II 

108TH CONGRESS 

2D SESSION S. 2030

To amend the Internal Revenue Code of 1986 to make the dependent care 

credit refundable. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 26, 2004

Ms. SNOWE 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 make 

the dependent care credit refundable.

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

3 SECTION 1. DEPENDENT CARE TAX CREDIT. 

4 (a) DEPENDENT CARE SERVICES.—Subpart C of 

5 part IV of subchapter A of chapter 1 of the Internal Rev6 enue Code of 1986 (relating to refundable credits) is 

7 amended by redesignating section 36 as section 37 and 

8 by inserting after section 35 the following new section: 

9 ‘‘SEC. 36. DEPENDENT CARE SERVICES. 

10 ‘‘(a) ALLOWANCE OF CREDIT.—
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1 ‘‘(1) IN GENERAL.—In the case of an individual 

2 who maintains a household which includes as a 

3 member 1 or more qualifying individuals, there shall 

4 be allowed as a credit against the tax imposed by 

5 this subtitle for the taxable year an amount equal to 

6 the applicable percentage of the sum of—

7 ‘‘(A) the employment-related expenses paid 

8 by such individual during the taxable year, plus 

9 ‘‘(B) the respite care expenses paid by 

10 such individual during the taxable year. 

11 ‘‘(2) APPLICABLE PERCENTAGE DEFINED.—

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (1), the term ‘applicable percentage’ 

14 means 50 percent reduced (but not below 20 

15 percent) by 1 percentage point for each full 

16 $1,000 amount by which the taxpayer’s ad17 justed gross income for the taxable year exceeds 

18 $15,000. 

19 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—

20 ‘‘(i) IN GENERAL.—In the case of a 

21 taxable year beginning in a calendar year 

22 after 2004, subparagraph (A) shall be ap23 plied by increasing the $15,000 amount 

24 contained therein by the cost-of-living ad25 justment (as defined in section 1(f)(3)) for 
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1 such calendar year determined by sub2 stituting 2003 for 1992 in subparagraph 

3 (B) of section 1(f)(3). 

4 ‘‘(ii) ROUNDING.—If any increase de5 termined under clause (i) is not a multiple 

6 of $10, such increase shall be rounded to 

7 the nearest multiple of $10 (or if such in8 crease is a multiple of $5, such increase 

9 shall be increased to the next highest mul10 tiple of $10). 

11 ‘‘(b) EMPLOYMENT-RELATED EXPENSES.—For pur12 poses of this section—

13 ‘‘(1) DETERMINATION OF ELIGIBLE EX14 PENSES.—

15 ‘‘(A) IN GENERAL.—The term ‘employ16 ment-related expenses’ means amounts paid for 

17 the following expenses, but only if such ex18 penses are incurred to enable the taxpayer to be 

19 gainfully employed for any period for which 

20 there are 1 or more qualifying individuals with 

21 respect to the taxpayer: 

22 ‘‘(i) expenses for household services, 

23 and 

24 ‘‘(ii) expenses for the care of a quali25 fying individual. 
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1 Such term shall not include any amount paid 

2 for services outside the taxpayer’s household at 

3 a camp where the qualifying individual stays 

4 overnight and shall not include any respite care 

5 expense taken into account under subsection 

6 (a). 

7 ‘‘(B) EXCEPTION.—Employment-related 

8 expenses described in subparagraph (A) which 

9 are incurred for services outside the taxpayer’s 

10 household shall be taken into account only if in11 curred for the care of—

12 ‘‘(i) a qualifying individual described 

13 in subsection (d)(1), or 

14 ‘‘(ii) a qualifying individual (not de15 scribed in subsection (d)(1)) who regularly 

16 spends at least 8 hours each day in the 

17 taxpayer’s household. 

18 ‘‘(C) DEPENDENT CARE CENTERS.—Em19 ployment-related expenses described in subpara20 graph (A) which are incurred for services pro21 vided outside the taxpayer’s household by a de22 pendent care center (as defined in subpara23 graph (D)) shall be taken into account only if—
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1 ‘‘(i) such center complies with all ap2 plicable laws and regulations of a State or 

3 unit of local government, and 

4 ‘‘(ii) the requirements of subpara5 graph (B) are met.

6 ‘‘(D) DEPENDENT CARE CENTER DE7 FINED.—For purposes of this paragraph, the 

8 term ‘dependent care center’ means any facility 

9 which—

10 ‘‘(i) provides care for more than 6 in11 dividuals (other than individuals who re12 side at the facility), and

13 ‘‘(ii) receives a fee, payment, or grant 

14 for providing services for any of the indi15 viduals (regardless of whether such facility 

16 is operated for profit). 

17 ‘‘(2) DOLLAR LIMIT ON AMOUNT CRED18 ITABLE.—

19 ‘‘(A) IN GENERAL.—The amount of the 

20 employment-related expenses incurred during 

21 any taxable year which may be taken into ac22 count under subsection (a) shall not exceed—

23 ‘‘(i) $3,000 if there is 1 qualifying in24 dividual with respect to the taxpayer for 

25 such taxable year, or
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1 ‘‘(ii) $6,000 if there are 2 or more 

2 qualifying individuals with respect to the 

3 taxpayer for such taxable year.

