< Back to H.R. 3292 (105th Congress, 1997–1998)

Text of the Investment in Children Act of 1998

This bill was introduced on February 26, 1998, in a previous session of Congress, but was not enacted. The text of the bill below is as of Feb 26, 1998 (Introduced).

Source: GPO

HR 3292 IH

105th CONGRESS

2d Session

H. R. 3292

To amend the Internal Revenue Code of 1986 to increase the credit for dependent care services necessary for gainful employment and to provide an equivalent benefit for families where one parent stays at home to provide child care for a child under the age of 4 and to amend the Social Security Act to provide grants to States to improve the quality and availability of child care, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

February 26, 1998

Mrs. KENNELLY of Connecticut introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To amend the Internal Revenue Code of 1986 to increase the credit for dependent care services necessary for gainful employment and to provide an equivalent benefit for families where one parent stays at home to provide child care for a child under the age of 4 and to amend the Social Security Act to provide grants to States to improve the quality and availability of child care, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Investment in Children Act of 1998’.

SEC. 2. INCREASE IN DEPENDENT CARE CREDIT; EQUIVALENT BENEFIT WHERE ONE PARENT STAYS AT HOME TO PROVIDE CHILD CARE FOR CHILD UNDER AGE 4.

    (a) IN GENERAL- Paragraph (2) of section 21(a) of the Internal Revenue Code of 1986 (relating to expenses for household and dependent care services necessary for gainful employment) is amended to read as follows:

      ‘(2) APPLICABLE PERCENTAGE DEFINED- For purposes of paragraph (1), the term ‘applicable percentage’ means 50 percent reduced (but not below 20 percent) by 1 percentage point for each $1,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $30,000.’

    (b) EQUIVALENT OF INCREASED BENEFIT WHERE PARENT STAYS AT HOME TO PROVIDE CHILD CARE FOR CHILD UNDER AGE 4-

      (1) IN GENERAL- Section 24 of such Code (relating to child tax credit) is amended by redesignating subsections (e) and (f) as subsections (f) and (g), respectively, and by inserting after subsection (e) the following new subsection:

    ‘(f) ADDITIONAL CREDIT IF TAXPAYER HAS QUALIFYING CHILD UNDER AGE 4-

      ‘(1) IN GENERAL- If any qualifying child of the taxpayer is a young child, the credit allowed by subsection (a) shall be increased by the increased dependent care credit equivalent amount.

      ‘(2) INCREASED DEPENDENT CARE CREDIT EQUIVALENT AMOUNT- For purposes of paragraph (1), the term ‘increased dependent care credit equivalent amount’ means, with respect to any taxable year beginning in a calendar year, an amount equal to--

        ‘(A) the amount estimated by the Secretary (for taxable years beginning in the preceding calendar year) as being equal to the average employment-related expenses which are taken into account under section 21(a) by taxpayers who have only one qualifying individual and that qualifying individual is a young child, multiplied by

        ‘(B) the percentage equal to the excess (if any) of--

          ‘(i) the percentage applicable to the taxpayer under section 21(a)(2), over

          ‘(ii) the percentage which would be applicable to the taxpayer under section 21(a)(2) as in effect on the day before the date of the enactment of this paragraph.

      ‘(3) YOUNG CHILD- For purposes of this subsection, the term ‘young child’ means any individual who has not attained the age of 4 as of the close of the calendar year in which the taxable year of the taxpayer begins.

      ‘(4) COORDINATION WITH DEPENDENT CARE CREDIT- Credit shall be allowed under this subsection to a taxpayer for a taxable year only if the taxpayer elects not to have section 21 apply for such year.’

      (2) CONFORMING AMENDMENT- Subparagraph (I) of section 6213(g)(2) of such Code is amended by striking ‘section 24(e)’ and inserting ‘section 24(f)’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

SEC. 3. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD CARE ASSISTANCE.

    (a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

‘SEC. 45D. 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 25 percent of the qualified child care 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- The term ‘qualified child care expenditure’ means any amount paid or incurred--

        ‘(A) 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,

        ‘(B) 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,

        ‘(C) under a contract with a qualified child care facility to provide child care services to employees of the taxpayer,

        ‘(D) under a contract to provide child care resource and referral services to employees of the taxpayer, or

        ‘(E) for the costs of seeking accreditation from a child care credentialing or accreditation entity.

      ‘(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, but not limited to, 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) the facility is not the principal trade or business of the taxpayer unless 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)).

    ‘(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

--recapture

‘If the recapture event 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 subpart A, B, or D of this part.

        ‘(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.’

    (b) Conforming Amendments-

      (1) Section 38(b) of such Code is amended--

        (A) by striking ‘plus’ at the end of paragraph (11),

        (B) by striking the period at the end of paragraph (12), and inserting a comma and ‘plus’, and

        (C) by adding at the end the following new paragraph:

      ‘(13) the employer-provided child care credit determined under section 45D.’.

