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‘‘(7) describe how the partnership will protect
the privacy of families and their children partici-
pating in the activities assisted under this part.
‘‘SEC. 10997G. FEDERAL SHARE.
‘‘The Federal share of the cost of establishing and
expanding child opportunity zone family centers—
‘‘(1) for the first year for which an eligible
partnership receives assistance under this part shall
not exceed 90 percent;
‘‘(2) for the second such year, shall not exceed
80 percent;
‘‘(3) for the third such year, shall not exceed 70
percent;
‘‘(4) for the fourth such year, shall not exceed
60 percent; and
‘‘(5) for the fifth such year, shall not exceed 50
percent.
‘‘SEC. 10997H. FUNDING.
‘‘(a) CONTINUATION
OF FUNDING.—Each eligible
partnership that receives a grant under this part shall,
after the third year for which the partnership receives
funds through the grant, be eligible to continue to receive
the funds if the Secretary determines that the partnership
has made significant progress in meeting the performance
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measures used for the partnership’s local evaluation under
section 10997I(a).
‘‘(b) LIMITATION ON USE OF FUNDS TO OFFSET
OTHER PROGRAMS.—Notwithstanding any other provision
of law, none of the funds received under a grant under
this part may be used to pay for expenses related to any
other Federal program, including treating such funds as
an offset against such a Federal program.
‘‘SEC. 10997I. EVALUATIONS AND REPORTS.
‘‘(a) LOCAL EVALUATIONS.—Each partnership re-
ceiving funds under this part shall conduct annual evalua-
tions and submit to the Secretary reports containing the
results of the evaluations. The reports shall include the
results of the partnership’s performance assessment effec-
tiveness in reaching and meeting the needs of families and
children served under this part, including performance
measures demonstrating—
‘‘(1) improvements in areas such as student
achievement, family participation in schools, and ac-
cess to health care, mental health care, child care,
and family support services, resulting from activities
assisted under this part; and
‘‘(2) reductions in such areas as violence among
youth, truancy, suspension, and dropout rates, re-
sulting from activities assisted under this part.
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‘‘(b) NATIONAL EVALUATIONS.—The Secretary shall
reserve not more than 3 percent of the amount appro-
priated under this part to carry out a national evaluation
of the effectiveness of the activities assisted under this
part. Such evaluation shall be completed not later than
3 years after the date of enactment of the Child Oppor-
tunity Zone Family Center Act of 2001, and every year
thereafter and shall be submitted to Congress.
‘‘(c) EXEMPLARY ACTIVITIES.—The Secretary shall
broadly disseminate information on exemplary activities
developed under this part.
‘‘SEC. 10997J. AUTHORIZATION OF APPROPRIATIONS.
‘‘There are authorized to be appropriated to carry out
this part $100,000,000 for fiscal year 2002, and such
sums as may be necessary for each of the fiscal years 2003
through 2005.’’.
TITLE IV—FAIR START—LIFTING
CHILDREN OUT OF POVERTY
Subtitle A—Expanding the Child
Tax Credit
SEC. 4001. EXPANSION OF CHILD TAX CREDIT; CREDIT
MADE PARTIALLY REFUNDABLE.
(a) INCREASE IN AMOUNT ALLOWED.—Subsection
(a) of section 24 of the Internal Revenue Code of 1986
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(relating to allowance of credit) is amended to read as fol-
lows:
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—There shall be allowed as a
credit against the tax imposed by this chapter for
the taxable year with respect to each qualifying child
of the taxpayer an amount equal to the applicable
amount.
‘‘(2) APPLICABLE AMOUNT.—For purposes of
paragraph (1), the applicable amount shall be deter-
mined as follows:
‘‘In the case of any taxable
year beginning in—
The applicable amount is—
2002 .........................................................................................
$600
2003 .........................................................................................
700
2004 .........................................................................................
800
2005 .........................................................................................
900
2006 or thereafter ....................................................................
