Child Care Availability and Affordability Act
- Bill Number
- H.R. 1827
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-03-04: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-01T08:08:25Z
AI-Generated Summary
Purpose of the Legislation
The Child Care Availability and Affordability Act aims to make child care more accessible and affordable for working families by enhancing tax incentives. It expands credits and exclusions related to employer-provided child care and dependent care assistance, and replaces the existing non-refundable child and dependent care tax credit with a new refundable version to provide greater financial relief.
Key Provisions
- Employer-Provided Child Care Credit (Section 45F of the Internal Revenue Code):
- Increases the credit rate from 25% to 50% of qualified child care expenditures.
- Raises the maximum annual credit amount from $150,000 to $500,000 per employer.
- Allows facilities jointly owned or operated by multiple employers to qualify as a single employer's facility.
- Provides a special enhanced rate for small businesses (defined by average gross receipts over five years): 60% credit rate and $600,000 maximum.
- Dependent Care Assistance Exclusion (Section 129):
- Increases the annual exclusion limit for employer-provided dependent care benefits from $5,000 ($2,500 for married individuals filing separately) to $7,500 ($3,750 for married filing separately). This means employees can exclude more of these benefits from their taxable income.
- New Refundable Child and Dependent Care Credit (New Section 36C):
- Replaces the existing non-refundable credit (Section 21) with a refundable credit (meaning it can result in a tax refund even if no taxes are owed).
- Offers a credit of 50% of employment-related expenses for the care of qualifying individuals (children under 13, disabled dependents, or a disabled spouse), with phase-downs based on income: reduces by 1% for every $2,000 above $15,000 (down to 35%), and further to 0% above $150,000.
- Caps expenses at $5,000 for one qualifying individual or $8,000 for two or more.
- Limits the credit to the taxpayer's earned income (or the lesser of spouses' earned income if married); includes special rules for students or disabled spouses, deeming minimum earned income.
- Defines employment-related expenses as costs for household services or care enabling gainful employment, excluding overnight camps; requires compliance with state/local laws for care centers.
- Includes special rules for married couples (joint filing required), separated or divorced parents, payments to relatives (generally not allowed), and reporting requirements (e.g., provider's name, address, and taxpayer ID number).
All changes apply to amounts paid or incurred after the date of enactment, with the new credit effective for taxable years beginning after enactment.
Significant Changes to Existing Law
- Doubles the employer child care credit rate and triples its maximum amount, with added flexibility for shared facilities and bonuses for small businesses.
- Boosts the dependent care exclusion by 50%, allowing employees to shelter more income from taxes via employer programs.
- Shifts the individual child and dependent care credit from non-refundable (Section 21, which only offset taxes owed) to refundable (new Section 36C in the refundable credits subpart), increases expense limits from $3,000/$6,000 to $5,000/$8,000, and adjusts phase-out thresholds and rates for broader accessibility. Repeals the old Section 21 and updates cross-references in related tax code sections.
Potential Impacts
- On Citizens: Working parents, especially lower- and middle-income families, could see reduced tax bills or direct refunds, easing child care costs and supporting workforce participation. Small business owners benefit from higher incentives to offer child care, potentially improving employee retention.
- On Government Agencies: The Internal Revenue Service (IRS) will need to update forms, guidance, and processing for the expanded credits and new refundable credit, increasing administrative workload but also boosting compliance through required reporting (e.g., taxpayer IDs).
- On International Relations: No direct impact, as this is domestic tax policy focused on U.S. families and employers.
Main Stakeholders Affected
- Families and Individuals: Primary beneficiaries, particularly those with young children or disabled dependents needing care to work.
- Employers: Especially small businesses and those offering child care benefits, gaining larger tax credits to offset costs.
- Child Care Providers: Indirectly supported through increased demand from tax-incentivized programs, though they must comply with state/local regulations.
- Government: The U.S. Treasury and IRS, facing higher tax expenditures (estimated revenue loss from credits/exclusions) but potential economic gains from increased employment.
Notable Legal, Constitutional, or Political Implications
- Legal: Enhances tax equity by making the credit refundable, allowing low-income families to benefit fully, and requires "due diligence" for reporting errors to avoid penalties. Aligns with existing tax code structures but introduces new definitions and limits that may lead to litigation over eligibility (e.g., qualifying expenses or joint facilities).
- Constitutional: No apparent challenges; tax incentives are a standard congressional power under Article I, Section 8, promoting general welfare without infringing on states' rights (though it references state laws for care centers).
- Political: Supports bipartisan goals of family affordability and workforce development, potentially reducing child care deserts by encouraging employer involvement. Could increase federal deficits due to expanded tax breaks, influencing budget debates, but fosters economic growth by aiding parental employment.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Carbajal, Salud O. [D-CA-24]
Cosponsors (27)
Rep. Lawler, Michael [R-NY-17], Rep. Davids, Sharice [D-KS-3], Rep. Ciscomani, Juan [R-AZ-6], Rep. Neguse, Joe [D-CO-2], Rep. Landsman, Greg [D-OH-1], Rep. Harder, Josh [D-CA-9], Rep. Costa, Jim [D-CA-21], Rep. Nunn, Zachary [R-IA-3], Rep. Bacon, Don [R-NE-2], Rep. Houlahan, Chrissy [D-PA-6], Rep. Perez, Marie Gluesenkamp [D-WA-3], Rep. Valadao, David G. [R-CA-22], Rep. Mrvan, Frank J. [D-IN-1], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Sykes, Emilia Strong [D-OH-13], Rep. Gottheimer, Josh [D-NJ-5], Rep. Subramanyam, Suhas [D-VA-10], Rep. Davis, Donald G. [D-NC-1], Rep. Cuellar, Henry [D-TX-28], Rep. Bynum, Janelle S. [D-OR-5], Rep. Vargas, Juan [D-CA-52], Rep. Whitesides, George [D-CA-27], Rep. Edwards, Chuck [R-NC-11], Rep. Bresnahan, Robert P. [R-PA-8], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Goodlander, Maggie [D-NH-2], Rep. Stanton, Greg [D-AZ-4]
Recent Actions
- 2025-03-04: Referred to the House Committee on Ways and Means.
- 2025-03-04: Introduced in House
- 2025-03-04: Introduced in House
Bill Versions
- Child Care Availability and Affordability Act — issued 2025-03-04 — PDF (15 pages)