II

106TH CONGRESS

1ST SESSION S. 1147

To amend the Internal Revenue Code of 1986 to provide a credit against

tax for employers who provide child care assistance for dependents of

their employees, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 27, 1999

Mr. GRAHAM (for himself, Mr. JEFFORDS, Mr. KOHL, and Mrs. HUTCHISON)

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 provide

a credit against tax for employers who provide child

care assistance for dependents of their employees, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Worksite Child Care

5 Development Act of 1999’’.
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1 SEC. 2. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES

2 FOR CHILD CARE ASSISTANCE.

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of

5 1986 (relating to business related credits) is amended by

6 adding at the end the following new section:

7 ‘‘SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

8 ‘‘(a) IN GENERAL.—For purposes of section 38, the

9 employer-provided child care credit determined under this

10 section for the taxable year is an amount equal to the sum

11 of—

12 ‘‘(1) 50 percent of the qualified child care facil13 ity start-up expenses,

14 ‘‘(2) 50 percent of the qualified child care facil15 ity expenses, and

16 ‘‘(3) 50 percent of the qualified child care ex17 penses,

18 of the taxpayer during the taxable year.

19 ‘‘(b) DOLLAR LIMITATIONS.—

20 ‘‘(1) QUALIFIED CHILD CARE FACILITY START21 UP EXPENSES.—The total amount of the credit de22 termined under subsection (a)(1) for all taxable

23 years shall not exceed $100,000.

24 ‘‘(2) QUALIFIED CHILD CARE FACILITY EX25 PENSES.—The amount of the credit determined
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1 under subsection (a)(2) for any taxable year shall

2 not exceed $25,000.

3 ‘‘(3) QUALIFIED CHILD CARE EXPENSES.—The

4 amount of the credit determined under subsection

5 (a)(3) for any taxable year shall not exceed $50,000.

6 ‘‘(c) DEFINITIONS.—For purposes of this section—

7 ‘‘(1) QUALIFIED CHILD CARE EXPENSES.—

8 ‘‘(A) IN GENERAL.—The term ‘qualified

9 child care expenses’ means any amount paid or

10 incurred to reimburse an employee for expenses

11 for child care which enables the employee to be

12 gainfully employed including expenses related

13 to—

14 ‘‘(i) day care and before and after

15 school care,

16 ‘‘(ii) transportation associated with

17 such care, and

18 ‘‘(iii) before and after school and holi19 day programs including educational and

20 recreational programs and camp programs.

21 ‘‘(B) FAIR MARKET VALUE.—The term

22 ‘qualified child care expenses’ shall not include

23 expenses in excess of the fair market value of

24 such care.

25 ‘‘(2) QUALIFIED CHILD CARE FACILITY.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 child care facility’ means a facility—

3 ‘‘(i) the principal use of which is to

4 provide child care assistance to dependents

5 of employees, and

6 ‘‘(ii) which meets the requirements of

7 all applicable laws and regulations of the

8 State or local government in which it is lo9 cated, including, but not limited to, the li10 censing of the facility as a child care facil11 ity or back-up child care facility providing

12 daily care for dependents who are mildly ill

13 or need temporary care for other reasons

14 that disrupt the normal care arrangements

15 of employees.

16 Clause (i) shall not apply to a facility which is

17 the principal residence (within the meaning of

18 section 1034) of the operator of the facility.

19 ‘‘(B) SPECIAL RULES WITH RESPECT TO A

20 TAXPAYER.—A facility shall not be treated as a

21 qualified child care facility with respect to a

22 taxpayer unless—

23 ‘‘(i) enrollment in the facility is open

24 to employees of the taxpayer during the

25 taxable year,
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1 ‘‘(ii) the facility is not the principal

2 trade or business of the taxpayer, and

3 ‘‘(iii) the use of such facility (or the

4 eligibility to use such facility) does not dis5 criminate in favor of employees of the tax6 payer who are highly compensated employ7 ees (within the meaning of section 414(q)).