1,000.’’.
(b) CREDIT ALLOWED AGAINST ALTERNATIVE MIN-
IMUM TAX.—
(1) IN GENERAL.—Section 24(b) of the Internal
Revenue Code of 1986 (relating to limitation based
on adjusted gross income) is amended by adding at
the end the following new paragraph:
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF
TAX.—The credit allowed under subsection (a) for
any taxable year shall not exceed the excess of—
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‘‘(A) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax im-
posed by section 55, over
‘‘(B) the sum of the credits allowable
under this subpart (other than this section) and
section 27 for the taxable year.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 24(d) of such Code is
amended—
(i) by striking ‘‘section 26(a)’’ each
place it appears and inserting ‘‘subsection
(b)(3)’’, and
(ii) in paragraph (1)(B) by striking
‘‘aggregate amount of credits allowed by
this subpart’’ and inserting ‘‘amount of
credit allowed by this section’’.
(B) Paragraph (1) of section 26(a) of such
Code is amended by inserting ‘‘(other than sec-
tion 24)’’ after ‘‘this subpart’’.
(C) Subsection (c) of section 23 is amend-
ed by striking ‘‘and section 1400C’’ and insert-
ing ‘‘and sections 24 and 1400C’’.
(D) Subparagraph (C) of section 25(e)(1)
is amended by inserting ‘‘, 24,’’ after ‘‘sections
23’’.
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(E) Section 904(h) of such Code is amend-
ed by inserting ‘‘(other than section 24)’’ after
‘‘chapter’’.
(F) Subsection (d) of section 1400C is
amended by inserting ‘‘and section 24’’ after
‘‘this section’’.
(G) The heading for section 24(b) of such
Code is amended to read as follows: ‘‘LIMITA-
TIONS.—’’.
(H) The heading for section 24(b)(1) of
such Code is amended to read as follows: ‘‘LIM-
ITATION
BASED
ON
ADJUSTED
GROSS
IN-
COME.—’’.
(c) PORTION OF CHILD CREDIT TREATED AS RE-
FUNDABLE.—
(1) IN
GENERAL.—Paragraph (1) of section
24(d) of the Internal Revenue Code of 1986 (relat-
ing to additional credit for families with 3 or more
children), as amended by subsection (b)(2)(A), is
amended to read as follows:
‘‘(1) IN GENERAL.—The aggregate credits al-
lowed to a taxpayer under subpart C shall be in-
creased by the sum of the credits allowable under
this section for all qualifying children of the tax-
payer (determined without regard to this subsection
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and the limitation under subsection (b)(3)). The
amount of the credit allowed under this subsection
shall not be treated as a credit allowed under this
subpart and shall reduce the amount of credit other-
wise allowable under subsection (a) without regard
to subsection (b)(3).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 24(d) of such Code is amended
by striking paragraphs (2) and (3).
(B) The heading for section 24(d) of such
Code is amended to read as follows: ‘‘ADDI-
TIONAL CREDIT FOR CERTAIN FAMILIES.—’’.
(C) Section 32 of such Code is amended by
striking subsection (m).
(d) COORDINATION WITH FEDERAL MEANS-TESTED
PROGRAMS.—Section 24(d) of the Internal Revenue Code
of 1986 (relating to additional credit for certain families),
as amended by subsection (c), is amended by adding at
the end the following new paragraph:
‘‘(2) COORDINATION WITH MEANS-TESTED PRO-
GRAMS.—For purposes of any benefits, assistance,
or supportive services under any Federal program or
under any State or local program financed, in whole
or in part, with Federal funds or with State funds,
taken into account under any maintenance of effort
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requirements, which imposes income limitations on
eligibility for such program, any refund made to an
individual (or the spouse of an individual) by reason
of this subsection shall not be treated as income
(and shall not be taken into account in determining
resources for the month of its receipt and the fol-
lowing month).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
Subtitle B—Strengthening the
Earned Income Tax Credit
SEC. 4101. SHORT TITLE.
