Rep. Sanchez Pushes Bipartisan Bill to Give Tax Credits to Child Care Centers That Raise Wages
To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.
Legislative Progress
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.
From policy text
“the amount of the child care supply credit determined under this section with respect to any employer for any taxable year is an amount equal to the lesser of-- ``(1) the applicable percentage of the qualified child care wages paid or incurred by the employer for such taxable year, or ``(2) the excess (if any) of-- ``(A) the qualified child care wages paid or incurred by the employer for such taxable year, over ``(B) the qualified child care wages paid or incurred by the employer for the preceding taxable year.”
View in full text - 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.
From policy text
“Except as provided in paragraph (2), the applicable percentage is 5 percent. ``(2) Rural areas.-- ``(A) In general.--In the case of qualified child care wages paid or incurred with respect to employment at an eligible childcare facility which is located in a rural area, the applicable percentage is 7 percent.”
View in full text - 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.
From policy text
“The term `eligible child care facility' means any facility which-- ``(A) provides child care services for at least 6 individuals, ``(B) receives a fee, payment, or grant for providing such services, and ``(C) complies with all applicable laws and regulations of a State or unit of local government.”
View in full text - 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.
From policy text
“Section 6417(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: ``(13) The child care supply credit determined under section 45BB(a).''.”
View in full text - 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.
From policy text
“The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.”
View in full text
Impact Analysis
Personal Impact
Milestones
Referred to the House Committee on Ways and Means.
Introduced in House
What Happens Next
Projected impacts based on AI analysis
Tax credit becomes available for child care employers who raise wages
Child care centers could start claiming the credit on their taxes for any year beginning after the law is signed, incentivizing them to raise worker pay immediately.
Non-profit child care providers can apply for elective payments
Tax-exempt child care organizations that don't owe income tax could receive the credit as a direct cash payment, expanding the reach of the program to many community-based providers.
Source Information
Document Type
Congressional Bill
Official Title
To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.
Sponsor
Cosponsors
(1)Data Sources
Analysis generated by AI. Always verify with official sources.