A bill to amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.
Analysis under review: This bill has generated analysis that may be too generic or incomplete. Clause-level evidence remains available below.
Summary
What This Bill Does
This bill creates a new tax credit for employers who operate child care facilities and pay wages to child care workers. Employers can claim a credit equal to 5% of qualified child care wages, or 7% if the facility is located in a rural area. The credit is part of the general business credit under the Internal Revenue Code. Tax-exempt organizations can also benefit through the elective pay mechanism (Section 6417), allowing them to receive the credit as a direct payment.
Who Benefits and How
Child care facility operators benefit from reduced labor costs through the tax credit, making it more financially viable to pay child care workers competitive wages. Child care workers indirectly benefit if employers use the savings to increase wages or maintain staffing levels. Rural child care providers receive an enhanced credit rate (7% vs 5%), incentivizing child care services in underserved areas. Tax-exempt child care providers can claim the credit as a direct payment.
Who Bears the Burden and How
The federal government bears the cost through reduced tax revenue from credits claimed by employers. All taxpayers indirectly bear this cost. Employers must track and report qualified child care wages separately for credit purposes, creating administrative overhead. The IRS bears the burden of administering the new credit and processing elective pay claims from tax-exempt entities.
Key Provisions
- Creates new Section 45BB providing a 5% tax credit on qualified child care wages paid by employers
- Enhanced 7% credit rate for child care facilities located in rural areas (defined as non-urban areas under 23 U.S.C. 101(a)(35))
- Eligible facilities must serve at least 6 children, receive fees/payments for services, and comply with state and local regulations
- Makes the credit available to tax-exempt entities through the elective pay mechanism (Section 6417)
- Includes anti-double-counting rule preventing wages from being used for multiple credits
- Employers may elect out of the credit for any taxable year
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers.
At a Glance
What This Bill Does
Creates a new general business tax credit (Section 45BB) for employers who pay wages to child care workers, with a standard 5% credit rate and an enhanced 7% rate for child care facilities in rural areas.
Key Policy Areas
Taxation, Child Care, Labor and Employment
Primary Purpose
Creates a new general business tax credit (Section 45BB) for employers who pay wages to child care workers, with a standard 5% credit rate and an enhanced 7% rate for child care facilities in rural areas.
Policy Domains
Whole Bill
Identified Gains
Contextual inference, no direct clause citation- Child care facility operators
- Child care workers
- Rural communities
- Tax-exempt child care organizations
- Parents and families
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- Federal government (reduced tax revenue)
- U.S. taxpayers
- IRS (administration)
Contextual inference, no direct clause citation
Sponsors
Legislative Progress
In CommitteeMr. Warner (for himself and Mr. Justice) introduced the following …
Read twice and referred to the Committee on Finance.
Introduced in Senate
Impact analysis is available but no clear stakeholder effects identified. View clause-level analysis →
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
Key Definitions
Terms defined in this bill
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