Enhancement of Employer-Provided Child Care Credit
Section 70401 · Sec. 70401 ·
What this chapter is about
This part raises a credit for employers who help with child care. The rate goes from 25 percent to 40 percent, or 50 percent for a small business. The yearly cap goes to $500,000, or $600,000 for a small business. Shared and contracted facilities now count.
“Section 45F(a)(1) is amended by striking "25 percent" and inserting "40 percent (50 percent in the case of an eligible small business)".”
The section strikes 25 percent in section 45F(a)(1) of the Internal Revenue Code of 1986 and inserts 40 percent, or 50 percent for an eligible small business.
What the document actually says
“Section 45F(a)(1) is amended by striking "25 percent" and inserting "40 percent (50 percent in the case of an eligible small business)".”
That sentence, in plain words
The rate of 25 percent is taken out. The rate of 40 percent is put in. A small business gets 50 percent.
What this is about
The rate sets how much of the cost the credit covers. A higher rate means a bigger credit. Small firms get the better rate.
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The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70401 in the PDF
What the document says
“The credit allowable under subsection (a) for any taxable year shall not exceed $500,000 ($600,000 in the case of an eligible small business).”
The section rewrites subsection (b) of section 45F of the Internal Revenue Code of 1986 to cap the credit at $500,000 a year, or $600,000 for an eligible small business, with both figures rising from a taxable year beginning after 2026 by a cost of living adjustment measured from calendar year 2025.
What the document actually says
“The credit allowable under subsection (a) for any taxable year shall not exceed $500,000 ($600,000 in the case of an eligible small business).”
That sentence, in plain words
The credit may not top $500,000 in a tax year. For a small business the cap is $600,000.
What this is about
Both figures grow with prices after 2026. The growth follows a measure in the tax code. That code is not indexed here.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“The term `eligible small business' means a business that meets the gross receipts test of section 448(c), determined--”
The section adds a new paragraph (4) to section 45F(c) of the Internal Revenue Code of 1986 defining an eligible small business as one meeting the gross receipts test of section 448(c), read with five-taxable-year in place of three-taxable-year in paragraph (1) and five-year in place of three-year in paragraph (3)(A).
What the document actually says
“The term `eligible small business' means a business that meets the gross receipts test of section 448(c), determined--”
That sentence, in plain words
The term covers a business that meets a receipts test. That test sits in the tax code. Two changes to it follow.
What this is about
Both changes stretch the test to five years. It normally runs over three. That older test is not indexed here.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“is amended by inserting ", or under a contract with an intermediate entity that contracts with one or more qualified child care facilities to provide such child care services" before the period at the end.”
The section inserts words into section 45F(c)(1)(A)(iii) of the Internal Revenue Code of 1986 so that child care services provided under a contract with an intermediate entity that itself contracts with one or more qualified child care facilities count.
What the document actually says
“is amended by inserting ", or under a contract with an intermediate entity that contracts with one or more qualified child care facilities to provide such child care services" before the period at the end.”
That sentence, in plain words
New words are added at the end of a rule. They cover a deal with a go-between. That go-between must contract with real care sites.
What this is about
Before this the deal had to be direct. Now a middle firm may sit in between. The care must still come from a qualified site.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70401 in the PDF
What the document says
“A facility shall not fail to be treated as a qualified child care facility of the taxpayer merely because such facility is jointly owned or operated by the taxpayer and other persons.”
The section adds a new subparagraph (C) to section 45F(c)(2) of the Internal Revenue Code of 1986 so that a facility does not stop counting as the taxpayer's qualified child care facility just because the taxpayer owns or runs it jointly with others. The Secretary must issue regulations or guidance to carry out the section, including on the intermediate entity and joint facility rules.
What the document actually says
“A facility shall not fail to be treated as a qualified child care facility of the taxpayer merely because such facility is jointly owned or operated by the taxpayer and other persons.”
That sentence, in plain words
A site still counts as the firm's own for one reason alone. That reason is that others share in owning or running it.
What this is about
So several firms may club together. Each may still claim the credit. The Secretary must write rules on how this works.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall apply”Who acts: Secretary of the TreasuryHow: statuteSec. 70401 in the PDF
What the document says
“The amendments made by this section shall apply to amounts paid or incurred after December 31, 2025.”
The section applies its amendments to amounts paid or incurred after December 31, 2025.
What the document actually says
“The amendments made by this section shall apply to amounts paid or incurred after December 31, 2025.”
That sentence, in plain words
The changes reach money paid out after December 31, 2025. Costs before then are left out.
What this is about
The old rules still hold for earlier costs. The date is fixed in the law. It turns on when the money is paid.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: raise the percentage of qualified expenditures taken into account, raise and index the dollar cap, define an eligible small business, allow the credit where an intermediate entity contracts for the care, allow a jointly owned or operated facility, require guidance, and fix the effective date.
Nothing in the section is left out. It has seven subsections and each is recorded.
The section works by amending section 45F of the Internal Revenue Code of 1986 and points to section 448(c), neither of which is indexed here.
