PlainBillCongress, translated.Legislation. Context. Public interest.Referred to the House Committee on Ways and Means.
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People & committees
Rep. Carbajal, Salud O. [D-CA-24] · D–CA
Legislative record
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Referred to the House Committee on Ways and Means.
Introduced in House
Introduced in House
Primary sources
Text links open the official source. We also preserved the text version used in the PlainBill explanation below.
Source last updated: Sep 19, 2026. Consult Congress.gov for the current record.
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PlainBill explanation
Based on the full Introduced in House · 2025-03-04 text. This explanation has not received human editorial review. This overview describes the proposal’s major provisions; it does not establish what its real-world effects would be.
The proposed Child Care Availability and Affordability Act would expand tax breaks for employers that help pay for child care, with higher credit rates and limits for qualifying small businesses. It would also raise the amount of employer-provided dependent care assistance excluded from taxable income. For individual taxpayers, it would replace the household and dependent care credit with a refundable credit, meaning it could produce a refund beyond income tax owed. Eligibility would depend on care expenses needed for work, income, family circumstances, and other requirements.
This Act may be cited as the Child Care Availability and Affordability Act.
Section 45F(a)(1) of the Internal Revenue Code of 1986 is amended by striking 25 percent and inserting 50 percent.
(i) subsection (a)(1) shall be applied by substituting 60 percent for 50 percent, and (ii) subsection (b) shall be applied by substituting $600,000 for $500,000.
3. Increase in amount excludable for dependent care assistance programs (a) In general Section 129(a)(2)(A) of the Internal Revenue Code of 1986 is amended by striking $5,000 ($2,500 and inserting $7,500 ($3,750.
4. Household and dependent care credit increased and made refundable
Section 21 of the Internal Revenue Code of 1986 is repealed.
such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer
Section 2 would raise the employer credit rate for qualified child care expenditures from 25% to 50% and increase the maximum credit from $150,000 to $500,000.
(a) Increase of amount of qualified child care expenditures taken into account Section 45F(a)(1) of the Internal Revenue Code of 1986 is amended by striking 25 percent and inserting 50 percent. (b) Increase of maximum credit amount Section 45F(b) of the Internal Revenue Code of 1986 is amended by striking $150,000 and inserting $500,000.
A child care facility would not lose qualified status merely because the taxpayer owns or operates it jointly with others. This provision would not waive other qualification requirements.
For purposes of subparagraph (A)(i)(I), a facility shall not fail to be treated as a qualified childcare facility of the taxpayer merely because such facility is jointly owned or operated by the taxpayer and other persons.
Qualifying small businesses would receive a 60% credit rate and a $600,000 maximum. Eligibility would use the referenced gross receipts test—a test based on business receipts—with five-year periods substituted for three-year periods. The bill does not reproduce that test's dollar threshold.
(4) Small businesses (A) In general In the case of a taxpayer described in subparagraph (B)— (i) subsection (a)(1) shall be applied by substituting 60 percent for 50 percent, and (ii) subsection (b) shall be applied by substituting $600,000 for $500,000. (B) Taxpayer described A taxpayer described in this subparagraph is a taxpayer that meets the gross receipts test of section 448(c), determined— (i) by substituting 5-taxable-year for 3-taxable-year in paragraph (1) thereof, and (ii) by substituting 5-year for 3-year each place such term appears in paragraph (3)(A) thereof.
The employer credit changes would apply to amounts paid or incurred after enactment of section 2.
The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this section.
Section 3 would increase the dependent care assistance exclusion amounts from $5,000 to $7,500 and from $2,500 to $3,750. These changes would apply to amounts paid or incurred after enactment of that section. The surrounding statutory language explaining the two limits is not reproduced.
Section 129(a)(2)(A) of the Internal Revenue Code of 1986 is amended by striking $5,000 ($2,500 and inserting $7,500 ($3,750. (b) Effective date The amendment made by this section shall apply to amounts paid or incurred after the date of the enactment of this section.
Section 4 would replace tax code section 21 with a new refundable household and dependent care credit in section 36C. The credit would equal an income-dependent percentage of eligible work-related expenses paid during the tax year.
4. Household and dependent care credit increased and made refundable
Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amending by inserting after section 36B the following new section: 36C. Expenses for household and dependent care services necessary for gainful employment
In the case of an individual for which there are 1 or more qualifying individuals with respect to such individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses paid by such individual during the taxable year.
Section 21 of the Internal Revenue Code of 1986 is repealed.
The proposed credit rate would start at 50%. For adjusted gross income—the income measure used here for tax purposes—above $15,000, it would fall by one percentage point for each $2,000 or part of $2,000, stopping at 35%. Above $150,000, a further reduction of one percentage point per $2,000 or part of $2,000 would apply, down to zero.
the term applicable percentage means 50 percent— (A) reduced (but not below 35 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $15,000, and (B) further reduced (but not below zero) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $150,000.
