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Read twice and referred to the Committee on Finance.
Strikes section 21 of subpart A of part IV of subchapter A (repeal of the credit for expenses for household and dependent care services).
Revises subsection 23(f)(1) to set forth rules for married couples including joint filing requirement, marital status (legal separation), and rules for certain married individuals living apart.
Amends subsection 35(g)(6) to apply rules similar to subparagraphs (B) and (C) of section 23(f)(1) regarding marital status and certain married individuals living apart.
Amends paragraph 129(a)(2)(C) to determine marital status under the rules of subparagraphs (B) and (C) of section 23(f)(1).
Amends subsection 129(b)(2) to specify deemed earned income amounts for a spouse who is a student or incapable of caring for self.
Amends subsection 129(e)(1) to revise definitions, including defining 'employment-related expenses', conditions for services outside the household, dependent care center requirements, and definition of dependent care center.
Strikes subsection (e) of section 213.
Amends paragraph 6213(g)(2) by striking specified text in subparagraphs (H) and (L).
Introduced February 12, 2025 by James E. Banks · Last progress February 12, 2025
Makes multiple changes to federal child-care policy and the tax code: it revises the Child Care and Development Block Grant Act to expand and clarify the use of child care certificates, add definitions (including in‑home and relative caregivers), strengthen protections for parents and religious child‑care providers (including a private right of action), require state notices and regulatory review for relative caregivers, and authorize two $50 million pilot programs to reduce fraud and promote relative caregiving. It also repeals the federal tax credit for household and dependent care expenses (Internal Revenue Code section 21) and implements related conforming and definitional changes to the Internal Revenue Code, with the tax changes applying to taxable years beginning after enactment.
State plans must give parents the option to receive a child care certificate and must provide all direct services authorized under the subchapter via child care certificates.
Defines “child care certificate” to mean a certificate or other disbursement issued to a parent that may be used as payment for child care, as a required deposit, or as a disbursement to married parents acting as a relative caregiver (so long as that disbursement is not less than the payment rate for other relative caregivers). The provision also states certificates are not grants or contracts and allows their use with religious child care providers.
Sets family asset and income eligibility rules: family assets must not exceed $1,000,000; unmarried‑parent families must have income ≤85% of the State median for comparable families; two‑parent married families must have income ≤70% of the State median; married parents who act as relative caregivers (and work a combined 40 hours/week) also qualify at ≤70% of the State median; includes a clause for families needing or receiving protective services.
Adds definitions for “in‑home child care provider” (individual providing child care in the child’s own home, excluding family child care providers) and “relative caregiver” (an individual 18 or older who provides child care only to eligible children who are relatives as listed, with a special married‑parent condition).
State plans must certify protection for working and newly married parents by not terminating assistance based solely on an unmarried parent’s marriage that raises family income above the State median for a family of the same size, and must continue the assistance for at least 6 months after such marriage.
Primary direct impacts:
Families with young children and parents who rely on child care assistance: may see expanded flexibility from broader certificate use and new supports for relatives; eligibility rules (income and asset limits) may change who qualifies for assistance.
Relative caregivers (family members who provide child care): gain clearer statutory recognition and payment authority; pilot funding and program changes aim to increase recruitment, retention, and supports for relatives acting as caregivers.
Religious child care providers: receive strengthened statutory protections (replacement of “sectarian” with “religious”) and a private right of action, enabling them to sue to enforce those protections; this could reduce some regulatory barriers for faith‑based providers and may increase litigation asserting religious‑liberty claims.
State child‑care agencies and administrators: incur additional procedural steps (notifications to parents, regulatory reviews, implementation of new relative‑caregiver frameworks) that may require administrative capacity and potentially increase costs; pilot programs may require cooperation, data collection, and reporting.
Working taxpayers who previously used the dependent care tax credit: will lose that specific tax benefit once section 21 is repealed for taxable years beginning after enactment; the net effect depends on whether programmatic child‑care changes and subsidies offset the loss of the tax credit for affected households.
The Internal Revenue Service and tax preparers: must implement and communicate numerous conforming changes and updated definitions, affecting tax filings and taxpayer guidance.
Overall effects and tradeoffs:
Uncertainties:
Expand sections to see detailed analysis
Read twice and referred to the Committee on Finance.
Introduced in Senate