I

103D CONGRESS

1ST SESSION H. R. 1993

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

tax for employers who provide on-site day-care facilities for dependents

of their employees, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 5, 1993

Mr. TALENT 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 against tax for employers who provide on-site

day-care facilities 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. ALLOWANCE OF CREDIT FOR EMPLOYER EX4 PENSES FOR CERTAIN ON-SITE DAY-CARE FA5 CILITIES.

6 (a) IN GENERAL.—Subpart D of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of
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1 1986 (relating to business related credits) is amended by

2 adding at the end thereof the following new section:

3 ‘‘SEC. 45A. EMPLOYER ON-SITE DAY-CARE FACILITY CRED4 IT.

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

6 employer on-site day-care facility credit determined under

7 this section for the taxable year is an amount equal to

8 50 percent of the qualified investment in property placed

9 in service during such taxable year as part of a qualified

10 day-care facility.

11 ‘‘(b) LIMITATION.—The credit allowable under sub12 section (a) with respect to any qualified day-care facility

13 shall not exceed $150,000.

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

15 ‘‘(1) QUALIFIED INVESTMENT.—The term

16 ‘qualified investment’ means the amount paid or in17 curred to acquire, construct, rehabilitate, or expand

18 property—

19 ‘‘(A) which is to be used as part of a quali20 fied day-care facility, and

21 ‘‘(B) with respect to which a deduction for

22 depreciation (or amortization in lieu of depre23 ciation) is allowable.

24 Such term includes only amounts properly charge25 able to capital account.
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1 ‘‘(2) QUALIFIED DAY-CARE FACILITY.—

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

3 day-care facility’ means a facility—

4 ‘‘(i) operated by an employer to pro5 vide dependent care assistance for enroll6 ees, at least 30 percent of whom are de7 pendents of employees of employers to

8 which a credit under subsection (a) with

9 respect to the facility is allowable,

10 ‘‘(ii) the principal use of which is to

11 provide dependent care assistance de12 scribed in clause (i),

13 ‘‘(iii) located on the premises of such

14 employer,

15 ‘‘(iv) which meets the requirements of

16 all applicable laws and regulations of the

17 State or local government in which it is lo18 cated, including, but not limited to, the li19 censing of the facility as a day-care facil20 ity, and

21 ‘‘(v) the use of which (or the eligibility

22 to use) does not discriminate in favor of

23 employees who are highly compensated em24 ployees (within the meaning of section

25 414(q)).
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1 ‘‘(B) MULTIPLE EMPLOYERS.—With re2 spect to a facility jointly operated by more than

3 1 employer, the term ‘qualified day-care facility’

4 shall include any facility located on the prem5 ises of 1 employer and within a reasonable dis6 tance from the premises of the other employers.

7 ‘‘(d) RECAPTURE OF CREDIT.—

8 ‘‘(1) IN GENERAL.—If, as of the close of any

9 taxable year, there is a recapture event with respect

10 to any qualified day-care facility, then the tax of the

11 taxpayer under this chapter for such taxable year

12 shall be increased by an amount equal to the prod13 uct of—

14 ‘‘(A) the applicable recapture percentage,

15 and

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

17 allowed under section 38 for all prior taxable

18 years which would have resulted if the qualified

19 on-site day-care expenses of the taxpayer with

20 respect to such facility had been zero.

21 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

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

23 subsection, the applicable recapture percentage

24 shall be determined from the following table:
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The applicable

recapture

‘‘If the recapture event percentage is:

occurs in:

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.

1 ‘‘(B) YEARS.—For purposes of subpara2 graph (A), year 1 shall begin on the first day

3 of the taxable year in which the qualified day4 care facility is placed in service by the taxpayer.

5 ‘‘(3) RECAPTURE EVENT DEFINED.—For pur6 poses of this subsection, the term ‘recapture event’

7 means—

8 ‘‘(A) CESSATION OF OPERATION.—The

9 cessation of the operation of the facility as a

10 qualified day-care facility.

