tions, in the second fiscal year for which 
the State receives such funds; 
(iii) not more than 80 percent of the 
cost of each grant made under such sec-
tions, in the third fiscal year for which the 
State receives such funds; and 
(iv) not more than 75 percent of the 
cost of each grant made under such sec-
tions, in any subsequent fiscal year for 
which the State receives such funds. 
(B) NON-FEDERAL SHARE.— 
(i) IN GENERAL.—The State may pro-
vide the non-Federal share of the cost in 
cash or in the form of an in-kind contribu-
tion, fairly evaluated by the Secretary. 
(ii) IN-KIND CONTRIBUTION.—In this 
subparagraph, the term ‘‘in-kind contribu-
tion’’ means payment of the costs of par-
ticipation of eligible child care providers in 
health insurance programs or retirement 
programs. 
(2) CHILD CARE PROVIDER HEALTH BENEFITS 
COVERAGE.— 
(A) FEDERAL SHARE.—The Federal share 
of the cost of carrying out activities under sec-
tion 228, with funds allotted under this section 
and distributed by the Secretary to a State, 
shall be not more than 50 percent of such cost. 
(B) NON-FEDERAL
SHARE.—The State 
may provide the non-Federal share of the cost 
in cash or in kind, fairly evaluated by the Sec-
retary, including plant, equipment, or services. 
The State shall provide the non-Federal share 
directly or through donations from public or 
private entities. Amounts provided by the Fed-
eral Government, or services assisted or sub-
sidized to any significant extent by the Federal 
Government, may not be included in deter-
mining the amount of such share. 
(g) AVAILABILITY OF ALLOTTED FUNDS DISTRIB-
UTED TO STATES.—Of the funds allotted under this sec-
tion for activities described in sections 226 and 227 and 
distributed by the Secretary to a State for a fiscal year— 
(1) not less than 67.5 percent shall be available 
to the State for grants under section 226; 
(2) not less than 22.5 percent shall be available 
to the State for grants under section 227; and 
(3) not more than 10 percent shall be available 
to pay administrative costs incurred by the State to
carry out activities described in sections 226 and 
227. 
(h) DEFINITION.—For the purposes of subsections 
(a) through (e), the term ‘‘State’’ includes only the 50 
States, the District of Columbia, and the Commonwealth 
of Puerto Rico. 
SEC. 225. APPLICATION AND PLAN. 
(a) APPLICATION.—To be eligible to receive a dis-
tribution of funds allotted under section 224, a State shall 
submit to the Secretary an application at such time, in 
such manner, and containing such information as the Sec-
retary may require by rule and shall include in such appli-
cation— 
(1) a State plan that satisfies the requirements 
of subsection (b); and 
(2) assurances of compliance satisfactory to the 
Secretary with respect to the requirements of section 
228. 
(b) REQUIREMENTS OF PLAN.— 
(1) LEAD AGENCY.—The State plan shall iden-
tify the lead agency to make grants under this sub-
title for the State. 
(2) RECRUITMENT AND RETENTION OF CHILD 
CARE
PROVIDERS.—The State plan shall describe 
how the lead agency will encourage both the recruit-
ment of qualified child care providers who are new 
to the child care field and the retention of qualified 
child care providers who have a demonstrated com-
mitment to the child care field. 
(3) NOTIFICATION OF AVAILABILITY OF GRANTS 
AND BENEFITS.—The State plan shall describe how 
the lead agency will identify all eligible child care 
providers in the State and notify the providers of the 
availability of grants and benefits under this sub-
title. 
(4) DISTRIBUTION
OF
GRANTS.—The State 
plan shall describe how the lead agency will make 
grants under sections 226 and 227 to eligible child 
care providers in selected geographical areas in the 
State in compliance with the following requirements: 
(A) 
SELECTION
OF
GEOGRAPHICAL 
AREAS.—For the purpose of making such 
grants for a fiscal year, the State shall— 
(i) select a variety of geographical 
areas, determined by the State, that, col-
lectively— 
(I) include urban areas, suburban 
areas, and rural areas; and 
(II) are areas whose residents 
have diverse income levels; and
(ii) give special consideration to geo-
graphical areas selected under this sub-
paragraph for the preceding fiscal year. 
(B) SELECTION
OF
CHILD
CARE
PRO-
VIDERS
TO
RECEIVE
GRANTS.—In making 
grants under section 226, the State may make 
grants only to eligible child care providers in 
geographical areas selected under subparagraph 
(A), but may give special consideration in such 
areas to eligible child care providers— 
(i) who have attained a higher rel-
evant educational credential; 
(ii) who provide a specific kind of 
child care services; 
(iii) who provide child care services to 
populations who meet specific economic 
characteristics; or 
(iv) who meet such other criteria as 
the State may establish. 
(C) LIMITATION.—The State shall describe 
how the State will ensure that grants made 
under section 226 to child care providers will 
not be used to offset reductions in the com-
pensation of such providers.
(D) REPORTING REQUIREMENT.—With re-
spect to each particular geographical area se-
lected under subparagraph (A), the State shall 
provide an assurance that the State will, for 
each fiscal year for which such State receives a 
grant under section 226— 
(i) include in the report required by 
section 229, detailed information regard-
ing— 
(I) the continuity of employment 
of the grant recipients as child care 
providers with the same employer; 
(II) with respect to each em-
ployer that employed such a grant re-
cipient, whether such employer was 
accredited by a recognized national or 
State accrediting body during the pe-
riod of employment; and 
(III) to the extent practicable 
and available to the State, the rate 
and frequency of employment turnover 
of 
qualified 
child 
care 
providers 
throughout such area, 
during the 2-year period ending on the 
deadline for submission of applications for