This subtitle may be cited as the ‘‘Tax Relief for
Working Families Act of 2001’’.
SEC. 4102. INCREASED EARNED INCOME TAX CREDIT FOR 2
OR MORE QUALIFYING CHILDREN.
(a) IN GENERAL.—The table in section 32(b)(1)(A)
of the Internal Revenue Code of 1986 (relating to percent-
ages) is amended—
(1) in the second item—
(A) by striking ‘‘or more’’, and
(B) by striking ‘‘21.06’’ and inserting
‘‘19.06’’, and
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(2) by inserting after the second item the fol-
lowing:
‘‘3 or more qualifying children
45 .............................
19.06’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 4103. SIMPLIFICATION OF DEFINITION OF EARNED IN-
COME.
(a) IN GENERAL.—Section 32(c)(2)(A)(i) of the In-
ternal Revenue Code of 1986 (defining earned income) is
amended by inserting ‘‘, but only if such amounts are in-
cludible in gross income for the taxable year’’ after ‘‘other
employee compensation’’.
(b) 
CONFORMING
AMENDMENT.—Section
32(c)(2)(B) of the Internal Revenue Code of 1986 (defin-
ing earned income) is amended by striking ‘‘and’’ at the
end of clause (iv), by striking the period at the end of
clause (v) and inserting ‘‘, and’’, and by adding at the
end the following:
‘‘(vi) the requirement under subpara-
graph (A)(i) that an amount be includible
in gross income shall not apply if such
amount is exempt from tax under section
7873 or is derived directly from restricted
and allotted land under the Act of Feb-
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ruary 8, 1887 (commonly known as the In-
dian General Allotment Act) (25 U.S.C.
331 et seq.) or from land held under Acts
or treaties containing an exception provi-
sion similar to the Indian General Allot-
ment Act.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received in taxable
years beginning after December 31, 2001.
SEC. 4104. SIMPLIFICATION OF DEFINITION OF CHILD DE-
PENDENT.
(a) REMOVAL OF SUPPORT TEST FOR CERTAIN INDI-
VIDUALS.—Section 152(a) of the Internal Revenue Code
of 1986 (relating to general definition) is amended to read
as follows:
‘‘(a) GENERAL DEFINITION.—For purposes of this
subtitle—
‘‘(1) 
DEPENDENT.—The 
term 
‘dependent’
means—
‘‘(A) any individual described in paragraph
(2) over half of whose support, for the calendar
year in which the taxable year of the taxpayer
begins, was received from the taxpayer (or is
treated under subsection (c) as received from
the taxpayer), or
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‘‘(B) any individual described in subsection
(f).
‘‘(2) INDIVIDUALS.—An individual is described
in this paragraph if such individual is—
‘‘(A) a brother, sister, stepbrother, or step-
sister of the taxpayer,
‘‘(B) the father or mother of the taxpayer,
or an ancestor of either,
‘‘(C) a stepfather or stepmother of the tax-
payer,
‘‘(D) a son or daughter of a brother or sis-
ter of the taxpayer,
‘‘(E) a brother or sister of the father or
mother of the taxpayer,
‘‘(F) a son-in-law, daughter-in-law, father-
in-law, mother-in-law, brother-in-law, or sister-
in-law of the taxpayer, or
‘‘(G) an individual (other than an indi-
vidual who at any time during the taxable year
was the spouse, determined without regard to
section 7703, of the taxpayer) who, for the tax-
able year of the taxpayer, has as their principal
place of abode the home of the taxpayer and is
a member of the taxpayer’s household.’’.
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‘‘(B) a stepson or stepdaughter of the tax-
payer.
‘‘(3) SPECIAL RULES.—
‘‘(A) 2 OR MORE CLAIMING DEPENDENT.—
Except as provided in subparagraph (B), if an
individual may be claimed as a dependent by 2
or more taxpayers (but for this subparagraph)
for a taxable year beginning in the same cal-
endar year, only the taxpayer with the highest
adjusted gross income for such taxable year
shall be allowed the deduction with respect to
such individual.
