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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7407 Introduced in House (IH)]

<DOC>

118th CONGRESS
  2d Session
                                H. R. 7407

   To amend the Internal Revenue Code of 1986 to provide a credit to 
    certain small employers for the startup costs of dependent care 
                        flexible spending plans.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           February 16, 2024

  Mr. Smith of Nebraska (for himself, Mr. Davis of Illinois, and Mr. 
  Feenstra) 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 provide a credit to 
    certain small employers for the startup costs of dependent care 
                        flexible spending plans.

    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 ``Small Business Dependent Care FSA 
Opportunity Act''.

SEC. 2. SMALL EMPLOYER DEPENDENT CARE FLEXIBLE SPENDING PLAN STARTUP 
              COSTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45BB. SMALL EMPLOYER DEPENDENT CARE FLEXIBLE SPENDING PLAN 
              STARTUP COSTS.

    ``(a) In General.--For purposes of section 38, in the case of an 
eligible employer, the small employer dependent care flexible spending 
plan startup cost credit determined under this section for any taxable 
year is an amount equal to the qualified startup costs paid or incurred 
by the taxpayer during the taxable year.
    ``(b) Dollar Limitation.--The amount of the credit determined under 
this section for any taxable year shall not exceed--
            ``(1) for the first credit year and each of the 2 taxable 
        years immediately following the first credit year, the greater 
        of--
                    ``(A) $500, or
                    ``(B) the lesser of--
                            ``(i) $250 for each employee of the 
                        eligible employer who is not a highly 
                        compensated employee (as defined in section 
                        414(q)) and who is eligible to participate in 
                        the dependent care flexible spending plan 
                        maintained by the eligible employer, or
                            ``(ii) $5,000, and
            ``(2) zero for any other taxable year.
    ``(c) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' has the 
        meaning given such term by section 408(p)(2)(C)(i).
            ``(2) Requirement for new dependent care flexible spending 
        plans.--Such term shall not include an employer if, during the 
        3-taxable year period immediately preceding the 1st taxable 
        year for which the credit under this section is otherwise 
        allowable for a dependent care flexible spending plan of the 
        employer, the employer or any member of any controlled group 
        including the employer (or any predecessor of either) 
        established or maintained a dependent care flexible spending 
        plan for substantially the same employees as the employees for 
        whom the dependent care flexible spending plan with respect to 
        which such credit is otherwise allowable is established or 
        maintained.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) In general.--The term `qualified startup costs' means 
        any ordinary and necessary expenses of an eligible employer 
        which are paid or incurred in connection with--
                    ``(A) the establishment or administration of a 
                dependent care flexible spending plan, or
                    ``(B) education of employees with respect to such 
                plan.
            ``(2) Plan must have at least 1 participant.--Such term 
        shall not include any expense in connection with a plan that 
        does not have at least 1 employee eligible to participate who 
        is not a highly compensated employee (as defined in section 
        414(q)).
            ``(3) Dependent care flexible spending plan.--The term 
        ``dependent care flexible spending plan'' means so much of any 
        plan of an employer as consists of dependent care flexible 
        spending arrangements. For purposes of the preceding sentence, 
        an arrangement shall be treated as a dependent care flexible 
        spending arrangement only if employer contributions to such 
        arrangement are excludible from the gross income of an employee 
        under section 129.
            ``(4) First credit year.--The term ``first credit year'' 
        means, with respect to any qualified startup costs--
                    ``(A) the taxable year which includes the date that 
                the dependent care flexible spending plan to which such 
                costs relate becomes effective, or
                    ``(B) at the election of the eligible employer, the 
                taxable year preceding the taxable year referred to in 
                subparagraph (A).
    ``(e) Special Rules.--Rules similar to the rules of section 45E(e) 
shall apply for purposes of this section.''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
such Code is amended by striking ``plus'' at the end of paragraph (40), 
by striking the period at the end of paragraph (41) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(42) in the case of an eligible employer (as defined in 
        section 45BB(c), the small employer dependent care flexible 
        spending plan startup cost credit determined under section 
        45BB.''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45BB. Small employer dependent care flexible spending plan 
                            startup costs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act, in taxable years ending after such date.
                                 <all>
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