      (2) Subsection (d) of section 39 of such Code (relating to carryback and carryforward of unused credits) is amended by adding at the end the following new paragraph:

      ‘(9) NO CARRYBACK OF SECTION 45D CREDIT BEFORE JANUARY 1, 1999- No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 45D may be carried back to a taxable year beginning before January 1, 1999.’.

      (3) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 45D. Employer-provided child care credit.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

SEC. 4. GRANTS TO STATES TO IMPROVE THE QUALITY AND SAFETY OF CHILD CARE, TO PROVIDE CHILD CARE FOR LOW-INCOME WORKING FAMILIES, AND FOR BEFORE AND AFTER SCHOOL CHILD CARE.

    Part A of title IV of the Social Security Act (42 U.S.C. 601-619) is amended by inserting after section 418 the following:

‘SEC. 418A. GRANTS TO STATES TO IMPROVE THE QUALITY AND SAFETY OF CHILD CARE, TO PROVIDE CHILD CARE FOR LOW-INCOME WORKING FAMILIES, AND FOR BEFORE AND AFTER SCHOOL CHILD CARE.

    ‘(a) CHILD CARE QUALITY AND SAFETY IMPROVEMENT GRANTS-

      ‘(1) ENTITLEMENT- Each State shall be entitled to receive from the Secretary a grant in an amount determined under paragraph (2).

      ‘(2) AMOUNT OF GRANT-

        ‘(A) ALLOTMENTS TO STATES- After making the reservation described in paragraph (3) of this subsection, the total amount available for grants under this subsection for a fiscal year shall be allotted among the States in the manner provided for in section 418(a)(2)(B).

        ‘(B) FEDERAL MATCHING OF STATE EXPENDITURES EXCEEDING HISTORICAL EXPENDITURES- The Secretary shall make payments under this subsection in the manner provided for in section 418(a)(2)(C) as if ‘400 percent’ were substituted for ‘the Federal medical assistance percentage for the State for the fiscal year (as defined in section 1905(b), as such section was in effect on September 30, 1995)’.

        ‘(C) REDISTRIBUTION- Section 418(a)(2)(D) shall apply to amounts allotted under subparagraph (A) of this paragraph.

      ‘(3) INDIAN TRIBES- The Secretary shall reserve not less than 1 percent, and not more than 2 percent, of the aggregate amount appropriated to carry out this subsection for each fiscal year for payments to Indian tribes and tribal organizations.

      ‘(4) USE OF FUNDS- Amounts received by a State under this subsection shall be used only to improve the quality and safety of child care through such means as--

        ‘(A) reducing staff-to-child ratios;

        ‘(B) improving and expanding child care training (including training in first aid and cardiopulmonary resuscitation);

        ‘(C) improving enforcement of State health and safety requirements (including increasing unannounced inspections of child care settings);

        ‘(D) helping providers meet accreditation and licensing requirements;

        ‘(E) promoting programs to improve early learning for children who have not attained 6 years of age;

        ‘(F) providing increased payment rates for child care services for infants or children with special medical needs;

        ‘(G) connecting child care providers to centers for education and health care professionals;

        ‘(H) conducting background checks on child care providers;

        ‘(I) improving the compensation of child care providers; and

        ‘(J) expanding activities to educate parents on the availability and quality of child care, including the development and operation of resource and referral systems.

      ‘(5) APPROPRIATION- Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated for grants under this subsection--

        ‘(A) $250,000,000 for fiscal year 1999;

        ‘(B) $500,000,000 for each of fiscal years 2000 and 2001;

        ‘(C) $750,000,000 for fiscal year 2002; and

        ‘(D) $1,000,000,000 for fiscal year 2003.

    ‘(b) GRANTS FOR CHILD CARE FOR LOW-INCOME WORKING FAMILIES-

      ‘(1) ENTITLEMENT- If a State has received from the Secretary under section 418(a)(2) during a fiscal year an amount equal to the State’s allotment under section 418(a)(2)(B) for the fiscal year, the State shall be entitled to receive from the Secretary a grant in an amount determined under paragraph (2).

      ‘(2) AMOUNT OF GRANT-

        ‘(A) ALLOTMENTS TO STATES- After making the reservation described in paragraph (3) of this subsection, the total amount available for grants under this subsection for a fiscal year shall be allotted among the States in the manner provided for in section 418(a)(2)(B).

        ‘(B) FEDERAL MATCHING OF STATE EXPENDITURES EXCEEDING HISTORICAL EXPENDITURES- The Secretary shall make payments under this subsection in the manner provided for in section 418(a)(2)(C) as if ‘400 percent’ were substituted for ‘the Federal medical assistance percentage for the State for the fiscal year (as defined in section 1905(b), as such section was in effect on September 30, 1995)’.