4 The amount determined under clause (i) or (ii) 

5 (whichever is applicable) shall be reduced by the 

6 aggregate amount excludable from gross income 

7 under section 129 for the taxable year. 

8 ‘‘(B) REDUCTION IN LIMIT FOR AMOUNT

9 OF RESPITE CARE EXPENSES.—The limitation 

10 of subparagraph (A) shall be reduced by the 

11 amount of the respite care expenses taken into 

12 account by the taxpayer under subsection (a) 

13 for the taxable year. 

14 ‘‘(3) EARNED INCOME LIMITATION.—

15 ‘‘(A) IN GENERAL.—Except as otherwise 

16 provided in this paragraph, the amount of the 

17 employment-related expenses incurred during 

18 any taxable year which may be taken into ac19 count under subsection (a) shall not exceed—

20 ‘‘(i) in the case of an individual who 

21 is not married at the close of such year, 

22 such individual’s earned income for such 

23 year, or 

24 ‘‘(ii) in the case of an individual who 

25 is married at the close of such year, the 
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1 lesser of such individual’s earned income or 

2 the earned income of his spouse for such 

3 year. 

4 ‘‘(B) SPECIAL RULE FOR SPOUSE WHO IS

5 A STUDENT OR INCAPABLE OF CARING FOR

6 HIMSELF.—In the case of a spouse who is a 

7 student or a qualified individual described in 

8 subsection (d)(3), for purposes of subparagraph 

9 (A), such spouse shall be deemed for each 

10 month during which such spouse is a full-time 

11 student at an educational institution, or is such 

12 a qualifying individual, to be gainfully employed 

13 and to have earned income of not less than—

14 ‘‘(i) $250 if paragraph (2)(A)(i) ap15 plies for the taxable year, or 

16 ‘‘(ii) $500 if paragraph (2)(A)(ii) ap17 plies for the taxable year. 

18 In the case of any husband and wife, this sub19 paragraph shall apply with respect to only one 

20 spouse for any one month. 

21 ‘‘(c) RESPITE CARE EXPENSES.—For purposes of 

22 this section—

23 ‘‘(1) IN GENERAL.—The term ‘respite care ex24 penses’ means expenses paid (whether or not to en25 able the taxpayer to be gainfully employed) for—
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1 ‘‘(A) the care of a qualifying individual—

2 ‘‘(i) who has attained the age of 13, 

3 or 

4 ‘‘(ii) who is under the age of 13 but 

5 has a physical or mental impairment which 

6 results in the individual being incapable of 

7 caring for himself, 

8 during any period when such individual regu9 larly spends at least 8 hours each day in the 

10 taxpayer’s household, or 

11 ‘‘(B) the care (for not more than 14 days 

12 during the calendar year) of a qualifying indi13 vidual described in subparagraph (A) during 

14 any period during which the individual does not 

15 regularly spend at least 8 hours each day in the 

16 taxpayer’s household. 

17 ‘‘(2) DOLLAR LIMIT.—The amount of the res18 pite care expenses incurred during any taxable year 

19 which may be taken into account under subsection 

20 (a) shall not exceed—

21 ‘‘(A) $1,200 if such expenses are incurred 

22 with respect to only 1 qualifying individual for 

23 the taxable year, or
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1 ‘‘(B) $2,400 if such expenses are incurred 

2 for 2 or more qualifying individuals for such 

3 taxable year. 

4 ‘‘(d) QUALIFYING INDIVIDUAL.—For purposes of this 

5 section, the term ‘qualifying individual’ means—

6 ‘‘(1) a dependent of the taxpayer who is under 

7 the age of 13 and with respect to whom the taxpayer 

8 is entitled to a deduction under section 151(c), 

9 ‘‘(2) a dependent of the taxpayer who is phys10 ically or mentally incapable of caring for himself, or 

11 ‘‘(3) the spouse of the taxpayer, if he is phys12 ically or mentally incapable of caring for himself. 

13 ‘‘(e) SPECIAL RULES.—For purposes of this sec14 tion—

15 ‘‘(1) MAINTAINING HOUSEHOLD.—An indi16 vidual shall be treated as maintaining a household 

17 for any period only if over half the cost of maintain18 ing the household for such period is furnished by 

19 such individual (or, if such individual is married 

20 during such period, is furnished by such individual 

21 and his spouse). 

22 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE23 TURN.—If the taxpayer is married at the close of 

24 the taxable year, the credit shall be allowed under 
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1 subsection (a) only if the taxpayer and his spouse 

2 file a joint return for the taxable year.

3 ‘‘(3) MARITAL STATUS.—An individual legally 

4 separated from his spouse under a decree of divorce 

5 or of separate maintenance shall not be considered 

6 as married. 

7 ‘‘(4) CERTAIN MARRIED INDIVIDUALS LIVING

8 APART.—If—

9 ‘‘(A) an individual who is married and who 

10 files a separate return—

11 ‘‘(i) maintains as his home a house12 hold that constitutes for more than one13 half of the taxable year the principal place 

14 of abode of a qualifying individual, and 

15 ‘‘(ii) furnishes over half the cost of 

16 maintaining such household during the 

17 taxable year, and

18 ‘‘(B) during the last 6 months of such tax19 able year such individual’s spouse is not a mem20 ber of such household, 

21 such individual shall not be considered as married. 