‘‘(B) RELEASE
OF
CLAIM
TO
EXEMP-
TION.—Subparagraph (A) shall not apply with
respect to an individual if—
‘‘(i) the taxpayer with the highest ad-
justed gross income under subparagraph
(A), for any calendar year signs a written
declaration (in such manner and form as
the Secretary may by regulations pre-
scribe) that such taxpayer will not claim
such individual as a dependent for any tax-
able year beginning in such calendar year,
‘‘(ii) the other taxpayer provides over
half of such individual’s support for the
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calendar year in which the taxable year of
such other taxpayer begins, and
‘‘(iii) such other taxpayer attaches
such written declaration to such taxpayer’s
return for the taxable year beginning dur-
ing such calendar year.’’.
(c) RULES RELATING TO FOSTER CHILD.—Section
152(b)(2) of the Internal Revenue Code of 1986 (relating
to rules relating to general definition) is amended by strik-
ing ‘‘a foster child’’ and all that follows through ‘‘indi-
vidual)’’ and inserting ‘‘an eligible foster child (as defined
in section 32(c)(3)(B)(iii)) of an individual’’.
(d) EXEMPTION FROM GROSS INCOME TEST.—Sec-
tion 151(c)(3) of the Internal Revenue Code of 1986 (re-
lating to definition of child) is amended by striking ‘‘or
stepdaughter’’ and inserting ‘‘stepdaughter, or a descend-
ant of such individual’’.
(e) WAIVER OF DEDUCTION FOR DIVORCED PAR-
ENTS.—
(1) IN GENERAL.—So much of section 152(e)
as precedes paragraph (4) of the Internal Revenue
Code of 1986 (relating to support test in case of
child of divorced parents, etc.) is amended to read
as follows:
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‘‘(e) SPECIAL RULES FOR CHILD OF DIVORCED PAR-
ENTS.—
‘‘(1) RELEASE OF CLAIM TO EXEMPTION.—In
the case of a child (as defined in section 151(c)(3))
of parents—
‘‘(A) who are divorced or legally separated
under a decree of divorce or separate mainte-
nance,
‘‘(B) who are separated under a written
separation agreement, or
‘‘(C) who live apart at all times during the
last 6 months of the calendar year,
the custodial parent who is entitled to the deduction
under section 151 for a taxable year with respect to
such child may release such deduction to the non-
custodial parent.
‘‘(2) PROCEDURE.—The noncustodial parent
may claim a child described in paragraph (1) as a
dependent for the taxable year if—
‘‘(A) the custodial parent signs a written
declaration (in such manner and form as the
Secretary may by regulations prescribe) that
such custodial parent will not claim such child
as a dependent for any taxable year beginning
in such calendar year,
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‘‘(B) the custodial parent and the non-
custodial parent provide over half of such
child’s support for the calendar year in which
the taxable years of such parents begin, and
‘‘(C) the noncustodial parent attaches such
written declaration to such noncustodial par-
ent’s return for the taxable year beginning dur-
ing such calendar year.
‘‘(3) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) CUSTODIAL PARENT.—The term ‘cus-
todial parent’ means, with regard to an indi-
vidual, a parent who has custody of such indi-
vidual for a greater portion of the calendar year
than the noncustodial parent.
‘‘(B) NONCUSTODIAL PARENT.—The term
‘noncustodial parent’ means the parent who is
not the custodial parent.’’.
(2) 
PRE-1985
INSTRUMENTS.—Section
152(e)(4)(A) of such Code (relating to exception for
certain pre-1985 instruments) is amended by strik-
ing ‘‘A child’’ and all that follows through ‘‘non-
custodial parent’’ and inserting ‘‘A noncustodial par-
ent described in paragraph (1) shall be entitled to
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the deduction under section 151 for a taxable year
with respect to a child if’’.
