Title: Child and Dependent Care Modernization Act of 2018
Policy area: Taxation

Summary:
Child and Dependent Care Modernization Act of 2018
This bill amends the Internal Revenue Code, with respect to employer-provided dependent care assistance programs, to: (1) increase the amounts of dependent care assistance that employees may exclude from gross income, (2) require the increased limits to be adjusted for inflation after 2019, and (3) allow certain unused dependent care flexible spending account balances to be carried forward into the next year.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7057 Introduced in House (IH)]

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115th CONGRESS
  2d Session
                                H. R. 7057

   To amend the Internal Revenue Code to increase the exclusion for 
employer-provided dependent care assistance and to allow limited annual 
  carryforward of unused dependent care flexible spending arrangement 
                           account balances.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 9, 2018

  Mrs. Wagner (for herself and Mr. Sessions) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code to increase the exclusion for 
employer-provided dependent care assistance and to allow limited annual 
  carryforward of unused dependent care flexible spending arrangement 
                           account balances.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child and Dependent Care 
Modernization Act of 2018''.

SEC. 2. INCREASE IN EXCLUSION FOR EMPLOYER-PROVIDED DEPENDENT CARE 
              ASSISTANCE.

    (a) In General.--Section 129(a)(2) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``shall not exceed'' in subparagraph (A) 
        and all that follows and inserting the following: ``shall not 
        exceed--
                            ``(i) $8,000 (half such dollar amount in 
                        the case of a separate return by a married 
                        individual) if there is 1 qualifying individual 
                        with respect to the taxpayer during such 
                        taxable year, or
                            ``(ii) $16,000 (half such dollar amount in 
                        the case of such a separate return) if there 
                        are 2 or more qualifying individuals with 
                        respect to the taxpayer during such taxable 
                        year.''; and
            (2) by adding at the end the following new subparagraph:
                    ``(D) Qualifying individual.--For purposes of this 
                paragraph, the term `qualifying individual' has the 
                meaning given to such term under section 21(b)(1).''.
    (b) Inflation Adjustment.--Section 129(a)(2) of such Code is 
amended by redesignating subparagraph (C) as subparagraph (D) and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2019, 
                the dollar amounts in clauses (i) and (ii) of 
                subparagraph (A) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2018' 
                        for `calendar year 1992' in subparagraph 
                        (A)(ii) thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $100.''.
    (c) Conforming Amendment.--Section 129(a)(2).
    (d) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2018.

SEC. 3. CARRYFORWARD AND LIMITATION FOR DEPENDENT CARE FLEXIBLE 
              SPENDING ARRANGEMENT ACCOUNT BALANCE.

    (a) In General.--Section 125 of the Internal Revenue Code of 1986 
is amended by redesignating subsections (k) and (l) as subsections (l) 
and (m), respectively and by inserting after subsection (j) the 
following new subsection:
    ``(k) Rules for Dependent Care Flexible Spending Arrangements.--
            ``(1) Carryforward of unused dependent care benefits.--For 
        purposes of this title, a plan or other arrangement shall not 
        fail to be treated as a cafeteria plan or dependent care 
        flexible spending arrangement merely because such arrangement 
        provides that an amount not exceeding the lesser of--
                    ``(A) such arrangement's account balance determined 
                as of the end of any plan year, or
                    ``(B) the limitation described in paragraph (2) for 
                the succeeding plan year,
        may be carried forward to the succeeding plan year of such 
        flexible spending arrangement.
            ``(2) Cumulative limitation.--For purposes of this section, 
        if a benefit is provided under a cafeteria plan through a 
        dependent care flexible spending arrangement, such benefit 
        shall not be treated as a qualified benefit unless it provides 
        that the account balance of the employee shall not exceed the 
        dollar limitation in effect with respect to the employee under 
        section 129(a)(2)(A) for such plan year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.
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