II

104TH CONGRESS

2D SESSION S. 2148

To amend the Internal Revenue Code of 1986 to expand the child and

dependent care credit, and for other purposes.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 27, 1996

Mr. HARKIN (for himself and Mrs. MURRAY) 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 expand

the child and dependent care credit, 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; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Working Family Child Care Tax Relief Act of 1996’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 SEC. 2. EXPANSION OF CHILD AND DEPENDENT CARE

4 CREDIT.

5 (a) INCREASE IN CREDIT.—Paragraph (2) of section

6 21(a) (relating to credit for expenses for household and

7 dependent care services necessary for gainful employment)

8 is amended to read as follows:

9 ‘‘(2) APPLICABLE PERCENTAGE DEFINED.—For

10 purposes of paragraph (1), the term ‘applicable per11 centage’ means 30 percent reduced (but not below

12 20 percent) by 1 percentage point for each $3,000

13 (or fraction thereof) by which the taxpayer’s ad14 justed gross income exceeds $50,000.’’

15 (b) INCREASE IN MAXIMUM AMOUNT CREDITABLE.—

16 (1) IN GENERAL.—Section 21(c) (relating to

17 dollar limit on amount creditable) is amended—

18 (A) by striking ‘‘$2,400’’ in paragraph (1)

19 and inserting ‘‘$4,000’’, and

20 (B) by striking ‘‘$4,800’’ in paragraph (2)

21 and inserting ‘‘$8,000’’.

22 (2) PHASEOUT FOR TAXPAYERS WITH AD23 JUSTED GROSS INCOME IN EXCESS OF $50,000.—
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1 (A) IN GENERAL.—Section 21(c) is amend2 ed by adding at the end the following new para3 graph:

4 ‘‘(2) LIMITATION BASED ON ADJUSTED GROSS

5 INCOME.—If the taxpayer’s adjusted gross income

6 for the taxable year exceeds $50,000, the applicable

7 dollar amount under paragraph (1) shall be reduced

8 as follows:

9 ‘‘(A) The $4,000 amount under paragraph

10 (1)(A) shall be reduced (but not below $2,400)

11 by $53.33 for each $1,000 (or fraction thereof)

12 of such excess.

13 ‘‘(B) The $8,000 amount under paragraph

14 (1)(B) shall be reduced (but not below $4,800)

15 by $106.66 for each $1,000 (or fraction there16 of) of such excess.’’

17 (2) CONFORMING AMENDMENTS.—Section

18 21(c), as amended by subsection (b), is amended—

19 (A) by striking ‘‘The amount’’ and insert20 ing:

21 ‘‘(1) IN GENERAL.—The amount’’,

22 (B) by redesignating paragraphs (1) and

23 (2) as subparagraphs (A) and (B), respectively,

24 and
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1 (C) by striking ‘‘paragraph (1) or (2)’’ and

2 inserting ‘‘subparagraph (A) or (B)’’.

3 (c) CREDIT MADE REFUNDABLE.—

4 (1) IN GENERAL.—Section 21 (relating to cred5 it for expenses for household and dependent care

6 services), as amended by this section, is transferred

7 to subpart C of part IV of subchapter A of chapter

8 1, inserted after section 35, and redesignated as sec9 tion 36.

10 (2) CONFORMING AMENDMENTS.—

11 (A) Section 129 is amended—

12 (i) by striking ‘‘21(e)’’ in subsection

13 (a)(2)(C) and inserting ‘‘36(e)’’,

14 (ii) by striking ‘‘21(d)(2)’’ in sub15 section (b)(2) and inserting ‘‘36(d)(2)’’,

16 and

17 (iii) by striking ‘‘21(b)(2)’’ in sub18 section (e)(1) and inserting ‘‘36(b)(2)’’.

19 (B) Section 213(e) is amended by striking

20 ‘‘section 21’’ and inserting ‘‘section 36’’.

21 (3) CLERICAL AMENDMENTS.—

22 (A) The table of sections for subpart A of

23 part IV of subchapter A of chapter 1 is amend24 ed by striking the item relating to section 21.
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1 (B) The table of sections for subpart C of

2 part IV of subchapter A of chapter 1 is amend3 ed by adding at the end the following new item:

‘‘Sec. 36. Expenses for household and dependent care services

necessary for gainful employment.’’

4 (d) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1997.

7 SEC. 3. OFFSETS OF REVENUE LOSS.

8 (a) MODIFICATIONS TO FOREIGN EARNED INCOME

9 EXCLUSION.—

10 (1) REPEAL OF $70,000 EXCLUSION.—Para11 graph (1) of section 911(a) (relating to exclusion

12 from gross income) is amended by inserting ‘‘in the

13 case of taxable years beginning before January 1,

14 1998,’’ before ‘‘the foreign earned income’’.

15 (2) QUALIFIED SCHOOLING EXPENSES.—

16 (A) IN GENERAL.—Section 911(a) is

17 amended by striking ‘‘and’’ at the end of para18 graph (1), by striking the period at the end of

19 paragraph (2) and inserting ‘‘, and’’, and by

20 adding at the end the following new paragraph:

21 ‘‘(3) the qualified schooling expenses of such in22 dividual.’’