8 ‘‘(C) CHILD CARE FACILITIES SPONSORED

9 BY MORE THAN ONE TAXPAYER.—A facility

10 that is sponsored by more than 1 taxpayer shall

11 be treated as a qualified child care facility if it

12 meets the requirements of this paragraph.

13 ‘‘(3) QUALIFIED CHILD CARE FACILITY EX14 PENSES.—The term ‘qualified child care facility ex15 penses’ means any amount paid or incurred—

16 ‘‘(A) for the operating costs of a qualified

17 child care facility of the taxpayer,

18 ‘‘(B) under a contract with a qualified

19 child care facility to provide child care services

20 to employees of the taxpayer, or

21 ‘‘(C) under a contract to provide child care

22 resource and referral coordination services to

23 employees of the taxpayer.

24 ‘‘(4) QUALIFIED CHILD CARE FACILITY START25 UP EXPENSES.—The term ‘qualified child care facil-
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1 ity start-up expenses’ means any amount paid or

2 incurred—

3 ‘‘(A) to acquire, construct, rehabilitate, or

4 expand property—

5 ‘‘(i) which is to be used as part of a

6 qualified child care facility of the taxpayer,

7 ‘‘(ii) with respect to which a deduction

8 for depreciation (or amortization in lieu of

9 depreciation) is allowable, and

10 ‘‘(iii) which does not constitute part of

11 the principal residence (within the meaning

12 of section 1034) of the taxpayer or any

13 employee of the taxpayer, or

14 ‘‘(B) to acquire equipment and supplies

15 necessary for the operation of a qualified child

16 care facility.

17 ‘‘(d) CHILD CARE FACILITIES SPONSORED BY MORE

18 THAN ONE TAXPAYER.—In the case of a qualified child

19 care facility that is sponsored by more than 1 taxpayer,

20 the credit determined under paragraphs (1) and (2) of

21 subsection (a) for each taxpayer for any taxable year may

22 be apportioned among the taxpayers in any manner deter23 mined by the taxpayers.

24 ‘‘(e) RECAPTURE OF ACQUISITION AND CONSTRUC25 TION CREDIT.—
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1 ‘‘(1) IN GENERAL.—If, as of the close of any

2 taxable year, there is a recapture event with respect

3 to any qualified child care facility of the taxpayer,

4 then the tax of the taxpayer under this chapter for

5 such taxable year shall be increased by an amount

6 equal to the product of—

7 ‘‘(A) the applicable recapture percentage,

8 and

9 ‘‘(B) the aggregate decrease in the credits

10 allowed under section 38 for all prior taxable

11 years which would have resulted if the qualified

12 child care facility expenses of the taxpayer de13 scribed in subsection (c)(4) with respect to such

14 facility had been zero.

15 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

16 ‘‘(A) IN GENERAL.—For purposes of this

17 subsection, the applicable recapture percentage

18 shall be determined from the following table:

The applicable

recapture

‘‘If the recapture event occurs in: percentage is:

Years 1–3 .................................................................. 100

Year 4 ........................................................................ 90

Year 5 ........................................................................ 80

Year 6 ........................................................................ 70

Year 7 ........................................................................ 60

Year 8 ........................................................................ 50

Year 9 ........................................................................ 40

Year 10 and thereafter .............................................. 0.

19 ‘‘(B) YEARS.—For purposes of subpara20 graph (A), year 1 shall begin on the first day
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1 of the taxable year in which the qualified child

2 care facility is placed in service by the taxpayer.

3 ‘‘(3) RECAPTURE EVENT DEFINED.—For pur4 poses of this subsection, the term ‘recapture event’

5 means—

6 ‘‘(A) CESSATION OF OPERATION.—The

7 cessation of the operation of the facility as a

8 qualified child care facility.

9 ‘‘(B) CHANGE IN OWNERSHIP.—

10 ‘‘(i) IN GENERAL.—Except as pro11 vided in clause (ii), the disposition of a

12 taxpayer’s interest in a qualified child care

13 facility with respect to which the credit de14 scribed in subsection (a) was allowable.