Qualifying people would include dependent children under 13 under the cited tax definition. They would also include certain dependents and spouses physically or mentally unable to care for themselves, provided they share the taxpayer's main home for more than half the tax year. The dependent category uses specified exceptions to the existing tax definition.
(1) Qualifying individual The term qualifying individual means— (A) a dependent of the taxpayer (as defined in section 152(a)(1)) who has not attained age 13, (B) a dependent of the taxpayer (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or (C) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.
Eligible expenses would cover household services and care needed to enable the taxpayer to work during a period with a qualifying person. Overnight camp services would be excluded.
The term employment-related expenses means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer: (i) Expenses for household services. (ii) Expenses for the care of a qualifying individual. Such term shall not include any amount paid for services outside the taxpayer’s household at a camp where the qualifying individual stays overnight.
Care outside the home would qualify only for an eligible dependent child under 13 or another qualifying person who regularly spends at least eight hours each day in the taxpayer's household.
Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer’s household shall be taken into account only if incurred for the care of— (i) a qualifying individual described in paragraph (1)(A), or (ii) a qualifying individual (not described in paragraph (1)(A)) who regularly spends at least 8 hours each day in the taxpayer’s household.
(A) a dependent of the taxpayer (as defined in section 152(a)(1)) who has not attained age 13
Outside-home care at a dependent care center would also require compliance with all applicable state and local laws and regulations. The bill defines such a center as a facility caring for more than six people who do not live there and receiving a fee, payment, or grant for services to any of them, whether or not it operates for profit.
Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayer’s household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if— (i) such center complies with all applicable laws and regulations of a State or unit of local government, and (ii) the requirements of subparagraph (B) are met.
the term dependent care center means any facility which— (i) provides care for more than 6 individuals (other than individuals who reside at the facility), and (ii) receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).
The credit calculation would count at most $5,000 in expenses for one qualifying person or $8,000 for two or more. These are expense limits, not credit amounts. Subject to the spouse exception, counted expenses would also be capped at an unmarried taxpayer's earned income or the lower of the two spouses' earned incomes.
The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed— (1) $5,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or (2) $8,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
Except as otherwise provided in this subsection, the amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed— (A) in the case of an individual who is not married at the close of such year, such individual’s earned income for such year, or (B) in the case of an individual who is married at the close of such year, the lesser of such individual’s earned income or the earned income of his spouse for such year.
For the earned-income limit, a spouse who meets the student definition or qualifies as unable to care for themselves would be treated as working during qualifying months. Assumed monthly earnings would be at least $250 with one qualifying person or $500 with two or more. The student definition requires full-time attendance during each of five calendar months in the tax year at an educational organization meeting the cited tax-code definition.
In the case of a spouse who is a student or a qualifying individual described in subsection (b)(1)(C), for purposes of paragraph (1), such spouse shall be deemed for each month during which such spouse is a full-time student at an educational institution, or is such a qualifying individual, to be gainfully employed and to have earned income of not less than— (A) $250 if subsection (c)(1) applies for the taxable year, or (B) $500 if subsection (c)(2) applies for the taxable year.
(1) $5,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or (2) $8,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
(7) Student The term student means an individual who during each of 5 calendar months during the taxable year is a full-time student at an educational organization. (8) Educational organization The term educational organization means an educational organization described in section 170(b)(1)(A)(ii).
Married taxpayers generally would have to file jointly to claim the credit. People legally separated under a divorce or separate-maintenance decree would be treated as unmarried.
(2) Married couples must file joint return If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year. (3) Marital status An individual legally separated from the individual's spouse under a decree of divorce or of separate maintenance shall not be considered as married.
A married person filing separately would also be treated as unmarried if they maintain a home that is a qualifying person's main home for more than half the year, pay more than half its upkeep, and their spouse is absent from the household for the final six months.
(4) Certain married individuals living apart If— (A) an individual who is married and who files a separate return— (i) maintains as the individual's home a household which constitutes for more than 1/2 of the taxable year the principal place of abode of a qualifying individual, and (ii) furnishes over half of the cost of maintaining such household during the taxable year, and (B) during the last 6 months of such taxable year such individual’s spouse is not a member of such household, such individual shall not be considered as married.
Where the cited dependency rule for divorced parents and similar circumstances applies, a child under 13 or unable to care for themselves would qualify for the custodial parent's credit, not the noncustodial parent's. Separately, the shared-home requirement would not be satisfied if the relationship between the taxpayer and the person violates local law at any point during the tax year.
