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Democrats Introduce Bill Providing Tax Credits for Child Care

Posted on June 26, 2020

Employers that pay for employees’ dependent care benefits would receive a tax credit for the cost under a new bill introduced by House Democrats.

The 30 percent refundable payroll tax credit is one of several tax provisions included in the Child Care for Economic Recovery Act (H.R. 7327), which is intended to help provide child care for workers returning to their jobs as pandemic-related closure orders begin to lift.

House Ways and Means Committee Chair Richard E. Neal, D-Mass., introduced the bill June 25 alongside other House Democrats, including Reps. Nita M. Lowey of New York, Danny K. Davis of Illinois, Katherine M. Clark of Massachusetts, Rosa L. DeLauro of Connecticut, and Linda T. Sanchez of California.

The bill directly supports child care providers by establishing a 50 percent refundable payroll tax credit to cover mortgages, rent payments, and utility costs for those who have lost revenue because of the coronavirus pandemic.

It also expands the employee retention tax credit — created by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) — to keep child care providers who are unable to work because of a governmental order on the payroll.

“Without access to safe, affordable child care, American workers simply won’t be able to return to their jobs,” Neal said in a release. “This legislation is a key piece of our nation’s economic reopening strategy.”

The bill offers assistance for individual families’ child care expenses by enhancing the child and dependent care tax credit, making it refundable. The credit would cover up to half the expenses for a taxpayer’s child care.

Testimony at a June 18 Ways and Means subcommittee hearing called for making the child and dependent care credit refundable because “it would help working families meet the high cost of child care,” said Indivar Dutta-Gupta of the Georgetown Center on Poverty and Inequality. Other credits targeted toward low- and middle-income families, like the child tax credit and earned income tax credit, are already refundable.

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