(d) EFFECTIVE DATE.—The amendments made by
this section apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 104. MUTUALLY EXCLUSIVE USE OF DEPENDENT CARE
TAX CREDIT, CHILD TAX CREDIT, AND DE-
PENDENT CARE ASSISTANCE PROGRAM FOR
EACH DEPENDENT.
(a) ELECTION TO APPLY DEPENDENT CARE TAX
CREDIT.—
(1) IN GENERAL.—Section 21 of the Internal
Revenue Code of 1986 (relating to expenses for
household and dependent care services necessary for
gainful employment) is amended by redesignating
subsection (f) as subsection (g) and by inserting
after subsection (e) the following:
‘‘(f) ELECTION TO HAVE SECTION APPLY.—
‘‘(1) IN GENERAL.—No credit shall be allowed
under subsection (a) for a taxable year with respect
to any qualifying individual unless the taxpayer
elects to have this section apply with respect to such
individual for such year.
‘‘(2) COORDINATION WITH CHILD TAX CREDIT
AND DEPENDENT CARE ASSISTANCE EXCLUSION.—If
the taxpayer elects to apply this section with respect
to a qualifying individual for the taxable year, such
individual may not be considered—
‘‘(A) a qualifying child for purposes of sec-
tion 24 for such year, or
‘‘(B) a qualifying individual for purposes
of section 129 for such year.’’.
(2) CONFORMING AMENDMENT.—Section 21(c)
of such Code, as amended by section 101(a), is
amended by striking the last sentence.
(b) ELECTION TO APPLY CHILD TAX CREDIT.—Sec-
tion 24 of the Internal Revenue Code of 1986 (relating
to child tax credit) is amended by adding at the end the
following:
‘‘(g) ELECTION TO HAVE SECTION APPLY.—
‘‘(1) IN GENERAL.—No credit shall be allowed
under subsection (a) for a taxable year with respect
to any qualifying child unless the taxpayer elects to
have this section apply with respect to such child for
such year.
‘‘(2) COORDINATION WITH DEPENDENT CARE
TAX
CREDIT
AND
DEPENDENT
CARE
ASSISTANCE
EXCLUSION.—If the taxpayer elects to apply this
section with respect to a qualifying child for the tax-
able year, such child may not be considered a quali-
fying individual for purposes of section 21 or 129
for such year.’’.
(c) ELECTION TO APPLY DEPENDENT CARE ASSIST-
ANCE EXCLUSION.—Section 129 of the Internal Revenue
Code of 1986 (dependent care assistance programs) is
amended by adding at the end the following:
‘‘(f) ELECTION TO HAVE SECTION APPLY.—
‘‘(1) IN GENERAL.—No exclusion shall be al-
lowed under subsection (a) for a taxable year with
respect to any qualifying individual unless the tax-
payer elects to have this section apply with respect
to such individual for such year.
‘‘(2) COORDINATION WITH DEPENDENT CARE
TAX CREDIT AND CHILD TAX CREDIT.—If the tax-
payer elects to apply this section with respect to a
qualifying individual for the taxable year, such indi-
vidual may not be considered—
‘‘(A) a qualifying individual for purposes of
section 21 for such year, or
‘‘(B) a qualifying child for purposes of sec-
tion 24 for such year.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 105. EXPANSION OF HOME OFFICE DEDUCTION TO IN-
CLUDE USE OF OFFICE FOR DEPENDENT
CARE.
(a) IN GENERAL.—Section 280A(c)(1) of the Inter-
nal Revenue Code of 1986 (relating to certain business
use) is amended by adding at the end the following: ‘‘A
portion of a dwelling unit and the exclusive use of such
portion otherwise described in this paragraph shall not fail
to be so described if such portion is also used by the tax-
payer during such exclusive use to care for a dependent
of the taxpayer.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 106. INCLUSION OF CHILD CARE COSTS IN CHILD SUP-
PORT ORDERS.
(a) IN GENERAL.—Section 466(a) of the Social Secu-
rity Act (42 U.S.C. 666(a)) is amended by inserting after
paragraph (19) the following:
‘‘(20) CHILD CARE COSTS.—Procedures under
which any child support order enforced under this
part shall include an equitable division between the
custodial and noncustodial parents of any costs of
providing child care services in any case where the
custodial parent is employed or is actively seeking
employment.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to child support orders enforced
or otherwise modified by a court on and after the date
of enactment of this Act.
TITLE II—ENCOURAGING BUSI-
NESS 
INVOLVEMENT 
IN
CHILD CARE
SEC. 201. ALLOWANCE OF CREDIT FOR EMPLOYER EX-
PENSES FOR CHILD CARE ASSISTANCE.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45E. EMPLOYER-PROVIDED CHILD CARE CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec-
tion 38, the employer-provided child care credit deter-
mined under this section for the taxable year is an amount
equal to 40 percent of the qualified child care expenditures
of the taxpayer for such taxable year.