(5) Special dependency test in case of divorced parents, etc If— (A) section 152(e) applies to any child with respect to any calendar year, and (B) such child is under the age of 13 or is physically or mentally incapable of caring for himself or herself, in the case of any taxable year beginning in such calendar year, such child shall be treated as a qualifying individual described in subparagraph (A) or (B) of subsection (b)(1) (whichever is appropriate) with respect to the custodial parent (as defined in section 152(e)(4)(A)), and shall not be treated as a qualifying individual with respect to the noncustodial parent.
An individual shall not be treated as having the same principal place of abode of the taxpayer if at any time during the taxable year of the taxpayer the relationship between the individual and the taxpayer is in violation of local law.
Payments would not qualify if made to someone for whom the taxpayer or spouse is allowed the referenced dependent exemption deduction, or to the taxpayer's child who is under 19 at the end of the tax year. For this rule, the relevant year is when the service is performed.
No credit shall be allowed under subsection (a) for any amount paid by the taxpayer to an individual— (A) with respect to whom, for the taxable year, a deduction under section 151(c) (relating to deduction for personal exemptions for dependents) is allowable either to the taxpayer or the taxpayer's spouse, or (B) who is a child of the taxpayer (within the meaning of section 152(f)(1)) who has not attained the age of 19 at the close of the taxable year. For purposes of this paragraph, the term taxable year means the taxable year of the taxpayer in which the service is performed.
Tax returns generally would need the care provider's name, address, and taxpayer identification number. For a tax-exempt organization described in section 501(c)(3), only its name and address would be required. Failure to supply provider information could be excused if the taxpayer shows diligent efforts to obtain it. The return would also need each qualifying person's taxpayer identification number.
(9) Identifying information required with respect to service provider No credit shall be allowed under subsection (a) for any amount paid to any person unless— (A) the name, address, and taxpayer identification number of such person are included on the return claiming the credit, or (B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return claiming the credit. In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required.
(10) Identifying information required with respect to qualifying individuals No credit shall be allowed under this section with respect to any qualifying individual unless the TIN of such individual is included on the return claiming the credit.
The Secretary would be required to issue regulations or other guidance needed or appropriate to implement the new individual credit. The bill would also update statutory references to reflect its move to section 36C.
(f) Regulations The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.
(6) The following sections of such Code are each amended by striking section 21(e) and inserting section 36C(e). (A) Section 23(f)(1). (B) Section 35(g)(6). (C) Section 129(a)(2)(C).
(1) Section 1324(b) of title 31 is amended by inserting 36C, after 36B,.
The individual credit changes would apply to tax years beginning after enactment of section 4.
(d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this section.
The supplied official-actions snapshot, updated September 19, 2026, records introduction in the House and referral to the House Committee on Ways and Means on March 4, 2025. This snapshot does not establish later action or enactment.
Source snapshot updated 2026-09-19T23:28:59Z. 2025-03-04: Referred to the House Committee on Ways and Means. 2025-03-04: Introduced in House
A closer look
Reviewed version: Introduced in House · 2025-03-04. These findings describe provisions and who may benefit; they are not judgments of waste, corruption, or motive.
This review covers the supplied bill text. “None identified” does not rule out provisions in later versions or accompanying reports and disclosures.
Provisions outside the bill’s main subject, or policy changes attached to appropriations.
None identified in the reviewed text
No unrelated provision or policy change attached to appropriations was identified in the complete supplied introduced text. This conclusion is limited to that version and does not establish absence in other versions or accompanying materials.
Spending directed to particular recipients or places outside ordinary competitive or formula-based allocation.
None identified in the reviewed text
No congressionally directed spending for a particular recipient or place was identified in the complete supplied introduced text. This conclusion is limited to that version; the source set does not establish formal earmark status in other versions or accompanying materials.
Narrow exceptions, exemptions, or preferential treatment that warrant a closer look.
Findings to examine
The supplied introduced text contains preferential tax treatment for a defined subset of employers. It directly relates to the bill's child care policy; classification does not establish whether the preference is justified.
Employers meeting the modified small-business gross receipts test would receive a higher child care expenditure credit rate and maximum than other eligible employers: 60% and $600,000 instead of 50% and $500,000. Eligibility would use five-year rather than three-year periods under the referenced test.
(4) Small businesses (A) In general In the case of a taxpayer described in subparagraph (B)— (i) subsection (a)(1) shall be applied by substituting 60 percent for 50 percent, and (ii) subsection (b) shall be applied by substituting $600,000 for $500,000. (B) Taxpayer described A taxpayer described in this subparagraph is a taxpayer that meets the gross receipts test of section 448(c), determined— (i) by substituting 5-taxable-year for 3-taxable-year in paragraph (1) thereof, and (ii) by substituting 5-year for 3-year each place such term appears in paragraph (3)(A) thereof.
Full text preserved for this analysis. Legislative record snapshot: Sep 19, 2026. How PlainBill uses AI