Sponsors (3)
The bill reduces employers' startup costs and increases access to dependent-care FSAs for working families, but the subsidy is temporary, capped, and may not benefit employers with no tax liability or those previously offering similar plans.
Working parents and families will have greater access to employer-offered dependent-care FSAs, making dependent care more affordable.
Small-business owners can recoup startup costs for offering dependent-care FSAs via a tax credit, lowering the net cost of providing this benefit and making it easier to adopt.
Eligible employers claim the credit as part of the general business credit, using a familiar tax mechanism to reduce tax liability.
Parents and small employers may only get short-term relief because the credit phases out after three years, which may not sustain long-term availability of dependent-care FSAs.
Small-business owners with little or no federal tax liability may receive no immediate benefit because the credit is nonrefundable.
Employers that recently maintained similar dependent-care FSAs are excluded, denying some employers and their employees access to the credit.
Based on analysis of 2 sections of legislative text.
Creates a three-year nonrefundable tax credit for small employers to cover startup costs of dependent care FSAs, capped per employer and per participant.
Official title: To amend the Internal Revenue Code of 1986 to provide a credit to certain small employers for the startup costs of dependent care flexible spending plans.
Introduced March 12, 2026 by Adrian Smith · Last progress March 12, 2026
Creates a new business tax credit to help small employers start dependent care flexible spending accounts (FSAs). The credit reimburses qualified startup costs for a limited three-year period, capped per employer and per non-highly-compensated participant, and is available only to employers that did not already offer a substantially similar plan in the prior three years. The credit is nonrefundable, treated as part of the general business credit, applies to amounts paid or incurred after enactment, and includes definitions and exclusions (including a requirement that at least one non-highly-compensated employee participate).