Internal Revenue Code:Sec. 45F. Employer-provided child care credit
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart D - Business Related Credits
Statute
Sec. 45F. 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) 25 percent of the qualified child care expenditures, and
(2) 10 percent of the qualified child care resource and
referral expenditures,
of the taxpayer 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
(A) In general
The term ''qualified child care expenditure'' means any
amount paid or incurred -
(i) 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 employee of the taxpayer,
(ii) 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 higher
levels of child care training, or
(iii) under a contract with a qualified child care facility
to provide child care services to employees of the taxpayer.
(B) Fair market value
The term ''qualified child care expenditures'' 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, and
(ii) which meets the requirements of all applicable laws
and regulations of the State or local government in which it
is located, including the licensing 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) if the facility is the principal trade or business of
the taxpayer, at least 30 percent of the enrollees of such
facility are dependents of employees 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)).
(3) Qualified child care resource and referral expenditure
(A) In general
The term ''qualified child care resource and referral
expenditure'' means any amount paid or incurred under a
contract to provide child care resource and referral services
to an employee of the taxpayer.
(B) Nondiscrimination
The services shall not be treated as qualified unless the
provision of such services (or the eligibility to use such
services) does not discriminate in favor of employees of the
taxpayer who are highly compensated employees (within the
meaning of section 414(q)).
(d) 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 expenditures of the
taxpayer described 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
If the recapture event recapture
occurs in: percentage is:
Years 1-3 100
Year 4 85
Year 5 70
Year 6 55
Year 7 40
Year 8 25
Years 9 and 10 10
Years 11 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 this chapter or for
purposes of section 55.
(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.
(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 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.
(f) 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)(1)(A), 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 (d).
(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.
Sources
(Added Pub. L. 107-16, title II, Sec. 205(a), June 7, 2001, 115
Stat. 50.)
Amendment of Section
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16,
see Effective and Termination Dates note below.
Miscellaneous
AMENDMENTS
2002 - Subsec. (d)(4)(B). Pub. L. 107-147, Sec. 411(d)(1) amends
Section 45F(d)(4)(B) by striking ``subpart A,
B, or D of this part'' and inserting ``this chapter or for
purposes of section 55''.
EFFECTIVE AND TERMINATION DATES
Section applicable to taxable years beginning after Dec. 31,
2001, see section 205(c) of Pub. L. 107-16, set out as an Effective
and Termination Dates of 2001 Amendment note under section 38 of
this title.
Section inapplicable to taxable, plan, or limitation years
beginning after Dec. 31, 2010, and the Internal Revenue Code of
1986 to be applied and administered to such years as if it had
never been enacted, see section 901 of Pub. L. 107-16, set out as
an Effective and Termination Dates of 2001 Amendment note under
section 1 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 38, 1016 of this title.
