To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.

Summary

Creates a refundable business tax credit for employers who increase wages paid to child care workers. The credit equals the lesser of (a) a percentage of qualified child care wages (5% nationwide, 7% for qualified rural facilities) or (b) the dollar increase in qualified child care wages compared with the prior taxable year, but only if an employer’s average hourly child care wage rises over the prior year. The credit is added to the general business credit, can be made an elective payment, is subject to rules preventing double benefits, and applies to taxable years beginning after enactment.

• Establishes a refundable-eligible employer tax credit to encourage increases in wages for child care workers.
• Credit equals the lesser of an applicable percentage of qualified child care wages (5% standard; 7% for eligible rural facilities) or the year-over-year increase in qualified child care wages.
• Employer must have a higher average hourly child care wage in the taxable year than in the prior year to claim the credit.
• Eligible facilities must serve at least six individuals, receive payment for services, and comply with state/local laws.
• Credit is added to the general business credit and can be claimed as an elective payment (increasing potential federal outlays).
• Amounts used to compute other specified tax credits are excluded from qualified child care wages to prevent double counting.
• Employers can elect out of the credit for a taxable year under rules modeled on existing election procedures.
• Effective for taxable years beginning after enactment, requiring IRS guidance and recordkeeping for hours and wage calculations.