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House Passes Bill Providing Tax Credits for Child Care

Posted on July 30, 2020

The House has approved legislation to provide families and businesses with tax benefits designed to boost child care infrastructure and help employees return to work amid the coronavirus.

The Child Care for Economic Recovery Act (H.R. 7327), introduced by Rep. Nita M. Lowey, D-N.Y., passed July 29 on a 250-161 vote. Included in the bill is a 30 percent refundable payroll tax credit for employers that pay for their workers’ dependent care benefits and an enhanced child and dependent care tax credit that would cover half of a taxpayer’s child care expenses.

“This bill provides unprecedented federal support for child care because we are all in this together, and we’ve got your back,” House Ways and Means Committee Chair and bill cosponsor Richard E. Neal, D-Mass., said on the House floor.

Following the vote, Neal called on the Senate to pass the bill, saying, “I hope Senate Republicans can grasp the urgency with which we need to address the child care crisis and will quickly pass this legislation to relieve the fear and stress parents are experiencing.”

The bill also would expand the employee retention tax credit — created by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) — to help employers continue to pay child care workers who are unable to work because of a governmental order.

Further, it would establish a 50 percent refundable payroll tax credit for child care businesses that have lost revenue because of the coronavirus pandemic to cover mortgages, rent payments, and utility costs.

The bill would cost $91.3 billion over the next decade, with the expanded child and dependent care tax credit alone costing $88.7 billion, according to the Joint Committee on Taxation (JCX-19-20).

The bill’s passage comes amid negotiations for the next coronavirus relief package among congressional Democrats and Republicans and the Trump administration. The House-passed Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) already includes the enhanced child and dependent care tax credit, while Senate Republicans’ Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act doesn’t.

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