Title: PACE Act
Policy area: Taxation

Summary:
Promoting Affordable Childcare for Everyone Act or the PACE Act
This bill amends the Internal Revenue Code, with respect to the tax credit for expenses for household and dependent care services necessary for gainful employment (known as the Child and Dependent Care Tax Credit), to: (1) make the credit refundable, (2) increase the rate for the credit, and (3) require the dollar amounts for such credit to be adjusted for inflation after 2017.
The bill also increases the amount of employer-provided dependent care assistance which may be excluded from the gross income of an employee and requires the increased exclusion amount to be adjusted for inflation after 2018.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 208 Introduced in Senate (IS)]

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115th CONGRESS
  1st Session
                                 S. 208

   To amend the Internal Revenue Code of 1986 to make the Child and 
  Dependent Care Tax Credit fully refundable, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 24, 2017

  Mr. King (for himself and Mr. Burr) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to make the Child and 
  Dependent Care Tax Credit fully refundable, and for other purposes.

    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 ``Promoting Affordable Childcare for 
Everyone Act'' or the ``PACE Act''.

SEC. 2. REFUNDABILITY OF CHILD AND DEPENDENT CARE TAX CREDIT.

    (a) In General.--The Internal Revenue Code of 1986 is amended--
            (1) by redesignating section 21 as section 36C, and
            (2) by moving section 36C, as so redesignated, from subpart 
        A of part IV of subchapter A of chapter 1 to the location 
        immediately before section 37 in subpart C of part IV of 
        subchapter A of chapter 1.
    (b) Technical Amendments.--
            (1) Paragraph (1) of section 23(f) of the Internal Revenue 
        Code of 1986 is amended by striking ``21(e)'' and inserting 
        ``36C(e)''.
            (2) Paragraph (6) of section 35(g) of such Code is amended 
        by striking ``21(e)'' and inserting ``36C(e)''.
            (3) Paragraph (1) of section 36C(a) of such Code (as 
        redesignated by subsection (a)) is amended by striking ``this 
        chapter'' and inserting ``this subtitle''.
            (4) Subparagraph (C) of section 129(a)(2) of such Code is 
        amended by striking ``section 21(e)'' and inserting ``section 
        36C(e)''.
            (5) Paragraph (2) of section 129(b) of such Code is amended 
        by striking ``section 21(d)(2)'' and inserting ``section 
        36C(d)(2)''.
            (6) Paragraph (1) of section 129(e) of such Code is amended 
        by striking ``section 21(b)(2)'' and inserting ``section 
        36C(b)(2)''.
            (7) Subsection (e) of section 213 of such Code is amended 
        by striking ``section 21'' and inserting ``section 36C''.
            (8) Subparagraph (H) of section 6213(g)(2) of such Code is 
        amended by striking ``section 21'' and inserting ``section 
        36C''.
            (9) Subparagraph (L) of section 6213(g)(2) of such Code is 
        amended by striking ``section 21, 24, or 32,'' and inserting 
        ``section 24, 32, or 36C,''.
            (10) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``36C,'' after ``36B,''.
            (11) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 36B 
        the following:

``Sec. 36C. Expenses for household and dependent care services 
                            necessary for gainful employment.''.
            (12) The table of sections for subpart A of such part IV is 
        amended by striking the item relating to section 21.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3. ENHANCEMENT OF THE CHILD AND DEPENDENT CARE TAX CREDIT.

    (a) In General.--Section 36C of the Internal Revenue Code of 1986, 
as redesignated by section 2 of this Act, is amended--
            (1) in paragraph (1) of subsection (a), by striking ``35 
        percent reduced (but not below 20 percent)'' and inserting ``50 
        percent reduced (but not below 35 percent)'',
            (2) by redesignating subsection (f) as subsection (g), and
            (3) by inserting after subsection (e) the following new 
        subsection:
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2017, each of the dollar amounts in subsections 
        (a)(2) and (c) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) 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 2016' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $50, such increase shall be rounded to 
        the nearest multiple of $50.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 4. INCREASE IN EXCLUSION FOR EMPLOYER-PROVIDED DEPENDENT CARE 
              ASSISTANCE.

    (a) In General.--Subparagraph (A) of section 129(a)(2) of the 
Internal Revenue Code of 1986 (relating to dependent care assistance 
programs) is amended by striking ``$5,000 ($2,500'' and inserting 
``$7,500 (half such dollar amount''.
    (b) Inflation Adjustment.--Paragraph (2) of section 129(a) 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 2018, 
                the $7,500 amount in 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 2017' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $100.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
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