‘‘(2) APPLICABLE PERCENTAGE DEFINED.—For
purposes of paragraph (1), the term ‘applicable per-
centage’ means 50 percent reduced (but not below
20 percent) by 1 percentage point for each $1,000
(or fraction thereof) by which the taxpayer’s ad-
justed gross income for the taxable year exceeds
$30,000.’’
(b) EQUIVALENT OF INCREASED BENEFIT WHERE
PARENT STAYS AT HOME TO PROVIDE CHILD CARE FOR
CHILD UNDER AGE 4.—
(1) IN GENERAL.—Section 24 of such Code (re-
lating to child tax credit) is amended by redesignat-
ing subsections (e) and (f) as subsections (f) and
(g), respectively, and by inserting after subsection
(e) the following new subsection:
‘‘(f) ADDITIONAL CREDIT IF TAXPAYER HAS QUALI-
FYING CHILD UNDER AGE 4.—
‘‘(1) IN GENERAL.—If any qualifying child of
the taxpayer is a young child, the credit allowed by
subsection (a) shall be increased by the increased de-
pendent care credit equivalent amount.
‘‘(2) INCREASED
DEPENDENT
CARE
CREDIT
EQUIVALENT AMOUNT.—For purposes of paragraph
(1), the term ‘increased dependent care credit equiv-
alent amount’ means, with respect to any taxable
year beginning in a calendar year, an amount equal
to—
‘‘(A) the amount estimated by the Sec-
retary (for taxable years beginning in the pre-
ceding calendar year) as being equal to the av-
erage employment-related expenses which are
taken into account under section 21(a) by tax-
payers who have only one qualifying individual
and that qualifying individual is a young child,
multiplied by
‘‘(B) the percentage equal to the excess (if
any) of—
‘‘(i) the percentage applicable to the
taxpayer under section 21(a)(2), over
‘‘(ii) the percentage which would be
applicable to the taxpayer under section
21(a)(2) as in effect on the day before the
date of the enactment of this paragraph.
‘‘(3) YOUNG CHILD.—For purposes of this sub-
section, the term ‘young child’ means any individual
who has not attained the age of 4 as of the close of
the calendar year in which the taxable year of the
taxpayer begins.
‘‘(4) COORDINATION
WITH
DEPENDENT
CARE
CREDIT.—Credit shall be allowed under this sub-
section to a taxpayer for a taxable year only if the
taxpayer elects not to have section 21 apply for such
year.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(I) of section 6213(g)(2) of such Code is amended
by striking ‘‘section 24(e)’’ and inserting ‘‘section
24(f)’’.
(c) 
INFLATION
ADJUSTMENT
OF
DOLLAR
AMOUNTS.—
(1) Section 21 of such Code is amended by add-
ing at the end the following new subsection:
‘‘(c) INFLATION ADJUSTMENT.—In the case of any
taxable year beginning in a calendar year after 1999, the
$30,000 amount contained in subsection (a) and the
$2,400 amount in subsection (c) shall be increased by an
amount equal to—
‘‘(1) such dollar amount, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1998’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If the increase determined under the preceding sentence
is not a multiple of $50, such amount shall be rounded
to the next lowest multiple of $50.’’
(2) Paragraph (2) of section 21(c) of such Code
is amended by striking ‘‘$4,800’’ and inserting
‘‘twice the dollar amount applicable under paragraph
(1)’’.
(3) Paragraph (2) of section 21(d) of such Code
is amended by striking ‘‘less than—’’ and all that
follows through the end of the first sentence and in-
serting ‘‘less than 1⁄12 of the amount which applies
under subsection (c) to the taxpayer for the taxable
year.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 202. 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. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
employer-provided child care credit determined under this
section for the taxable year is an amount equal to 25 per-
cent of the qualified child care expenditures of the tax-
payer for such taxable year.
‘‘(b) DOLLAR LIMITATION.—The credit allowable
under subsection (a) for any taxable year shall not exceed
$150,000.
‘‘(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.
‘‘(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
facility.
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) services available at such facility
do not discriminate in favor of employees
of the taxpayer who are highly com-
pensated employees (within the meaning of
section 414(q)), and
‘‘(iii) in the case of a facility which is
owned or operated by the taxpayer, at least
30 percent of the enrollees of such facility
are dependents of employees of the tax-
payer.
‘‘(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 dispos-
ing of such interest in effect immediately
before such disposition. In the event of
such an assumption, the person acquiring
the interest in the facility shall be treated
as the taxpayer for purposes of assessing
any recapture liability (computed as if
there had been no change in ownership).
‘‘(4) SPECIAL RULES.—
‘‘(A) TAX
BENEFIT
RULE.—The tax for
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed
by reason of this section which were used to re-
duce tax liability. In the case of credits not so
used to reduce tax liability, the carryforwards
and carrybacks under section 39 shall be appro-
priately adjusted.
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for
purposes of determining the amount of any
credit under subpart A, B, or D of this part.
‘‘(C) NO RECAPTURE BY REASON OF CAS-
UALTY LOSS.—The increase in tax under this
subsection shall not apply to a cessation of op-
eration of the facility as a qualified child care
facility by reason of a casualty loss to the ex-
tent such loss is restored by reconstruction or
replacement within a reasonable period estab-
lished by the Secretary.
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) AGGREGATION RULES.—All persons which
are treated as a single employer under subsections
(a) and (b) of section 52 shall be treated as a single
taxpayer.
‘‘(2) PASS-THRU IN THE CASE OF ESTATES AND
TRUSTS.—Under regulations prescribed by the Sec-
retary, rules similar to the rules of subsection (d) of
section 52 shall apply.
Subtitle B—After School Snacks
SEC. 411. CHILD AND ADULT CARE FOOD PROGRAM; MEAL
SUPPLEMENTS FOR CHILDREN IN AFTER-
SCHOOL CARE.
(a) PARTICIPATION BY CERTAIN ADDITIONAL INSTI-
TUTIONS UNDER THE CHILD AND ADULT CARE FOOD
PROGRAM.—Section 17 of the National School Lunch Act
(42 U.S.C. 1766) is amended by adding at the end the
following:
‘‘(q) PARTICIPATION BY CERTAIN ADDITIONAL IN-
STITUTIONS UNDER THE PROGRAM.—
‘‘(1) IN GENERAL.—Subject to the conditions in
this subsection, institutions that provide care to
school children during after-school hours, weekends,
or holidays during the regular school year may par-
ticipate in the program authorized under this sec-
tion. Unless otherwise specified in this subsection,
all other provisions of this section shall apply to
these institutions.
‘‘(2) 
ELIGIBLE
CHILDREN.—Reimbursement
may be provided under this subsection only for sup-
plements served to children who are not more than
18 years of age.
‘‘(3) SUPPLEMENT REIMBURSEMENT.—