[Congressional Record Volume 142, Number 129 (Wednesday, September 18, 1996)]
[Senate]
[Pages S10838-S10839]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL:

  S. 2088. A bill to amend the Internal Revenue Code of 1986 to provide 
a credit against tax for employers who provide childcare assistance for 
dependents of their employees, and for other purposes; to the Committee 
on Finance.


                   the child care infrastructure act

 Mr. KOHL. Mr. President, as we reach the end of the 104th 
Congress, we can be proud of the business we have finished, and we 
should look forward to finishing the business we have just begun. In 
that spirit, I introduce the Child Care Infrastructure Act of 1996--a 
tax credit designed to encourage employers to increase the supply of 
quality child care by providing it to their employees.
  My bill responds to the challenges presented by the landmark welfare 
legislation recently enacted. And it responds to the fundamental 
changes in the American economy that have led to parents entering the 
workforce in record numbers.
  Already in my State of Wisconsin, 67 percent of the women with 
children under 6 are in the workforce, yet there is only 1 accredited 
child care center for every 2,800 of these kids. Wisconsin has 6,500 
children from 4,000 families on waiting lists for child care. What is 
most amazing is that Wisconsin, even with this sort of supply 
bottleneck, is considered by many to be one of the best States in which 
to find quality child care.
  With the advent of welfare reform, and the movement of more mothers 
of young children into the workforce, the shortage of good child care 
will only get worse. Conservative estimates show that at least 8,000 
new, full-time child care slots will be needed in Milwaukee County 
alone to provide for the children of welfare mothers moving into work.
  Quality child care is the answer on many levels to the challenges of 
an economy fueled more and more by working parents. Safe child care is 
the link that makes it possible for welfare mothers to move from 
dependency to a decent job. Stimulating child care gives our youngest 
children a leg up on a lifetime of learning. Employer-provided child 
care gives working parents the peace of mind to perform their jobs 
well.
  The Child Care Infrastructure Act of 1996 creates a tax credit for 
employers who get involved in increasing the supply of quality child 
care. The credit goes to employers who engage in activities like: 
building and subsidizing an entire child care center, reserving slots 
in a child care center for employees, or contracting with a resource 
and referral agency to provide services such as placement or the design 
of a family day care network to employees. The credit is designed so 
that any company --small or large--has an incentive to get involved in 
the provision of quality child care to its employees.
  The credit is limited to 50 percent of $150,000 per year. The credit 
will sunset after 3 years. With this legislation, I want to encourage 
companies to consider providing child care as an employee benefit. 
However, I believe, and study after study has shown, that once a 
company offers this benefit, they will want to continue it even without 
a tax write-off. That is because companies that provide child care find 
their workers stay in their jobs longer (cutting training costs), have 
higher morale, work harder, and take less sick leave.
  I had the opportunity during the August recess to visit Quad 
Graphics, a large printing firm in Wisconsin that is known for its 
provision of quality child care to its employees through on-site child 
care centers. Quad Graphics is one of Working Mothers magazine's ``100 
Best Companies''--primarily because of the quality of its on-site child 
care centers. Talking to the parents of children at one of those 
centers--seeing the happy and healthy children greeting their parents 
on their breaks and at lunch--was all the evidence I needed to convince 
me that we ought to be encouraging this sort of corporate involvement 
nationwide. Their 24 hour facility improves the company's bottom line--
Quad Graphics is able to attract and retain dedicated employees who 
want a job that allows them to be near their children. And that day 
care center improves the participating families' bottom line as well--
many parents I spoke with told me they would not be able to work, or to 
work well, if they had to worry each day about whether their children 
were cared for, safe, and happy.

