To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.

Key Points

• This bill creates a new tax credit for child care employers that raise wages for their workers. The credit equals the lesser of a percentage of total child care wages or the actual dollar amount of the wage increase over the prior year. To qualify, the employer must show that average hourly pay for child care staff went up compared to last year.
• The standard credit rate is 5% of qualified child care wages, but child care centers in rural areas get a higher 7% credit. This bonus is designed to help address the especially tough staffing shortages in less populated areas where it's harder to recruit and retain workers.
• Eligible facilities must serve at least six children, receive payment for their services, and comply with all state and local laws. Workers who qualify are those employed at eligible facilities who provide care, education, protection, supervision, or guidance to children.
• The credit is part of the general business credit and also qualifies for "elective payment" under Section 6417, meaning tax-exempt organizations like nonprofits could receive the credit as a direct payment even if they owe no federal income tax. This is important because many child care providers are nonprofits.
• The bill is bipartisan, introduced by Rep. Sanchez with Rep. Miller of West Virginia as a cosponsor. It was referred to the House Ways and Means Committee and would take effect for taxable years beginning after the date it is signed into law.

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