23 (B) QUALIFIED SCHOOLING EXPENSES.—

24 Section 911 is amended by redesignating sub-
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1 sections (e) and (f) as subsections (f) and (g)

2 and by inserting after subsection (d) the follow3 ing new subsection:

4 ‘‘(e) QUALIFIED SCHOOLING EXPENSES.—For pur5 poses of this section—

6 ‘‘(1) IN GENERAL.—For purposes of this sec7 tion, the term ‘qualified schooling expenses’ means

8 the reasonable schooling expenses paid or incurred

9 by or on behalf of the individual during the taxable

10 year for the education of each dependent of the indi11 vidual at the elementary or secondary level. For pur12 poses of the preceding sentence, the elementary or

13 secondary level means education which is the equiva14 lent of education from the kindergarten through the

15 12th grade in a United States-type school.

16 ‘‘(2) EXPENSES INCLUDED.—For purposes of

17 paragraph (1), the term ‘schooling expenses’ means

18 the cost of tuition, fees, books, and local transpor19 tation and of other expenses required by the school.

20 Except as provided in paragraph (3), such term does

21 not include expenses of room and board or expenses

22 of transportation other than local transportation.

23 ‘‘(3) ROOM, BOARD, AND TRAVEL ALLOWED IN

24 CERTAIN CASES.—If an adequate United States-type

25 school is not available within a reasonable commut-
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1 ing distance of the individual’s tax home, the ex2 penses of room and board of the dependent and the

3 expenses of the transportation of the dependent each

4 school year between such tax home and the location

5 of the school shall be treated as schooling expenses.

6 ‘‘(4) DETERMINATION OF REASONABLE EX7 PENSES.—If—

8 ‘‘(A) there is an adequate United States9 type school available within a reasonable com10 muting distance of the individual’s tax home,

11 and

12 ‘‘(B) the dependent attends a school other

13 than the school referred to in subparagraph

14 (A),

15 then the amount taken into account under para16 graph (2) shall not exceed the aggregate amount

17 which would be charged for the period by the school

18 referred to in subparagraph (A).

19 ‘‘(5) PERIOD TAKEN INTO ACCOUNT.—An

20 amount shall be taken into account as a qualified

21 schooling expense only if it is attributable to edu22 cation for a period during which the individual’s tax

23 home is in a foreign country.

24 ‘‘(6) SPECIAL RULES WHERE SCHOOLING EX25 PENSES NOT PROVIDED BY EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—To the extent the

2 qualified schooling expenses of any individual

3 for any taxable year is not attributable to em4 ployer provided amounts, such expenses shall be

5 treated as a deduction allowable in computing

6 adjusted gross income to the extent of the limi7 tation of subparagraph (B).

8 ‘‘(B) LIMITATION.—For purposes of sub9 paragraph (A), the limitation of this subpara10 graph is the excess of—

11 ‘‘(i) the foreign earned income of the

12 individual for the taxable year, over

13 ‘‘(ii) the amount of such income ex14 cluded from gross income under subsection

15 (a) for the taxable year.

16 ‘‘(C) 1-YEAR CARRYOVER OF EXPENSES

17 NOT ALLOWED BY REASON OF SUBPARAGRAPH

18 (B).—

19 ‘‘(i) IN GENERAL.—The amount not

20 allowable as a deduction for any taxable

21 year under subparagraph (A) by reason of

22 the limitation of subparagraph (B) shall be

23 treated as a deduction allowable in com24 puting adjusted gross income for the suc25 ceeding taxable year (and only for the suc-
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1 ceeding taxable year) to the extent of the

2 limitation of clause (ii) for such succeeding

3 taxable year.

4 ‘‘(ii) LIMITATION.—For purposes of

5 clause (i), the limitation of this clause for

6 any taxable year is the excess of—

7 ‘‘(I) the limitation of subpara8 graph (B) for such taxable year, over

9 ‘‘(II) amounts treated as a de10 duction under subparagraph (A) for

11 such taxable year.

12 ‘‘(D) EMPLOYER PROVIDED AMOUNTS.—

13 For purposes of this paragraph, the term ‘em14 ployer provided amounts’ means any amount

15 paid or incurred on behalf of the individual by

16 the individual’s employer which is foreign

17 earned income included in the individual’s gross

18 income for the taxable year (without regard to

19 this section).’’

20 (C) CONFORMING AMENDMENT.—Section

21 911(d)(7) is amended by inserting ‘‘or

22 (e)(6)(A)’’ after ‘‘subsection (c)(3)(A)’’.

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to taxable years begin25 ning after December 31, 1997.
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1 (b) SAVINGS FROM WELFARE REFORM.—If there is

2 an overall decrease in Federal revenues for any fiscal year

3 by reason of this Act (without regard to this subsection),

4 such decrease shall be offset by the decrease in Federal

5 expenditures for such fiscal year by reason of the amend6 ments made by, and provisions of, the Personal Respon7 sibility and Work Opportunity Reconciliation Act of 1996

8 (Public Law 104–193).

Æ