Sponsors (3)
The bill uses a targeted employer tax credit (larger in rural areas) to encourage higher wages and investment in child care, but it excludes many small/home providers, gives limited benefit to low‑profit providers because the credit is nonrefundable, and reduces federal revenue.
Employers of eligible child care facilities can reduce payroll tax liability by claiming a tax credit equal to 5% of qualified child care wages (7% in rural areas) when they raise wages.
Child care workers at qualifying facilities are likely to see higher hourly wages because employers must increase average pay year-over-year to remain eligible for the credit.
Rural child care providers get a larger credit rate (7%), encouraging investment and expanded child care capacity in rural communities.
The credit reduces federal revenue, which could increase the deficit or crowd out other spending unless offsets are provided.
Small or home-based providers that serve fewer than six children or cannot meet state/local rules are excluded, limiting support for many small providers and potentially reducing local access to care.
Because the credit is nonrefundable, low-margin, new, or otherwise low-tax-liability providers may receive little or no immediate cash benefit, reducing the incentive for startups and struggling providers.
Based on analysis of 2 sections of legislative text.
Creates a new nonrefundable employer tax credit for increased child care wages: employers can claim either 5% of qualified child care wages (7% in rural areas) or the year-over-year increase in those wages, whichever is less. Employers must raise their average hourly child care wage year-over-year to be eligible; the credit is treated as part of the general business credit and applies to taxable years beginning after enactment. The credit targets wages for qualifying child care workers at eligible child care facilities (minimum size and payment/registration requirements) and includes rules to prevent double tax benefits and allow an opt-out election; it also makes the credit eligible for certain elective payment rules under current tax law.
Creates a nonrefundable employer tax credit for year-over-year increases in qualified child care wages (5% normally, 7% in rural areas).
Official title: To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.
Introduced March 19, 2026 by Linda T. Sánchez · Last progress March 19, 2026