I 112th CONGRESS 2d Session H. R. 4397 IN THE HOUSE OF REPRESENTATIVES April 18, 2012 Mrs. Maloney 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 allow a deduction for expenses paid for household and dependent care services necessary for gainful employment and to increase, and make refundable, the credit for such expenses.

1.

Short title

This Act may be cited as the Child Care Affordability Act of 2012.

2.

Allowance of deduction for expenses for household and dependent care services necessary for gainful employment

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and inserting after section 223 the following new section:

224.

Expenses for household and dependent care services necessary for gainful employment

(a)

Allowance of deduction

In the case of an individual for whom there are 1 or more qualifying individuals with respect to such individual, there shall be allowed as a deduction an amount equal to so much of the employment-related expenses paid by such individual during the taxable year as do not exceed— (1)$13,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or (2)200 percent of the dollar amount in effect under paragraph (1) for the taxable year if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year. (b)

Definitions and special rules

For purposes of this section— (1)

Qualifying individual; employment-related expenses

The terms qualifying individual and employment-related expenses shall have the respective meanings given such terms by section 21(b). (2)

Denial of double benefit

(A)

Coordination with dependent care assistance program

The amount of employment-related expenses otherwise taken into account under subsection (a) shall be reduced by the aggregate amount excludable from gross income under section 129 for the taxable year. (B)

Coordination with credit for employment-related expenses

No deduction shall be allowed under subsection (a) for a taxable year with respect to the employment-related expenses of the taxpayer if the taxpayer elects to have section 21 apply for such taxable year. (3)

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 section 21(b)(1)(C), for purposes of paragraph (4), 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— (A)1/12 of the amount in effect under subsection (a)(1) if such subsection applies for the taxable year, or (B)1/12 of the amount in effect under subsection (a)(2) if such subsection applies for the taxable year. In the case of any husband and wife, this paragraph shall apply with respect to only one spouse for any one month.(4)

Other special rules

Rules similar to the rules of subsections (d)(1) and (e) of section 21 shall apply for purposes of this section. (c)

Inflation adjustment

(1)

In general

In the case of a taxable year beginning after 2013, the dollar amount under subsection (a)(1) shall be increased by an amount equal to— (A)such dollar amount, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof. (2)

Rounding

If any amount as adjusted under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100. (d)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.

. (b)

Deductible whether or not taxpayer itemizes

Subsection (a) of section 62 of such Code (defining adjusted gross income) is amended by inserting after paragraph (21) the following new paragraph: (22)

Expenses for household and dependent care services necessary for gainful employment

The deduction allowed by section 224. . (c)

Conforming amendments

(1)Subsection (e) of section 213 is amended by inserting or deduction under section 224 after section 21. (2)Paragraph (2) of section 6213(g) is amended— (A)by striking or in subparagraph (H) and inserting , section 224 (relating to expenses for household and dependent care services necessary for gainful employment), or, and (B)by striking or 6428 in subparagraph (L) and inserting 224, or 6428. (d)

Effective date

The amendments made by this section shall apply to expenses paid in taxable years beginning after the date of the enactment of this Act.

3.

Modification of credit for expenses for household and dependent care services necessary for gainful employment

(a)

In general

(1)

Increase in credit limitation

Subsection (c) of section 21 of the Internal Revenue Code of 1986 (relating to dollar limit on amount creditable) is amended— (A)by striking $3,000 in paragraph (1) and inserting $13,000, and (B)by striking $6,000 in paragraph (2) and inserting 200 percent of the dollar amount in effect under paragraph (1) for the taxable year. (2)

Inflation adjustment

Section 21 of such Code is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection: (f)

Inflation adjustment

(1)

In general

In the case of a taxable year beginning after 2013, the dollar amount under subsection (a)(1) shall be increased by an amount equal to— (A)such dollar amount, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof. (2)

Rounding

If any amount as adjusted under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100. . (3)

Increase in deemed earned income amounts

Paragraph (2) of section 21(d) of such Code (relating to special rules for spouse who is a student or incapable of caring for himself) is amended— (A)by striking $250 if subsection (c)(1) in subparagraph (A) and inserting 1/12 of the amount in effect under subsection (c)(1) if such subsection, and (B)by striking $500 if subsection (c)(2) in subparagraph (B) and inserting 1/12 of the amount in effect under subsection (c)(2) if such subsection. (4)

Increases in credit not subject to EGTRRA sunset

Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to the amendments made by section 204 of such Act. (b)

Coordination with deduction for employment-Related expenses

Subsection (e) of section 21 of such Code (relating to special rules) is amended by adding at the end the following new paragraph: (11)

Election to have section apply

This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year. . (c)

Credit made refundable

(1)

Credit moved to subpart relating to refundable credits

Such Code is amended— (A)by redesignating section 21, as amended by this section, as section 36B, and (B)by moving section 36B (as so redesignated) from subpart A of part IV of subchapter A of chapter 1 to the location immediately before section 37 in subpart C of part IV of subchapter A of chapter 1. (d)

Conforming amendments

(1)Section 224(b) of such Code, as added by this Act, is amended— (A)by striking section 21(b) in paragraph (1) and inserting section 36B(b), (B)by striking section 21 in paragraph (2)(B) and inserting section 36B, (C)by striking section 21(b)(1)(C) in paragraph (3) and inserting section 36B(b)(1)(C), and (D)by striking section 21 in paragraph (4) and inserting section 36B. (2)Subsection (e) of section 213 of such Code is amended by striking section 21 and inserting section 36B. (3)Paragraph (2) of section 6213(g) of such Code is amended by striking section 21 each place it appears and inserting section 36B. (4)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting , 36B, after 36A,. (5)The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 21. (6)The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 36A the following new item: Sec. 36B. Expenses for household and dependent care services necessary for gainful employment. . (e)

Effective date

The amendments made by this section shall apply to expenses paid in taxable years beginning after the date of the enactment of this Act.