11 ‘‘(B) CHANGE IN OWNERSHIP.—

12 ‘‘(i) IN GENERAL.—Except as pro13 vided in clause (ii), the disposition of a

14 taxpayer’s interest in a qualified day-care

15 facility with respect to which the credit de16 scribed in subsection (a) was allowable.

17 ‘‘(ii) AGREEMENT TO ASSUME RECAP18 TURE LIABILITY.—Clause (i) shall not

19 apply if the person acquiring such interest

20 in the facility agrees in writing to assume
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1 the recapture liability of the person dispos2 ing of such interest in effect immediately

3 before such disposition. In the event of

4 such an assumption, the person acquiring

5 the interest in the facility shall be treated

6 as the taxpayer for purposes of assessing

7 any recapture liability (computed as if

8 there had been no change in ownership).

9 ‘‘(4) SPECIAL RULES.—

10 ‘‘(A) TAX BENEFIT RULE.—The tax for

11 the taxable year shall be increased under para12 graph (1) only with respect to credits allowed

13 by reason of this section which were used to re14 duce tax liability. In the case of credits not so

15 used to reduce tax liability, the carryforwards

16 and carrybacks under section 39 shall be appro17 priately adjusted.

18 ‘‘(B) NO CREDITS AGAINST TAX.—Any in19 crease in tax under this subsection shall not be

20 treated as a tax imposed by this chapter for

21 purposes of determining the amount of any

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

23 ‘‘(C) NO RECAPTURE BY REASON OF CAS24 UALTY LOSS.—The increase in tax under this

25 subsection shall not apply to a cessation of op-
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1 eration of the facility as a qualified day-care fa2 cility by reason of a casualty loss to the extent

3 such loss is restored by reconstruction or re4 placement within a reasonable period estab5 lished by the Secretary.

6 ‘‘(e) SPECIAL ALLOCATION RULES.—For purposes of

7 this section—

8 ‘‘(1) ALLOCATION IN CASE OF MULTIPLE EM9 PLOYERS.—In the case of multiple employers jointly

10 operating a qualified day-care facility, the credit al11 lowable by this section to each such employer shall

12 be its proportionate share of the qualified on-site

13 day-care expenses giving rise to the credit.

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

15 TRUSTS.—Under regulations prescribed by the Sec16 retary, rules similar to the rules of subsection (d) of

17 section 52 shall apply.

18 ‘‘(3) ALLOCATION IN THE CASE OF PARTNER19 SHIPS.—In the case of partnerships, the credit shall

20 be allocated among partners under regulations pre21 scribed by the Secretary.

22 ‘‘(f) NO DOUBLE BENEFIT.—

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

24 this subtitle—
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1 ‘‘(A) IN GENERAL.—If a credit is deter2 mined under this section with respect to any

3 property, the basis of such property shall be re4 duced by the amount of the credit so deter5 mined.

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

7 any taxable year there is a recapture amount

8 determined with respect to any property the

9 basis of which was reduced under paragraph

10 (1), the basis of such property (immediately be11 fore the event resulting in such recapture) shall

12 be increased by an amount equal to such recap13 ture amount. For purposes of the preceding

14 sentence, the term ‘recapture amount’ means

15 any increase in tax (or adjustment in

16 carrybacks or carryovers) determined under

17 subsection (d).

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

19 deduction or credit shall be allowed under any other

20 provision of this chapter with respect to the amount

21 of the credit determined under this section.

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

23 taxable years beginning after December 31, 1996.’’.

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 38(b) of the Internal Revenue Code

2 of 1986 is amended—

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

4 paragraph (7),

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

6 of paragraph (8), and inserting in lieu thereof

7 a comma and ‘‘plus’’, and

8 (C) by adding at the end thereof the fol9 lowing new paragraph:

10 ‘‘(9) the employer on-site day-care facility credit

11 determined under section 45A.’’.

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

13 IV of subchapter A of chapter 1 is amended by add14 ing at the end thereof the following new item:

‘‘Sec. 45A. Employer on-site day-care facility credit.’’.

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

16 this section shall apply to taxable years beginning after

17 December 31, 1993.

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