Child and Dependent Care Tax Credit Enhancement Act of 2021

Bill: 117-s-271
Sponsor: full_name: Sen. Casey, Robert P., Jr. [D-PA]
Introduced: 2021-02-08
Policy area: Taxation
Subjects: Child care and development

Income tax credits

Inflation and prices

Marriage and family status
Latest action: action_date: 2021-02-08
text: Read twice and referred to the Committee on Finance.

Summaries:
action_date: 2021-02-08
action_desc: Introduced in Senate
text: <p><b>Child and Dependent Care Tax Credit Enhancement Act of 2021</b></p> <p>This bill modifies the tax credit for employment-related expenses incurred for the care of a taxpayer's dependent to (1) increase to $400,000, the adjusted gross income threshold level above which the credit is incrementally reduced; (2) increase the dollar limits on the allowable amount of the credit; (3) specify rules for married couples filing separate returns; (4) allow an inflation adjustment to the adjusted gross income threshold and the maximum credit amounts, beginning after 2022; and (5) make the credit refundable.</p>

tv_txt: II 117th CONGRESS 1st Session S. 271 IN THE SENATE OF THE UNITED STATES February 8, 2021 Mr. Casey (for himself, Mr. Wyden , Mrs. Murray , Mr. Menendez , Mr. Cardin , Mr. Brown , Mr. Bennet , Mr. Whitehouse , Ms. Hassan , Ms. Cortez Masto , Ms. Stabenow , Ms. Cantwell , Ms. Smith , Mr. Blumenthal , Mr. Murphy , Mr. Durbin , Ms. Hirono , Mr. Leahy , Ms. Klobuchar , Mr. Booker , Mr. Reed , Ms. Baldwin , Mrs. Gillibrand , Mr. Heinrich , Mr. Merkley , Mr. Van Hollen , Ms. Duckworth , and Mr. Luján ) 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 enhance the Child and Dependent Care Tax Credit and make the credit fully refundable.

1. Short title This Act may be cited as the Child and Dependent Care Tax Credit Enhancement Act of 2021 . 2. Enhancement of Child and Dependent Care Tax Credit (a) In general Paragraph (2) of section 21(a) of the Internal Revenue Code of 1986 is amended to read as follows: (2) Applicable percentage (A) In general For purposes of paragraph (1), the term applicable percentage means 50 percent reduced (but not below the phaseout percentage) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $125,000. (B) Phaseout percentage For purposes of subparagraph (A), the term phaseout percentage means 20 percent reduced (but not below zero) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $400,000. . (b) Increase in dollar limit on amount creditable Subsection (c) of section 21 of the Internal Revenue Code of 1986 is amended— (1) in paragraph (1), by striking $3,000 and inserting $8,000 ; and (2) in paragraph (2), by striking $6,000 and inserting $16,000 . (c) Special rule for married couples filing separate returns Paragraph (2) of section 21(e) of the Internal Revenue Code of 1986 is amended to read as follows: (2) Married couples filing separate returns (A) In general In the case of married individuals who do not file a joint return for the taxable year— (i) the applicable percentage under subsection (a)(2) and the number of qualifying individuals and aggregate amount excludable under section 129 for purposes of subsection (c) shall be determined with respect to each such individual as if the individual had filed a joint return with the individual's spouse, and (ii) the aggregate amount of the credits allowed under this section for such taxable year with respect to both spouses shall not exceed the amount which would have been allowed under this section if the individuals had filed a joint return. (B) Regulations The Secretary shall prescribe such regulations or other guidance as is necessary to carry out the purposes of this subsection. . (d) Adjustment for inflation Section 21 of the Internal Revenue Code of 1986 is amended— (1) by redesignating subsection (f) as subsection (g); and (2) by inserting after subsection (e) the following new subsection: (f) Inflation adjustment (1) In general In the case of a calendar year beginning after 2022, the $125,000 amount in paragraph (2) of subsection (a) and the dollar amounts in subsection (c) shall each 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 2021 for calendar year 2016 in subparagraph (A)(ii) thereof. (2) Rounding If any dollar amount, after being increased under paragraph (1), is not a multiple of $100, such dollar amount shall be rounded to the next lowest multiple of $100. . (e) Credit To be refundable (1) In general The Internal Revenue Code of 1986 is amended— (A) by redesignating section 21 as section 36C; and (B) 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. (2) Technical amendments (A) Paragraph (1) of section 23(f) of the Internal Revenue Code of 1986 is amended by striking 21(e) and inserting 36C(e) . (B) Paragraph (6) of section 35(g) of such Code is amended by striking 21(e) and inserting 36C(e) . (C) Paragraph (1) of section 36C(a) of such Code (as redesignated by paragraph (1)) is amended by striking this chapter and inserting this subtitle . (D) Subparagraph (C) of section 129(a)(2) of such Code is amended by striking section 21(e) and inserting section 36C(e) . (E) Paragraph (2) of section 129(b) of such Code is amended by striking section 21(d)(2) and inserting section 36C(d)(2) . (F) Paragraph (1) of section 129(e) of such Code is amended by striking section 21(b)(2) and inserting section 36C(b)(2) . (G) Subsection (e) of section 213 of such Code is amended by striking section 21 and inserting section 36C . (H) Subparagraph (H) of section 6213(g)(2) of such Code is amended by striking section 21 and inserting section 36C . (I) 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, . (J) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36C, after 36B, . (K) 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. . (L) The table of sections for subpart A of such part IV is amended by striking the item relating to section 21. (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2021.