Small Business Dependent Care FSA Opportunity Act
- Bill Number
- H.R. 7922
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-03-12: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-03-31T21:28:25Z
AI-Generated Summary
Purpose
The Small Business Dependent Care FSA Opportunity Act (H.R. 7922) aims to encourage small employers to offer dependent care flexible spending arrangements (FSAs) by providing a tax credit for the startup costs of establishing these plans. Dependent care FSAs allow employees to use pre-tax dollars for expenses like childcare or care for other dependents.
Key Provisions
- New Tax Credit (Section 45BB): Eligible small employers can claim a credit equal to qualified startup costs, which include ordinary and necessary expenses for:
- Setting up or administering the plan.
- Educating employees about the plan.
- Credit Limits:
- Applies only in the first credit year (when the plan becomes effective or the prior year, if elected) and the next two taxable years.
- Maximum per year: The greater of $500 or the lesser of $250 per eligible non-highly compensated employee (up to $5,000 total).
- Zero in later years.
- Eligible Employers:
- Defined as small employers under IRC Section 408(p)(2)(C)(i) (generally those with 100 or fewer employees earning at least $5,000/year).
- Must not have offered a similar dependent care FSA for the same employees in the prior three taxable years.
- Plan Requirements:
- Must have at least one participating non-highly compensated employee (as defined in IRC Section 414(q), typically those earning under $155,000 in 2024, adjusted annually).
- Employer contributions must qualify for exclusion from employee gross income under IRC Section 129.
- Administration: The credit is added to the general business credit under IRC Section 38(b).
- Effective Date: Applies to costs paid or incurred after enactment, in taxable years ending after that date.
Significant Changes to Existing Law
- Introduces a new tax credit (IRC Section 45BB) that did not previously exist, specifically targeting startup costs for dependent care FSAs.
- Amends IRC Section 38(b) to include this credit in the list of general business credits.
- Adds corresponding updates to the IRC table of sections.
Potential Impacts
- On Small Employers: Lowers the financial barrier to offering dependent care benefits, potentially improving employee retention and attraction.
- On Employees: Increases access to tax-advantaged dependent care savings, especially for lower-wage workers at small businesses.
- On Government: Minor reduction in federal tax revenue; IRS will need to administer claims and verify eligibility.
- No direct international relations impact.
Main Stakeholders Affected
- Small employers (primary beneficiaries of the credit).
- Employees of eligible small employers, particularly non-highly compensated workers who gain FSA access.
- IRS (handles credit claims and audits).
- Families relying on dependent care services.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on existing IRC definitions (e.g., highly compensated employees, controlled groups), ensuring consistency; includes anti-abuse rules to prevent credits for prior plans.
- Constitutional: No apparent issues; standard tax incentive within Congress's taxing power.
- Political: Promotes small business growth and family support through targeted tax relief, with built-in limits to control costs.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Davis, Danny K. [D-IL-7], Rep. Moran, Nathaniel [R-TX-1]
Recent Actions
- 2026-03-12: Referred to the House Committee on Ways and Means.
- 2026-03-12: Introduced in House
- 2026-03-12: Introduced in House
Bill Versions
- Small Business Dependent Care FSA Opportunity Act — issued 2026-03-12 — PDF (6 pages)