[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4571 Introduced in House (IH)]

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118th CONGRESS
  1st Session
                                H. R. 4571

   To amend the Internal Revenue Code of 1986 to expand the employer-
provided child care credit and the dependent care assistance exclusion.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 12, 2023

   Mr. Carbajal (for himself and Mrs. Chavez-DeRemer) 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 the employer-
provided child care credit and the dependent care assistance exclusion.

    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 ``Child Care Investment Act of 2023''.

SEC. 2. EXPANSION EMPLOYER-PROVIDED CHILD CARE CREDIT.

    (a) Increase of Amount of Qualified Child Care Expenditures Taken 
Into Account.--Section 45F(a)(1) of the Internal Revenue Code of 1986 
is amended by striking ``25 percent'' and inserting ``50 percent''.
    (b) Increase of Maximum Credit Amount.--Section 45F(b) of such Code 
is amended by striking ``$150,000'' and inserting ``$500,000''.
    (c) Treatment of Jointly Owned or Operated Childcare Facility.--
Section 45F(c)(1) of such Code is amended by adding at the end the 
following new subparagraph:
                    ``(C) Jointly owned or operated childcare 
                facility.--For purposes of subparagraph (A)(i)(I), a 
                qualified childcare facility shall not fail to be 
                treated as being of the taxpayer merely because such 
                facility is jointly owned or operated by the taxpayer 
                and other persons.''.
    (d) In-Home Childcare Service Expenses Eligible for Credit.--
Section 45F(c)(1)(A)(iii) of such Code is amended by striking 
``facility'' and inserting ``provider''.
    (e) Special Rule for Small Businesses.--Section 45F(e) of such Code 
is amended by adding at the end the following new paragraph:
            ``(4) Small businesses.--In the case of a taxpayer that 
        meets the gross receipts test of section 448(c), determined 
        after substituting `5-taxable-year' for `3-taxable-year' in 
        such section and `5-year' for `3-year' each place such term 
        appears in paragraph (3)(A) of such section--
                    ``(A) subsection (a)(1) shall be applied by 
                substituting `60 percent' for `50 percent', and
                    ``(B) subsection (b) shall be applied by 
                substituting `$600,000' for `$500,000'.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this section.

SEC. 3. INCREASE IN AMOUNT EXCLUDABLE FOR DEPENDENT CARE ASSISTANCE 
              PROGRAMS.

    (a) Section 129(a)(2)(A) of the Internal Revenue Code of 1986 is 
amended by striking ``$5,000 ($2,500'' and inserting ``the applicable 
limitation amount (half such amount''.
    (b) Section 129(a)(2) of such Code is amended by adding at the end 
the following new subparagraph:
                    ``(E) Applicable limitation amount.--For purposes 
                of this paragraph, the term `applicable limitation 
                amount' means the amount that is the sum of $10,000 
                plus $2,000 for each individual described in 
                subparagraph (A) or (B) of section 21(b)(1) with 
                respect to such taxpayer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this section.

SEC. 4. HOUSEHOLD AND DEPENDENT CARE CREDIT INCREASED AND MADE 
              REFUNDABLE.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amending by inserting after 
section 36B the following new section:

``SEC. 36C. EXPENSES FOR HOUSEHOLD AND DEPENDENT CARE SERVICES 
              NECESSARY FOR GAINFUL EMPLOYMENT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an individual for which 
        there are 1 or more qualifying individuals with respect to such 
        individual, there shall be allowed as a credit against the tax 
        imposed by this chapter for the taxable year an amount equal to 
        the applicable percentage of the employment-related expenses 
        paid by such individual during the taxable year.
            ``(2) Applicable percentage defined.--For purposes of 
        paragraph (1), the term `applicable percentage' means 50 
        percent reduced (but not below 35 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 
        $15,000.
    ``(b) Definitions of Qualifying Individual and Employment-Related 
Expenses.--For purposes of this section--
            ``(1) Qualifying individual.--The term `qualifying 
        individual' means--
                    ``(A) a dependent of the taxpayer (as defined in 
                section 152(a)(1)) who has not attained age 13,
                    ``(B) a dependent of the taxpayer (as defined in 
                section 152, determined without regard to subsections 
                (b)(1), (b)(2), and (d)(1)(B)) who is physically or 
                mentally incapable of caring for himself or herself and 
                who has the same principal place of abode as the 
                taxpayer for more than one-half of such taxable year, 
                or
                    ``(C) the spouse of the taxpayer, if the spouse is 
                physically or mentally incapable of caring for himself 
                or herself and who has the same principal place of 
                abode as the taxpayer for more than one-half of such 
                taxable year.
            ``(2) Employment-related 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.
                    ``(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 
                        paragraph (1)(A), or
                            ``(ii) a qualifying individual (not 
                        described in paragraph (1)(A)) 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 six 
                        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).
    ``(c) Dollar Limit on Amount Creditable.--The amount of the 
employment-related expenses incurred during any taxable year which may 
be taken into account under subsection (a) shall not exceed--
            ``(1) $3,000 if there is 1 qualifying individual with 
        respect to the taxpayer for such taxable year, or
            ``(2) $6,000 if there are 2 or more qualifying individuals 
        with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is 
applicable) shall be reduced by the aggregate amount excludable from 
gross income under section 129 for the taxable year.
    ``(d) Earned Income Limitation.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the amount of the employment-related expenses 
        incurred during any taxable year which may be taken into 
        account under subsection (a) shall not exceed--
                    ``(A) 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
                    ``(B) 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.
            ``(2) 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 qualifying individual described in subsection 
        (b)(1)(C), for purposes of paragraph (1), 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) $250 if subsection (c)(1) applies for the 
                taxable year, or
                    ``(B) $500 if subsection (c)(2) applies for the 
                taxable year.
    ``(e) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2023, the dollar amounts in this section 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 2022' for `calendar year 2016' in 
                subparagraph (A)(ii).
            ``(2) Rounding.--If any increase under paragraph (1) is not 
        a multiple of $10, such increase shall be rounded to the 
        nearest multiple of $10.
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Place of abode.--An individual shall not be treated 
        as having the same principal place of abode of the taxpayer if 
        at any time during the taxable year of the taxpayer the 
        relationship between the individual and the taxpayer is in 
        violation of local law.
            ``(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 
                        which constitutes for more than one-half of the 
                        taxable year the principal place of abode of a 
                        qualifying individual, and
                            ``(ii) furnishes over half of 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) 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 
        described in subparagraph (A) or (B) of subsection (b)(1) 
        (whichever is appropriate) with respect to the custodial parent 
        (as defined in section 152(e)(4)(A)), 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 152(f)(1)) 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.
    ``(g) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out the 
purposes of this section.''.
    (b) Conforming Amendments.--
            (1) Section 1324(b) of title 31 is amended by inserting 
        ``36C,'' after ``36B,''.
            (2) Section 21 of such Code is repealed.
            (3) Section 45F(C)(1)(A)(iv) of such Code, as added by this 
        Act, is amended by striking ``section 21(b)(1)(A)'' and 
        inserting ``section 36C(b)(1)(A)''.
            (4) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the item relating to section 21.
            (5) Section 6211(b)(4)(A) of such Code is amended by 
        striking ``21 by reason of subsection (g) thereof,''.
            (6) Section 6213(g)(2) of such Code is amended--
                    (A) in subparagraph (H), by striking ``section 21'' 
                and inserting ``section 36C'', and
                    (B) in subparagraph (L)--
                            (i) by striking ``21,'', and
                            (ii) by inserting ``36C,'' after ``32,''.
            (7) The following sections of such Code are each amended by 
        striking ``section 21(e)'' and inserting ``section 36C(e)''.
                    (A) Section 23(f)(1).
                    (B) Section 35(g)(6).
                    (C) Section 129(a)(2)(C), as amended by this Act.
            (8) Section 129 of such Code is further amended--
                    (A) in subsection (b)(2), by striking ``section 
                21(d)(2)'' and inserting ``section 36C(d)(2)'', and
                    (B) in subsection (e)(1), by striking ``section 
                21(b)(2)'' and inserting ``section 36C(b)(2)''.
            (9) Section 213(e) of such Code is amended by striking 
        ``section 21'' and inserting ``section 36C''.
    (c) Clerical Amendment.--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 36B the following new 
item:

``Sec. 36C. Expenses for household and dependent care services 
                            necessary for gainful employment.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this section.
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