15 ‘‘(ii) AGREEMENT TO ASSUME RECAP16 TURE LIABILITY.—Clause (i) shall not

17 apply if the person acquiring such interest

18 in the facility agrees in writing to assume

19 the recapture liability of the person dis20 posing of such interest in effect imme21 diately before such disposition. In the

22 event of such an assumption, the person

23 acquiring the interest in the facility shall

24 be treated as the taxpayer for purposes of

25 assessing any recapture liability (computed
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1 as if there had been no change in owner2 ship).

3 ‘‘(4) SPECIAL RULES.—

4 ‘‘(A) TAX BENEFIT RULE.—The tax for

5 the taxable year shall be increased under para6 graph (1) only with respect to credits allowed

7 by reason of this section which were used to re8 duce tax liability. In the case of credits not so

9 used to reduce tax liability, the carryforwards

10 and carrybacks under section 39 shall be appro11 priately adjusted.

12 ‘‘(B) NO CREDITS AGAINST TAX.—Any in13 crease in tax under this subsection shall not be

14 treated as a tax imposed by this chapter for

15 purposes of determining the amount of any

16 credit under subpart A, B, or D of this part.

17 ‘‘(C) NO RECAPTURE BY REASON OF CAS18 UALTY LOSS.—The increase in tax under this

19 subsection shall not apply to a cessation of op20 eration of the facility as a qualified child care

21 facility by reason of a casualty loss to the ex22 tent such loss is restored by reconstruction or

23 replacement within a reasonable period estab24 lished by the Secretary.
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1 ‘‘(f) SPECIAL RULES.—For purposes of this

2 section—

3 ‘‘(1) AGGREGATION RULES.—All persons which

4 are treated as a single employer under subsections

5 (a) and (b) of section 52 shall be treated as a single

6 taxpayer.

7 ‘‘(2) PASS-THRU IN THE CASE OF ESTATES AND

8 TRUSTS.—Under regulations prescribed by the Sec9 retary, rules similar to the rules of subsection (d) of

10 section 52 shall apply.

11 ‘‘(3) ALLOCATION IN THE CASE OF PARTNER12 SHIPS.—In the case of partnerships, the credit shall

13 be allocated among partners under regulations pre14 scribed by the Secretary.

15 ‘‘(g) NO DOUBLE BENEFIT.—

16 ‘‘(1) REDUCTION IN BASIS.—For purposes of

17 this subtitle—

18 ‘‘(A) IN GENERAL.—If a credit is deter19 mined under this section with respect to any

20 property by reason of expenditures described in

21 subsection (c)(4), the basis of such property

22 shall be reduced by the amount of the credit so

23 determined.

24 ‘‘(B) CERTAIN DISPOSITIONS.—If during

25 any taxable year there is a recapture amount
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1 determined with respect to any property the

2 basis of which was reduced under subparagraph

3 (A), the basis of such property (immediately be4 fore the event resulting in such recapture) shall

5 be increased by an amount equal to such recap6 ture amount. For purposes of the preceding

7 sentence, the term ‘recapture amount’ means

8 any increase in tax (or adjustment in

9 carrybacks or carryovers) determined under

10 subsection (e).

11 ‘‘(2) OTHER DEDUCTIONS AND CREDITS.—No

12 deduction or credit shall be allowed under any other

13 provision of this chapter with respect to the amount

14 of the credit determined under this section.

15 ‘‘(h) TERMINATION.—This section shall not apply to

16 taxable years beginning after December 31, 2009.’’

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 38(b) of the Internal Revenue Code

19 of 1986 is amended—

20 (A) by striking out ‘‘plus’’ at the end of

21 paragraph (11),

22 (B) by striking out the period at the end

23 of paragraph (12), and inserting a comma and

24 ‘‘plus’’, and
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1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(13) the employer-provided child care credit

4 determined under section 45D.’’

5 (2) The table of sections for subpart D of part

6 IV of subchapter A of chapter 1 is amended by add7 ing at the end the following new item:

‘‘Sec. 45D. Employer-provided child care credit.’’

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1999.

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