  The 21st century economy will be one in which more of us are working, 
and more of us are trying to balance work and family. How well we 
adjust to that balance will determine how strong we are as an economy 
and as a nation of families. My legislation is an attempt to encourage 
businesses to play an active role in this deeply important transition.
  In the 1950's, Federal, State, local governments, communities and 
businesses banded together to build a highway system that is the most 
impressive in the world. Those roads allowed our economy to flourish 
and our people to move safely and quickly to work. In the 1990's, we 
need the same sort of national, comprehensive effort to build safe and 
affordable child care for our children. As more and more parents--of 
all income levels--move into the work force, they need access to 
quality child care just as much as their parents needed quality 
highways to drive to work. And if we are successful--and I plan to be 
successful--in the 21st century excellent child care--like the care 
these kids are getting--will be as common as interstate highways.
  Child care is an investment that is good for children, good for 
business, good for our States, and good for the Nation. We need to 
involve every level of government--and private communities and private 
businesses--in building a child care infrastructure that is the best in 
the world. My legislation is a first, essential step toward this end.
  Mr. President, I ask unanimous consent that the text of my 
legislation and a section-by-section summary be placed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2088

       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 Infrastructure 
     Act of 1996''.

     SEC. 2. 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. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

       ``(a) In General.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to 50 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.
       ``(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 1034) 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 dependent care services to employees of the 
     taxpayer, or
       ``(D) under a contract to provide dependent care resource 
     and referral services to employees of the taxpayer.

[[Page S10839]]

       ``(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 dependent 
     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 1034) 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)).
       ``(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 evpercentage 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.--In the case 
     of partnerships, the credit shall be allocated among partners 
     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, 1999.''
       (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 (11),
       (B) by striking out the period at the end of paragraph 
     (12), and inserting a comma and ``plus'', and
       (C) by adding at the end the following new paragraph:
       ``(13) the employer-provided child care credit determined 
     under section 45D.''
                                                                    ____


                           Section-by-Section


                         Section 1. Short Title

       The bill's short title is the ``Child Care Infrastructure 
     Act of 1996''.


  Section 2. Allowance of Credit for Employer Expenses for Child Care 
                               Assistance

       This section adds a new business related credit called the 
     ``employer-provided child care credit.'' The credit is set at 
     50 percent of eligible expenditures up to a limit of $150,000 
     per taxpayer per tax year. Qualified expenditures mean 
     amounts spent to: build, rehabilitate or expand a qualified 
     child care facility for the taxpayer's employees; to 
     subsidize the operating costs of such a facility; to contract 
     with a child care facility to provide services for the 
     taxpayer's employees; and to contract with a resource and 
     referral service for the taxpayers' employees. The tax credit 
     will not be available to build, rehabilitate, or expand a 
     child care facility if that facility is also the home of the 
     taxpayer or one of the taxpayer's employees.
       A child care facility is considered ``qualified'' if its 
     principle use is to provide dependent care assistance, and if 
     the facility meets all applicable state licensing 
     requirements and other regulations. If the facility is a 
     family day care center located in a home, i.e., if the 
     facility is the primary residence of the operator of the 
     facility, then the requirement that the facility's principle 
     use be as a dependent care center is waived.
       A facility also will not be treated as ``qualified'' unless 
     enrollment is open to employees of the taxpayer, and unless 
     the facility does not discriminate in favor of highly 
     compensated employees. A taxpayer whose primary business is 
     the provision of dependent care assistance will not be 
     eligible for the credit unless the taxpayer's investment is 
     in a facility in which 30 percent of the enrollees are 
     dependents of employees of the taxpayer. The provision was 
     added to ensure that for-profit day care centers would not be 
     eligible for a tax credit simply for engaging in their 
     primary business by building a center. They will, however, be 
     eligible if they build a center chiefly for the children of 
     their employees.
       Under a set of recapture rules, a taxpayer who invests in a 
     facility that ceases activity or changes ownership in less 
     than ten years will have some of his or her credit clawed 
     back. The applicable recapture percentage ranges from 100 
     percent in years 1 through 3 of the center's operation to 10 
     percent in years 9 and 10.
       The credit will be in effect beginning after December 21, 
     1996 and sunset on December 31, 1999.
                                 ______