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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Worksite Child Care Development
Center Act of 1998''.

SEC. 2. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD CARE
ASSISTANCE.

(a) In General.--Subpart D of part IV of subchapter 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 the sum of--
''(1) 50 percent of the qualified child care facility
start-up expenses,
''(2) 50 percent of the qualified child care facility
expenses, and
''(3) 50 percent of the qualified child care expenses,
of the taxpayer during the taxable year.
''(b) Dollar Limitations.--
''(1) Qualified child care facility start-up expenses.--The
total amount of the credit determined under subsection (a)(1)
for all taxable years shall not exceed $100,000.
''(2) Qualified child care facility expenses.--The amount
of the credit determined under subsection (a)(2) for any
taxable year shall not exceed $25,000.
''(3) Qualified child care expenses.--The amount of the
credit determined under subsection (a)(3) for any taxable year
shall not exceed $50,000.
''(c) Definitions.--For purposes of this section--
''(1) Qualified child care expenses.--
''(A) In general.--The term 'qualified child care
expenses' means any amount paid or incurred to
reimburse an employee for expenses for child care which
enables the employee to be gainfully employed including
expenses related to--
''(i) day care and before and after school
care,
''(ii) transportation associated with such
care, and
''(iii) before and after school and holiday
programs including educational and recreational
programs and camp programs.
''(B) Fair market value.--The term 'qualified child
care expenses' shall not include expenses in excess of
the fair market value of such care.
''(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 to dependents of
employees, and
''(ii) which meets the requirements of all
applicable laws and regulations of the State or
local government in which it is located,
including, but not limited to, the licensing of
the facility as a child care facility or back-
up child care facility providing daily care for
dependents who are mildly ill or need temporary
care for other reasons that disrupt the normal
care arrangements of employees.
Clause (i) shall not apply to a facility which is the
principal residence (within the meaning of section
1034) 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, and
''(iii) the use of such facility (or the
eligibility to use such facility) does not
discriminate in favor of employees of the
taxpayer who are highly compensated employees
(within the meaning of section 414(q)).
''(C) Child care facilities sponsored by more than
one taxpayer.--A facility that is sponsored by more
than 1 taxpayer shall be treated as a qualified child
care facility if it meets the requirements of this
paragraph.
''(3) Qualified child care facility expenses.--The term
'qualified child care facility expenses' means any amount paid
or incurred--
''(A) for the operating costs of a qualified child
care facility of the taxpayer,
''(B) under a contract with a qualified child care
facility to provide child care services to employees of
the taxpayer, or
''(C) under a contract to provide child care
resource and referral coordination services to
employees of the taxpayer.
''(4) Qualified child care facility start-up expenses.--The
term 'qualified child care facility start-up expenses' 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 1034) of the taxpayer or any employee
of the taxpayer, or
''(B) to acquire equipment and supplies necessary
for the operation of a qualified child care facility.
''(d) Child Care Facilities Sponsored by More Than One Taxpayer.--
In the case of a qualified child care facility that is sponsored by
more than 1 taxpayer, the credit determined under paragraphs (1) and
(2) of subsection (a) for each taxpayer for any taxable year may be
apportioned among the taxpayers in any manner determined by the
taxpayers.
''(e) Recapture of Acquisition and Construction 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
facility expenses of the taxpayer described in
subsection (c)(4) 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............................... 90
Year 5............................... 80
Year 6............................... 70
Year 7............................... 60
Year 8............................... 50
Year 9............................... 40
Year 10 and thereafter............... 0.
''(B) Years.--For purposes of subparagraph (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 purposes 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 provided in
clause (ii), the disposition of a taxpayer's
interest in a qualified child care facility
with respect to which the credit described in
subsection (a) was allowable.
''(ii) Agreement to assume recapture
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 disposing 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 paragraph (1) only with
respect to credits allowed by reason of this section
which were used to reduce tax liability. In the case of
credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be
appropriately adjusted.
''(B) No credits against tax.--Any increase 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 casualty loss.--The
increase in tax under this subsection shall not apply
to a cessation of operation of the facility as a
qualified child care facility by reason of a casualty
loss to the extent such loss is restored by
reconstruction or replacement within a reasonable
period established by the Secretary.
''(f) 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 Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
''(3) Allocation in the case of partnerships.--In the case
of partnerships, the credit shall be allocated among partners
under regulations prescribed by the Secretary.
''(g) No Double Benefit.--
''(1) Reduction in basis.--For purposes of this subtitle--
''(A) In general.--If a credit is determined under
this section with respect to any property by reason of
expenditures described in subsection (c)(4), the basis
of such property shall be reduced by the amount of the
credit so determined.
''(B) Certain dispositions.--If during any taxable
year there is a recapture amount determined with
respect to any property the basis of which was reduced
under subparagraph (A), the basis of such property
(immediately before the event resulting in such
recapture) shall be increased by an amount equal to
such recapture amount. For purposes of the preceding
sentence, the term 'recapture amount' means any
increase in tax (or adjustment in carrybacks or
carryovers) determined under subsection (e).
''(2) Other deductions and credits.--No deduction or credit
shall be allowed under any other provision of this chapter with
respect to the amount of the credit determined under this
section.
''(h) Termination.--This section shall not apply to taxable years
beginning after December 31, 2008.''
(b) Conforming Amendments.--
(1) Section 38(b) of the Internal Revenue Code of 1986 is
amended--
(A) by striking out ''plus'' at the end of
paragraph (11),
(B) by striking out the period at the end of
paragraph (12), and inserting a comma and ''plus'', and
(C) by adding at the end the following new
paragraph:
''(13) the employer-provided child care credit determined
under section 45D.''
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:

''Sec. 45D. Employer-provided child care
credit.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
A:
Worksite Child Care Development Center Act of 1998 - Amends the Internal Revenue Code to provide a limited tax credit for employers who provide child care assistance for dependents of their employees. Terminates such credit for taxable years beginning after December 31, 2008.