Child Care for American Families Act
The Child Care for American Families Act would overhaul the employer-provided child care credit in the Internal Revenue Code (section 45F). It replaces the flat 25% credit with a tiered “applicable percentage” that can be higher depending on who pays for the care and where the care is located. Specifically, the bill sets a base 40% credit, with 50% for qualified expenditures by an eligible small business (defined as an average of 500 or fewer employees over the prior two years) and 60% for expenditures at a qualified child care facility in an eligible area (census tract described in 45D(e) or a rural county). The bill also raises the overall credit caps: up to $1.2 million in credit per year, and up to $2 million in qualified expenditures per year. It adds new requirements for guidance on multi-employer facilities, a public awareness program, and a GAO study on regulatory barriers to help streamline and broaden employer participation. The changes take effect for taxable years beginning after enactment.
Key Points
- 1Increase in credit amount: the 45F credit changes from a flat 25% to an “applicable percentage” with tiers—40% base, 50% for eligible small businesses, and 60% for expenditures in an eligible area.
- 2Eligible small business: defined as a taxpayer with an average of 500 or fewer employees during either of the two preceding years (and in existence for the full year prior).
- 3Eligible area: defined as either a census tract described in section 45D(e) or a rural county; a rural county must have more than 50% of its population living in census blocks designated as rural.
- 4Dollar limitations: aggregate credit cannot exceed $1,200,000 per taxable year; the aggregate amount of qualified child care expenditures that may be taken into account cannot exceed $2,000,000 per year.
- 5Effective date: applies to taxable years beginning after enactment.
- 6Administrative provisions: Secretary must issue guidance on applying the credit to multi-employer facilities; a public awareness program must be established within 1 year; GAO must study regulatory barriers and make recommendations to ease compliance and expand participation, including for multi-state and multi-employer providers.
- 7Congressional oversight: the bill includes specific references to the relevant Senate and House committees for the GAO study and related guidance.