‘‘(b) DOLLAR LIMITATION.—The credit allowable
under subsection (a) for any taxable year shall not exceed
$150,000 ($250,000 in the case of qualified child care ex-
penditures with respect to 3 or more qualified child care
facilities each located in a different jurisdiction of State
or local government).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED CHILD CARE EXPENDITURE.—
The term ‘qualified child care expenditure’ means
any amount paid or incurred—
‘‘(A) to acquire, construct, rehabilitate, or
expand property—
‘‘(i) which is to be used as part of a
qualified child care facility of the taxpayer,
‘‘(ii) with respect to which a deduction
for depreciation (or amortization in lieu of
depreciation) is allowable, and
‘‘(iii) which does not constitute part of
the principal residence (within the meaning
of section 121) of the taxpayer or any em-
ployee of the taxpayer,
‘‘(B) for the operating costs of a qualified
child care facility of the taxpayer, including
costs related to the training of employees, to
scholarship programs, and to the providing of
increased compensation to employees with high-
er levels of child care training,
‘‘(C) under a contract with a qualified
child care facility to provide child care services
to employees of the taxpayer,
‘‘(D) under a contract to provide child care
resource and referral services to employees of
the taxpayer, or
‘‘(E) for the costs of seeking accreditation
from a child care credentialing or accreditation
entity with respect to a qualified child care fa-
cility.
‘‘(2) QUALIFIED CHILD CARE FACILITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
child care facility’ means a facility—
‘‘(i) the principal use of which is to
provide child care assistance, and
‘‘(ii) which meets the requirements of
all applicable laws and regulations of the
State or local government in which it is lo-
cated, including, but not limited to, the li-
censing of the facility as a child care facil-
ity.
Clause (i) shall not apply to a facility which is
the principal residence (within the meaning of
section 121) of the operator of the facility.
‘‘(B) SPECIAL RULES WITH RESPECT TO A
TAXPAYER.—A facility shall not be treated as a
qualified child care facility with respect to a
taxpayer unless—
‘‘(i) enrollment in the facility is open
to employees of the taxpayer during the
taxable year,
‘‘(ii) the facility is not the principal
trade or business of the taxpayer unless at
least 30 percent of the enrollees of such fa-
cility are dependents of employees of the
taxpayer, and
‘‘(iii) the use of such facility (or the
eligibility to use such facility) does not dis-
criminate in favor of employees of the tax-
payer who are highly compensated employ-
ees (within the meaning of section 414(q)).
‘‘(3) CHILD CARE CREDENTIALING OR ACCREDI-
TATION ENTITY.—The term ‘child care credentialing
or accreditation entity’ means a nonprofit private or-
ganization or public agency that—
(A) is recognized by a State agency, a trib-
al organization, or a national organization that
serves as a peer review panel on the standards
and procedures of public and private child care
or school accrediting bodies; and
(B) accredits a facility or credentials an in-
dividual to provide child care on the basis of—
(i) an accreditation or credentialing
instrument based on peer-validated re-
search;
(ii) compliance with applicable State
and local licensing requirements, or stand-
ards described in section 658E(c)(2)(E)(ii)
of the Child Care and Development Block
Grant Act (42 U.S.C. 9858c(c)(2)(E)(ii)),
as appropriate, for the facility or indi-
vidual;
(iii) outside monitoring of the facility
or individual; and
(iv) criteria that provide assurances
of—
(I) compliance with age-appro-
priate health and safety standards at
the facility or by the individual;
(II) use of developmentally ap-
propriate educational activities, as an
integral part of the child care pro-
gram carried out at the facility or by
the individual; and
(III) use of ongoing staff devel-
opment or training activities for the
staff of the facility or the individual,
including related skills-based testing.
‘‘(d) RECAPTURE OF ACQUISITION AND CONSTRUC-
TION CREDIT.—
‘‘(1) IN GENERAL.—If, as of the close of any
taxable year, there is a recapture event with respect
to any qualified child care facility of the taxpayer,
then the tax of the taxpayer under this chapter for
such taxable year shall be increased by an amount
equal to the product of—
‘‘(A) the applicable recapture percentage,
and
‘‘(B) the aggregate decrease in the credits
allowed under section 38 for all prior taxable
years which would have resulted if the qualified
child care expenditures of the taxpayer de-
scribed in subsection (c)(1)(A) with respect to
such facility had been zero.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
The applicable
recapture
‘‘If the recapture event occurs in:
percentage is:
Years 1–3 ..................................................................
100
Year 4 ........................................................................
Year 5 ........................................................................
Year 6 ........................................................................
Year 7 ........................................................................
Year 8 ........................................................................
Years 9 and 10 ..........................................................
Years 11 and thereafter ............................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day
of the taxable year in which the qualified child
care facility is placed in service by the taxpayer.
‘‘(3) RECAPTURE EVENT DEFINED.—For pur-
poses of this subsection, the term ‘recapture event’
means—
‘‘(A) CESSATION
OF
OPERATION.—The
cessation of the operation of the facility as a
qualified child care facility.
‘‘(B) CHANGE IN OWNERSHIP.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the disposition of a
taxpayer’s interest in a qualified child care
facility with respect to which the credit de-
scribed in subsection (a) was allowable.
‘‘(ii) AGREEMENT TO ASSUME RECAP-
TURE
LIABILITY.—Clause (i) shall not
apply if the person acquiring such interest
in the facility agrees in writing to assume
the recapture liability of the person dis-
posing of such interest in effect imme-
diately before such disposition. In the