Internal Revenue Code:Sec. 45F. Employer-provided child care credit

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Contents


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.
 

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