22 ‘‘(5) SPECIAL DEPENDENCY TEST IN CASE OF

23 DIVORCED PARENTS, ETC.—If—
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1 ‘‘(A) paragraph (2) or (4) of section 

2 152(e) applies to any child with respect to any 

3 calendar year, and 

4 ‘‘(B) such child is under the age of 13 or 

5 is physically or mentally incapable of caring for 

6 himself, 

7 in the case of any taxable year beginning in such 

8 calendar year, such child shall be treated as a quali9 fying individual with respect to the custodial parent 

10 (within the meaning of section 152(e)(1)), and shall 

11 not be treated as a qualifying individual with respect 

12 to the noncustodial parent. 

13 ‘‘(6) PAYMENTS TO RELATED INDIVIDUALS.—

14 No credit shall be allowed under subsection (a) for 

15 any amount paid by the taxpayer to an individual—

16 ‘‘(A) with respect to whom, for the taxable 

17 year, a deduction under section 151(c) (relating 

18 to deduction for personal exemptions for de19 pendents) is allowable either to the taxpayer or 

20 his spouse, or 

21 ‘‘(B) who is a child of the taxpayer (within 

22 the meaning of section 151(c)(3)) who has not 

23 attained the age of 19 at the close of the tax24 able year.
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1 For purposes of this paragraph, the term ‘taxable 

2 year’ means the taxable year of the taxpayer in 

3 which the service is performed. 

4 ‘‘(7) STUDENT.—The term ‘student’ means an 

5 individual who during each of 5 calendar months 

6 during the taxable year is a full-time student at an 

7 educational organization. 

8 ‘‘(8) EDUCATIONAL ORGANIZATION.—The term 

9 ‘educational organization’ means an educational or10 ganization described in section 170(b)(1)(A)(ii). 

11 ‘‘(9) IDENTIFYING INFORMATION REQUIRED

12 WITH RESPECT TO SERVICE PROVIDER.—No credit 

13 shall be allowed under subsection (a) for any amount 

14 paid to any person unless—

15 ‘‘(A) the name, address, and taxpayer 

16 identification number of such person are in17 cluded on the return claiming the credit, or 

18 ‘‘(B) if such person is an organization de19 scribed in section 501(c)(3) and exempt from 

20 tax under section 501(a), the name and address 

21 of such person are included on the return 

22 claiming the credit. 

23 In the case of a failure to provide the information 

24 required under the preceding sentence, the preceding 

25 sentence shall not apply if it is shown that the tax-
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1 payer exercised due diligence in attempting to pro2 vide the information so required. 

3 ‘‘(10) IDENTIFYING INFORMATION REQUIRED

4 WITH RESPECT TO QUALIFYING INDIVIDUALS.—No 

5 credit shall be allowed under this section with re6 spect to any qualifying individual unless the TIN of 

7 such individual is included on the return claiming 

8 the credit. 

9 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

10 such regulations as may be necessary to carry out the pur11 poses of this section.’’. 

12 (b) CONFORMING AMENDMENTS.—

13 (1) Section 21 of such Code is repealed. 

14 (2) Section 23(f)(1) of such Code, section 

15 35(g)(6) of such Code, and section 129(a)(2)(C) of 

16 such Code are each amended by striking ‘‘section 

17 21(e)’’ and inserting ‘‘section 36(e)’’. 

18 (3) Section 129(b)(2) of such Code is amended 

19 by striking ‘‘section 21(d)(2)’’ and inserting ‘‘section 

20 36(b)(3)(B)’’. 

21 (4) Section 129(e)(1) of such Code is amended 

22 by striking ‘‘under section 21(b)(2) (relating to ex23 penses for household and dependent care services 

24 necessary for gainful employment)’’ and inserting 
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1 ‘‘or respite care services under section 36 (relating 

2 to dependent care services)’’. 

3 (5) Section 213(e) of such Code is amended by 

4 striking ‘‘section 21’’ and inserting ‘‘section 36’’. 

5 (6) Section 6213(g)(2)(H) of such Code is 

6 amended by striking ‘‘section 21 (related to expenses 

7 for household and dependent care services necessary 

8 for gainful employment)’’ and inserting ‘‘section 36 

9 (relating to dependent care services)’’. 

10 (7) Section 6213(g)(2)(L) of such Code is 

11 amended by striking ‘‘section 21’’ and inserting 

12 ‘‘section 36’’. 

13 (c) TECHNICAL AMENDMENTS.—(1) The table of sec14 tions for subpart C of part IV of subchapter A of chapter 

15 1 of such Code is amended by striking the item relating 

16 to section 36 and inserting the following:

‘‘Sec. 36. Dependent care services. 

‘‘Sec. 37. Overpayments of tax.’’.

17 (2) The table of sections for subpart A of such part 

18 IV is amended by striking the item relating to section 21. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2003.

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