To amend the Internal Revenue Code of 1986 to provide a credit for increasing wages paid to child care providers.
Summary
HB8023 would create a new federal tax credit, the “child care supply credit,” for employers that increase wages paid to child care workers. The credit would be available under the Internal Revenue Code and would generally equal 5% of qualified child care wages, or the amount of the wage increase over the prior year, whichever is less. For qualified wages tied to employment at an eligible child care facility in a rural area, the applicable percentage would be 7% instead of 5%.
To qualify, the employer must pay wages to employees who provide child care services at an eligible child care facility, and the facility must serve at least six individuals, receive compensation or grants for providing care, and comply with applicable state and local laws. The bill defines child care services broadly to include care, education, protection, supervision, or guidance to children. It also allows taxpayers to elect out of the credit, treats the credit as part of the general business credit, permits elective payment under existing tax rules, and prevents double benefits with other tax provisions. The amendments would apply to taxable years beginning after enactment.
Impact
The bill would add a new section 45BB to the Internal Revenue Code and make conforming changes to sections 38, 6417, 280C, and the Code’s table of sections. In practical terms, it would reduce federal tax liability for eligible employers that raise wages for child care workers, with a somewhat larger incentive for rural facilities. Because the credit is tied to wage increases, it is designed to encourage higher compensation in the child care sector rather than subsidize existing wage levels. The bill would not directly change state child care licensing or wage laws, but it would reference and rely on compliance with state and local regulations as a condition of eligibility.
Sentiment
Based on the bill text and the absence of recorded committee debate or votes, the measure appears to be framed as a pro-child-care workforce incentive with a generally supportive policy rationale. Its sponsors are from both parties, suggesting at least some bipartisan interest in addressing child care staffing and compensation. The inclusion of a higher rural credit rate also indicates an effort to tailor the proposal to workforce shortages outside urban areas.
Contention
The main policy questions likely concern whether a tax credit is the best way to raise child care wages, how effectively it would reach underpaid workers, and whether the credit’s structure is too narrow or too modest to materially affect staffing shortages. Potential points of contention include the requirement that wages increase year over year, the limitation to facilities serving at least six individuals, and the need for facilities to already comply with state and local rules. Some may also question the fiscal cost of making the credit available as elective payment and whether the benefit would primarily accrue to employers rather than directly to workers.
To amend the Internal Revenue Code of 1986 to increase the amount allowed as a credit under the expenses for household and dependent care services credit and the employer-provided child care credit.
To amend the Internal Revenue Code of 1986 to establish the Early Childhood Education Trust Fund consisting of amounts paid for the estate tax and made available to fund child care services, and for other purposes.
To Amend The Law Concerning Income Tax Credits For Child Care; To Amend The Income Tax Credit For Employer-provided Child Care; To Provide An Income Tax Credit For Licensed Childcare Providers; And To Declare An Emergency.