(f) CONFORMING AMENDMENTS.—
(1) Section 1(g)(5)(A) of the Internal Revenue
Code of 1986 is amended by inserting ‘‘as in effect
on the day before the date of the enactment of the
Tax Relief for Working Families Act of 2001’’ after
‘‘152(e)’’.
(2) Section 2(b)(1)(A)(i) of such Code is
amended by striking ‘‘paragraph (2) or (4) of’’.
(3) Section 2(b)(3)(B)(i) of such Code is
amended by striking ‘‘paragraph (9)’’ and inserting
‘‘paragraph (2)(G)’’.
(4) Section 21(e)(5)(A) of such Code is amend-
ed by striking ‘‘paragraph (2) or (4) of’’.
(5) Section 21(e)(5) of such Code is amended
in the matter following subclause (B) by inserting
‘‘as in effect on the day before the date of the enact-
ment of the Tax Relief for Working Families Act of
2001’’ after ‘‘152(e)(1)’’.
(6) Section 32(c)(1)(G) of such Code is amend-
ed by striking ‘‘(3)(D).’’ and inserting ‘‘(1)(C). An
individual whose qualifying child or qualifying chil-
dren are not taken into account under subsection (b)
solely by reason of paragraph (3)(D) shall be treated
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as an eligible individual if such individual otherwise
meets the requirements of subparagraph (A)(ii).’’.
(7) Section 32(c)(3)(B)(ii) of such Code is
amended by striking ‘‘paragraph (2) or (4) of’’.
(8) Section 51(i)(1)(C) of such Code is amend-
ed 
by 
striking 
‘‘152(a)(9)’’ 
and 
inserting
‘‘152(a)(2)(G)’’.
(9) Section 152(b) of such Code is amended by
striking ‘‘specified in subsection (a)’’ and inserting
‘‘specified in subsection (a)(2) or (f)(2)’’.
(10) Section 152(c) of such Code is amended by
striking ‘‘(a)’’ and inserting ‘‘(a)(1)’’.
(11) Section 7703(b)(1) of such Code is amend-
ed by striking ‘‘paragraph (2) or (4) of’’.
(12) The following provisions of such Code are
each amended by striking ‘‘paragraphs (1) through
(8) of section 152(a)’’ and inserting ‘‘subparagraphs
(A) through (F) of subsection (a)(2) or subsection
(f)(2) of section 152’’:
(A) Section 170(g)(3).
(B) Subparagraphs (A) and (B) of section
51(i)(1).
(C) The second sentence of section
213(d)(11).
(D) Section 529(e)(2)(B).
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(E) Section 7702B(f)(2)(C)(iii).
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 4105. OTHER MODIFICATIONS TO EARNED INCOME
TAX CREDIT.
(a) MODIFICATION
OF JOINT RETURN REQUIRE-
MENT.—Section 32(d) of the Internal Revenue Code of
1986 (relating to married individuals) is amended to read
as follows:
‘‘(d) MARRIED INDIVIDUALS.—
‘‘(1) IN GENERAL.—If the taxpayer is married
at the close of the taxable year, the credit shall be
allowed under subsection (a) only if the taxpayer
and his spouse file a joint return for the taxable
year.
‘‘(2) MARITAL STATUS.—For purposes of para-
graph (1), an individual legally separated from his
spouse under a decree of divorce or of separate
maintenance shall not be considered as married.
‘‘(3) CERTAIN
MARRIED
INDIVIDUALS
LIVING
APART.—For purposes of paragraph (1), if—
‘‘(A) an individual—
‘‘(i) is married and files a separate re-
turn, and
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‘‘(ii) has a qualifying child who is a
son, daughter, stepson, or stepdaughter of
such individual, and
‘‘(B) during the last 6 months of such tax-
able year, such individual and such individual’s
spouse do not have the same principal place of
abode,
such individual shall not be considered as married.’’.
