II

104TH CONGRESS

2D SESSION S. 2088

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

SEPTEMBER 18, 1996

Mr. KOHL 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 ‘‘Child Care Infrastruc5 ture Act of 1996’’.
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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 50 per11 cent of the qualified child care expenditures of the tax12 payer for such taxable year.

13 ‘‘(b) DOLLAR LIMITATION.—The credit allowable

14 under subsection (a) for any taxable year shall not exceed

15 $150,000.

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

17 ‘‘(1) QUALIFIED CHILD CARE EXPENDITURE.—

18 The term ‘qualified child care expenditure’ means

19 any amount paid or incurred—

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

21 expand property—

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

23 qualified child care facility of the taxpayer,

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

25 for depreciation (or amortization in lieu of

26 depreciation) is allowable, and
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1 ‘‘(iii) which does not constitute part of

2 the principal residence (within the meaning

3 of section 1034) of the taxpayer or any

4 employee of the taxpayer,

5 ‘‘(B) for the operating costs of a qualified

6 child care facility of the taxpayer, including

7 costs related to the training of employees, to

8 scholarship programs, and to the providing of

9 increased compensation to employees with high10 er levels of child care training,

11 ‘‘(C) under a contract with a qualified

12 child care facility to provide dependent care

13 services to employees of the taxpayer, or

14 ‘‘(D) under a contract to provide depend15 ent care resource and referral services to em16 ployees of the taxpayer.

17 ‘‘(2) QUALIFIED CHILD CARE FACILITY.—

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

19 child care facility’ means a facility—

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

21 provide dependent care assistance, and

22 ‘‘(ii) which meets the requirements of

23 all applicable laws and regulations of the

24 State or local government in which it is lo25 cated, including, but not limited to, the li-
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1 censing of the facility as a child care facil2 ity.

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

4 the principal residence (within the meaning of

5 section 1034) of the operator of the facility.

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

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

8 qualified child care facility with respect to a

9 taxpayer unless—

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

11 to employees of the taxpayer during the

12 taxable year,

13 ‘‘(ii) the facility is not the principal

14 trade or business of the taxpayer unless at

15 least 30 percent of the enrollees of such fa16 cility are dependents of employees of the

17 taxpayer, and

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

19 eligibility to use such facility) does not dis20 criminate in favor of employees of the tax21 payer who are highly compensated employ22 ees (within the meaning of section 414(q)).

23 ‘‘(d) RECAPTURE OF ACQUISITION AND CONSTRUC24 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 expenditures of the taxpayer de13 scribed in subsection (c)(1)(A) with respect to

14 such 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 ........................................................................ 85

Year 5 ........................................................................ 70

Year 6 ........................................................................ 55

Year 7 ........................................................................ 40

Year 8 ........................................................................ 25

Years 9 and 10 .......................................................... 10

Years 11 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 dispos20 ing of such interest in effect immediately

21 before such disposition. In the event of

22 such an assumption, the person acquiring

23 the interest in the facility shall be treated

24 as the taxpayer for purposes of assessing
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1 any recapture liability (computed as if

2 there had been no change in ownership).

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 ‘‘(e) SPECIAL RULES.—For purposes of this sec2 tion—

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 ‘‘(f) 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)(1)(A), 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 (d).

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

16 taxable years beginning after December 31, 1999.’’

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, 1996.

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