[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4874 Introduced in Senate (IS)]

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118th CONGRESS
  2d Session
                                S. 4874

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 31, 2024

 Mr. Kaine (for himself and Mrs. Britt) 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 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 Availability and 
Affordability Act''.

SEC. 2. EXPANSION OF 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 the 
Internal Revenue Code of 1986 is amended by striking ``$150,000'' and 
inserting ``$500,000''.
    (c) Treatment of Jointly Owned or Operated Childcare Facility.--
Section 45F(c)(1) of the Internal Revenue Code of 1986 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 
                facility shall not fail to be treated as a qualified 
                childcare facility of the taxpayer merely because such 
                facility is jointly owned or operated by the taxpayer 
                and other persons.''.
    (d) Special Rule for Small Businesses.--Section 45F(e) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(4) Small businesses.--
                    ``(A) In general.--In the case of a taxpayer 
                described in subparagraph (B)--
                            ``(i) subsection (a)(1) shall be applied by 
                        substituting `60 percent' for `50 percent', and
                            ``(ii) subsection (b) shall be applied by 
                        substituting `$600,000' for `$500,000'.
                    ``(B) Taxpayer described.--A taxpayer described in 
                this subparagraph is a taxpayer that meets the gross 
                receipts test of section 448(c), determined--
                            ``(i) by substituting `5-taxable-year' for 
                        `3-taxable-year' in paragraph (1) thereof, and
                            ``(ii) by substituting `5-year' for `3-
                        year' each place such term appears in paragraph 
                        (3)(A) thereof.''.
    (e) 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) In General.--Section 129(a)(2)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``$5,000 ($2,500'' and inserting 
``$7,500 ($3,750''.
    (b) Effective Date.--The amendment 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--
                    ``(A) 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, and
                    ``(B) further reduced (but not below zero) by 1 
                percentage point for each $2,000 (or fraction thereof) 
                by which the taxpayer's adjusted gross income for the 
                taxable year exceeds $350,000.
    ``(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.
                            ``(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 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).
    ``(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) $5,000 if there is 1 qualifying individual with 
        respect to the taxpayer for such taxable year, or
            ``(2) $8,000 if there are 2 or more qualifying individuals 
        with respect to the taxpayer for such 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 self.--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) 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 the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(3) Marital status.--An individual legally separated from 
        the individual's 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 the individual's home a 
                        household which constitutes for more than \1/2\ 
                        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 
                or herself,
        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 the taxpayer's 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.
    ``(f) 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 the Internal Revenue Code of 1986 is 
        repealed.
            (3) 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.
            (4) Section 6211(b)(4)(A) of such Code is amended by 
        striking ``21 by reason of subsection (g) thereof,''.
            (5) 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,''.
            (6) 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).
            (7) 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)''.
            (8) 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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