(b) MODIFICATION OF RULE WHERE THERE ARE 2
OR MORE ELIGIBLE INDIVIDUALS.—Subparagraph (C) of
section 32(c)(1) of the Internal Revenue Code of 1986 (re-
lating to 2 or more eligible individuals) is amended to read
as follows:
‘‘(C) 2 OR MORE ELIGIBLE INDIVIDUALS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), if 2 or more individuals
would (but for this subparagraph and after
application of subparagraph (B)) be treat-
ed as eligible individuals with respect to
the same qualifying child for taxable years
beginning in the same calendar year, only
the individual with the highest modified
adjusted gross income for such taxable
years shall be treated as an eligible indi-
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vidual with respect to such qualifying
child.
‘‘(ii) EXCEPTION FOR CERTAIN PAR-
ENTS.—An otherwise eligible individual
who is not treated under clause (i) as the
only eligible individual with respect to any
qualifying child shall be treated as an eligi-
ble individual with respect to such child
if—
‘‘(I) such child is the son, daugh-
ter, stepson, or stepdaughter of such
individual,
‘‘(II) such child is not taken into
account under subsection (b) by any
other individual, and
‘‘(III) the limitation under sub-
section (a)(2) for the individual who
would (but for this clause) be treated
under clause (i) as the only eligible in-
dividual with respect to such child
would be greater than zero (deter-
mined as if such individual had 2
qualifying children).’’.
(c) EXPANSION OF MATHEMATICAL ERROR AUTHOR-
ITY.—Paragraph (2) of section 6213(g) of the Internal
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Revenue Code of 1986 (relating to definitions) is amended
by striking ‘‘and’’ at the end of subparagraph (K), by
striking the period at the end of subparagraph (L) and
inserting ‘‘, and’’, and by inserting after subparagraph (L)
the following new subparagraph:
‘‘(M) the entry on the return claiming the
credit under section 32 with respect to a child
if, according to the Federal Case Registry of
Child Support Orders established under section
453(h) of the Social Security Act, the taxpayer
is a noncustodial parent of such child.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 2000.
(2) EXPANSION OF MATHEMATICAL ERROR AU-
THORITY.—The amendment made by subsection (c)
shall apply to taxable years beginning after Decem-
ber 31, 2001.
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Subtitle C—Marriage Penalty
Relief
SEC. 4201. MARRIAGE PENALTY RELIEF FOR EARNED IN-
COME CREDIT.
(a) IN GENERAL.—Paragraph (2) of section 32(b) of
the Internal Revenue Code of 1986 (relating to percent-
ages and amounts) is amended—
(1) by striking ‘‘AMOUNTS.—The earned’’ and
inserting ‘‘AMOUNTS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the earned’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) JOINT RETURNS.—In the case of a
joint return, the earned income amount deter-
mined under subparagraph (A) shall be 120
percent of the otherwise applicable amount. If
any amount determined under the preceding
sentence is not a multiple of $10, such amount
shall be rounded to the nearest multiple of
$10.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
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Subtitle D—Expanding the
Dependent Care Tax Credit
SEC. 4301. DEPENDENT CARE TAX CREDIT.
(a) DEPENDENT CARE SERVICES.—Subpart C of
part IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 (relating to refundable credits), as
amended by section 4001(b)(1), is amended by redesig-
nating section 36 as section 37 and by inserting after sec-
tion 35 the following new section:
‘‘SEC. 36. DEPENDENT CARE SERVICES.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an individual
who maintains a household which includes as a
member 1 or more qualifying individuals, there shall
be allowed as a credit against the tax imposed by
this subtitle for the taxable year an amount equal to
the applicable percentage of the sum of—
‘‘(A) the employment-related expenses paid
by such individual during the taxable year, plus
‘‘(B) the respite care expenses paid by
such individual during the taxable year.
