at least 8 hours 
                each day in the taxpayer's household.
            ``(2) Dollar limit.--The amount of the respite care 
        expenses incurred during any taxable year which may be taken 
        into account under subsection (a) shall not exceed--
                    ``(A) $1,200 if such expenses are incurred with 
                respect to only 1 qualifying individual for the taxable 
                year, or
                    ``(B) $2,400 if such expenses are incurred for 2 or 
                more qualifying individuals for such taxable year.
    ``(d) Qualifying Individual.--For purposes of this section, the 
term `qualifying individual' means--
            ``(1) a dependent of the taxpayer who is under the age of 
        13 and with respect to whom the taxpayer is entitled to a 
        deduction under section 151(c),
            ``(2) a dependent of the taxpayer who is physically or 
        mentally incapable of caring for himself, or
            ``(3) the spouse of the taxpayer, if he is physically or 
        mentally incapable of caring for himself.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Maintaining household.--An individual shall be 
        treated as maintaining a household for any period only if over 
        half the cost of maintaining the household for such period is 
        furnished by such individual (or, if such individual is married 
        during such period, is furnished by such individual and his 
        spouse).
            ``(2) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and his spouse file a joint return for the taxable 
        year.
            ``(3) Marital status.--An individual legally separated from 
        his spouse under a decree of divorce or of separate maintenance 
        shall not be considered as married.
            ``(4) Certain married individuals living apart.--If--
                    ``(A) an individual who is married and who files a 
                separate return--
                            ``(i) maintains as his home a household 
                        that constitutes for more than one-half of the 
                        taxable year the principal place of abode of a 
                        qualifying individual, and
                            ``(ii) furnishes over half the cost of 
                        maintaining such household during the taxable 
                        year, and
                    ``(B) during the last 6 months of such taxable year 
                such individual's spouse is not a member of such 
                household,
        such individual shall not be considered as married.
            ``(5) Special dependency test in case of divorced parents, 
        etc.--If--
                    ``(A) paragraph (2) or (4) of section 152(e) 
                applies to any child with respect to any calendar year, 
                and
                    ``(B) such child is under the age of 13 or is 
                physically or mentally incapable of caring for himself,
        in the case of any taxable year beginning in such calendar 
        year, such child shall be treated as a qualifying individual 
        with respect to the custodial parent (within the meaning of 
        section 152(e)(1)), and shall not be treated as a qualifying 
        individual with respect to the noncustodial parent.
            ``(6) Payments to related individuals.--No credit shall be 
        allowed under subsection (a) for any amount paid by the 
        taxpayer to an individual--
                    ``(A) with respect to whom, for the taxable year, a 
                deduction under section 151(c) (relating to deduction 
                for personal exemptions for dependents) is allowable 
                either to the taxpayer or his spouse, or
                    ``(B) who is a child of the taxpayer (within the 
                meaning of section 151(c)(3)) who has not attained the 
                age of 19 at the close of the taxable year.
        For purposes of this paragraph, the term `taxable year' means 
        the taxable year of the taxpayer in which the service is 
        performed.
            ``(7) Student.--The term `student' means an individual who 
        during each of 5 calendar months during the taxable year is a 
        full-time student at an educational organization.
            ``(8) Educational organization.--The term `educational 
        organization' means an educational organization described in 
        section 170(b)(1)(A)(ii).
            ``(9) Identifying information required with respect to 
        service provider.--No credit shall be allowed under subsection 
        (a) for any amount paid to any person unless--
                    ``(A) the name, address, and taxpayer 
                identification number of such person are included on 
                the return claiming the credit, or
                    ``(B) if such person is an organization described 
                in section 501(c)(3) and exempt from tax under section 
                501(a), the name and address of such person are 
                included on the return claiming the credit.
        In the case of a failure to provide the information required 
        under the preceding sentence, the preceding sentence shall not 
        apply if it is shown that the taxpayer exercised due diligence 
        in attempting to provide the information so required.
            ``(10) Identifying information required with respect to 
        qualifying individuals.--No credit shall be allowed under this 
        section with respect to any qualifying individual unless the 
        TIN of such individual is included on the return claiming the 
        credit.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Conforming Amendments.--
            (1) Section 21 of such Code is repealed.
            (2) Section 23(f)(1) of such Code, section 35(g)(6) of such 
        Code, and section 129(a)(2)(C) of such Code are each amended by 
        striking ``section 21(e)'' and inserting ``section 36(e)''.
            (3) Section 129(b)(2) of such Code is amended by striking 
        ``section 21(d)(2)'' and inserting ``section 36(b)(3)(B)''.
            (4) Section 129(e)(1) of such Code is amended by striking 
        ``under section 21(b)(2) (relating to expenses for household 
        and dependent care services necessary for gainful employment)'' 
        and inserting ``or respite care services under section 36 
        (relating to dependent care services)''.
            (5) Section 213(e) of such Code is amended by striking 
        ``section 21'' and inserting ``section 36''.
            (6) Section 6213(g)(2)(H) of such Code is amended by 
        striking ``section 21 (related to expenses for household and 
        dependent care services necessary for gainful employment)'' and 
        inserting ``section 36 (relating to dependent care services)''.
            (7) Section 6213(g)(2)(L) of such Code is amended by 
        striking ``section 21'' and inserting ``section 36''.
    (c) Technical Amendments.--(1) The table of sections for subpart C 
of part IV of subchapter A of chapter 1 of such Code is amended by 
striking the item relating to section 36 and inserting the following:

                              ``Sec. 36. Dependent care services.
                              ``Sec. 37. Overpayments of tax.''.
    (2) The table of sections for subpart A of such part IV is amended 
by striking the item relating to section 21.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.
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