        ‘(C) REDISTRIBUTION- Section 418(a)(2)(D) shall apply to amounts allotted under subparagraph (A) of this paragraph.

      ‘(3) INDIAN TRIBES- The Secretary shall reserve not less than 1 percent, and not more than 2 percent, of the aggregate amount appropriated to carry out this subsection for each fiscal year for payments to Indian tribes and tribal organizations.

      ‘(4) USE OF FUNDS- Not less than 70 percent of the amounts received by a State under this subsection shall be used for child care assistance to persons who are not recipients of assistance under the State program funded under the provisions of this part other than section 418 or this section.

      ‘(5) APPROPRIATION- Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated for grants under this subsection--

        ‘(A) $1,000,000,000 for fiscal year 1999;

        ‘(B) $1,500,000,000 for each of fiscal years 2000 and 2001; and

        ‘(C) $2,000,000,000 for each of fiscal years 2002 and 2003.

    ‘(c) GRANTS FOR BEFORE AND AFTER SCHOOL CHILD CARE-

      ‘(1) ENTITLEMENT- Each State shall be entitled to receive from the Secretary a grant in an amount determined under paragraph (2).

      ‘(2) AMOUNT OF GRANT-

        ‘(A) ALLOTMENTS TO STATES- After making the reservation described in paragraph (3) of this subsection, the total amount available for grants under this subsection for a fiscal year shall be allotted among the States in the manner provided for in section 418(a)(2)(B).

        ‘(B) FEDERAL MATCHING OF STATE EXPENDITURES EXCEEDING HISTORICAL EXPENDITURES- The Secretary shall make payments under this subsection in the manner provided for in section 418(a)(2)(C) as if ‘400 percent’ were substituted for ‘the Federal medical assistance percentage for the State for the fiscal year (as defined in section 1905(b), as such section was in effect on September 30, 1995)’.

        ‘(C) REDISTRIBUTION- Section 418(a)(2)(D) shall apply to amounts allotted under subparagraph (A) of this paragraph.

      ‘(3) INDIAN TRIBES- The Secretary shall reserve not less than 1 percent, and not more than 2 percent, of the aggregate amount appropriated to carry out this subsection for each fiscal year for payments to Indian tribes and tribal organizations.

      ‘(4) USE OF FUNDS- Amounts received by a State under this subsection shall be used only for the provision of child care services before and after regular school hours and during months in which school is not in session.

      ‘(5) APPROPRIATION- Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated for grants under this subsection--

        ‘(A) $250,000,000 for fiscal year 1999;

        ‘(B) $500,000,000 for each of fiscal years 2000 and 2001;

        ‘(C) $750,000,000 for fiscal year 2002; and

        ‘(D) $1,000,000,000 for fiscal year 2003.

    ‘(d) DATA USED TO DETERMINE STATE AND FEDERAL SHARES OF EXPENDITURES- Section 418(a)(5) shall apply to determinations concerning expenditures required under this section.

    ‘(e) AVAILABILITY OF FUNDS- The 2nd sentence of section 418(b)(1) shall apply to amounts provided to a State under this section.

    ‘(f) APPLICATION OF CHILD CARE AND DEVELOPMENT BLOCK GRANT ACT of 1990- Section 418(c) shall apply to amounts provided to a State under this section.

    ‘(g) DEFINITION- As used in this section, the term ‘State’ means each of the 50 States and the District of Columbia.’.

SEC. 5. 21ST CENTURY LEARNING CENTERS.

    Part I of title X of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 8241 et seq.) is amended--

      (1) in section 10902 by striking ‘inner city’ each place it appears and inserting ‘urban’;

      (2) in section 10903--

        (A) in subsection (a)--

          (i) by striking ‘rural and inner-city’; and

          (ii) by striking ‘rural or inner-city’;

        (B) by amending subsection (b) to read as follows:

    ‘(b) EQUITABLE DISTRIBUTION-

      ‘(1) IN GENERAL- In awarding grants under this part, the Secretary shall assure an equitable distribution of assistance among the States and among areas within a State.

      ‘(2) PRIORITY- The Secretary shall give priority to urban and rural areas in the United States, and among such areas of a State.’; and

      (3) in section 10907, by amending the text to read as follows:

    ‘There are authorized to be appropriated $200,000,000 for each of the fiscal years 1999 through 2003 to carry out this part.’

SEC. 6. NONREFUNDABLE PERSONAL CREDITS ALLOWED IN DETERMINING ALTERNATIVE MINIMUM TAX LIABILITY.

    (a) ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS- Subsection (a) of section 26 of the Internal Revenue Code of 1986 (relating to limitation based on tax liability; definition of tax liability) is amended to read as follows:

    ‘(a) LIMITATION BASED ON AMOUNT OF TAX- The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of--

      ‘(1) the taxpayer’s regular tax liability for the taxable year, plus

      ‘(2) the tax imposed by section 55 for such taxable year.’

    (b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 1997.