‘‘(2) APPLICABLE PERCENTAGE DEFINED.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘applicable percentage’
means 50 percent reduced (but not below 20
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percent) by 1 percentage point for each full
$1,000 amount by which the taxpayer’s ad-
justed gross income for the taxable year exceeds
$15,000.
‘‘(B) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning in a calendar year
after 2001, subparagraph (A) shall be ap-
plied by increasing the $15,000 amount
contained therein by the cost-of-living ad-
justment (as defined in section 1(f)(3)) for
such calendar year determined by sub-
stituting ‘2000’ for ‘1992’ in subparagraph
(B) of section 1(f)(3).
‘‘(ii) ROUNDING.—If any increase de-
termined under clause (i) is not a multiple
of $10, such increase shall be rounded to
the nearest multiple of $10 (or if such in-
crease is a multiple of $5, such increase
shall be increased to the next highest mul-
tiple of $10).
‘‘(b) EMPLOYMENT-RELATED EXPENSES.—For pur-
poses of this section—
‘‘(1) 
DETERMINATION
OF
ELIGIBLE
EX-
PENSES.—
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‘‘(A) IN
GENERAL.—The term ‘employ-
ment-related expenses’ means amounts paid for
the following expenses, but only if such ex-
penses are incurred to enable the taxpayer to be
gainfully employed for any period for which
there are 1 or more qualifying individuals with
respect to the taxpayer:
‘‘(i) expenses for household services,
and
‘‘(ii) expenses for the care of a quali-
fying individual.
Such term shall not include any amount paid
for services outside the taxpayer’s household at
a camp where the qualifying individual stays
overnight and shall not include any respite care
expense taken into account under subsection
(a).
‘‘(B) 
EXCEPTION.—Employment-related
expenses described in subparagraph (A) which
are incurred for services outside the taxpayer’s
household shall be taken into account only if in-
curred for the care of—
‘‘(i) a qualifying individual described
in subsection (d)(1), or
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‘‘(ii) a qualifying individual (not de-
scribed in subsection (d)(1)) who regularly
spends at least 8 hours each day in the
taxpayer’s household.
‘‘(C) DEPENDENT
CARE
CENTERS.—Em-
ployment-related expenses described in subpara-
graph (A) which are incurred for services pro-
vided outside the taxpayer’s household by a de-
pendent care center (as defined in subpara-
graph (D)) shall be taken into account only if—
‘‘(i) such center complies with all ap-
plicable laws and regulations of a State or
unit of local government, and
‘‘(ii) the requirements of subpara-
graph (B) are met.
‘‘(D) DEPENDENT
CARE
CENTER
DE-
FINED.—For purposes of this paragraph, the
term ‘dependent care center’ means any facility
which—
‘‘(i) provides care for more than 6 in-
dividuals (other than individuals who re-
side at the facility), and
‘‘(ii) receives a fee, payment, or grant
for providing services for any of the indi-
698
HR 1990 IH
viduals (regardless of whether such facility
is operated for profit).
‘‘(2) 
DOLLAR
LIMIT
ON
AMOUNT
CRED-
ITABLE.—
‘‘(A) IN
GENERAL.—The amount of the
employment-related expenses incurred during
any taxable year which may be taken into ac-
count under subsection (a) shall not exceed—
‘‘(i) $2,400 if there is 1 qualifying in-
dividual with respect to the taxpayer for
such taxable year, or
‘‘(ii) $4,800 if there are 2 or more
qualifying individuals with respect to the
taxpayer for such taxable year.
The amount determined under clause (i) or (ii)
(whichever is applicable) shall be reduced by the
aggregate amount excludable from gross income
under section 129 for the taxable year.
‘‘(B) REDUCTION IN LIMIT FOR AMOUNT
OF RESPITE CARE EXPENSES.—The limitation
of subparagraph (A) shall be reduced by the
amount of the respite care expenses taken into
account by the taxpayer under subsection (a)
for the taxable year.
‘‘(3) EARNED INCOME LIMITATION.—