To amend the Internal Revenue Code of 1986 to provide a tax credit for expenses for household and elder care services necessary for gainful employment.

I 117TH CONGRESS 1ST SESSION H. R. 258 To amend the Internal Revenue Code of 1986 to provide a tax credit for expenses for household and elder care services necessary for gainful employment. IN THE HOUSE OF REPRESENTATIVES JANUARY 11, 2021 Ms. LEE of California introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide a tax credit for expenses for household and elder care services necessary for gainful employment. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. EXPENSES FOR HOUSEHOLD AND ELDER CARE 3 SERVICES NECESSARY FOR GAINFUL EM- 4 PLOYMENT. 5 (a) IN GENERAL.—Subpart A of part IV of sub- 6 chapter A of chapter 1 of the Internal Revenue Code of 7 1986 is amended by adding at the end the following new 8 section: 9 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 258 IH ‘‘SEC. 25E. EXPENSES FOR HOUSEHOLD AND ELDER CARE 1 SERVICES NECESSARY FOR GAINFUL EM- 2 PLOYMENT. 3 ‘‘(a) ALLOWANCE OF CREDIT.— 4 ‘‘(1) IN GENERAL.—In the case of an individual 5 for which there are one or more qualifying individ- 6 uals (as defined in subsection (b)(1)) with respect to 7 such individual, there shall be allowed as a credit 8 against the tax imposed by this chapter for the tax- 9 able year an amount equal to the applicable percent- 10 age of the employment-related expenses (as defined 11 in subsection (b)(2)) paid by such individual during 12 the taxable year. 13 ‘‘(2) APPLICABLE PERCENTAGE DEFINED.—For 14 purposes of paragraph (1), the term ‘applicable per- 15 centage’ means 35 percent reduced (but not below 16 20 percent) by 1 percentage point for each $2,000 17 (or fraction thereof) by which the taxpayer’s ad- 18 justed gross income for the taxable year exceeds 19 $15,000. 20 ‘‘(b) DEFINITIONS OF QUALIFYING INDIVIDUAL AND 21 EMPLOYMENT-RELATED EXPENSES.—For purposes of 22 this section— 23 ‘‘(1) QUALIFYING INDIVIDUAL.—The term 24 ‘qualifying individual’ means an individual who— 25 ‘‘(A) has attained age 50, and 26 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 258 IH ‘‘(B) is one of the following: 1 ‘‘(i) An individual who bears a rela- 2 tionship to the taxpayer described in sub- 3 paragraph (C) or (D) of section 152(d)(2) 4 (relating to fathers, mothers, and ances- 5 tors). 6 ‘‘(ii) An individual would be a depend- 7 ent of the taxpayer (as defined in section 8 152, determined without regard to sub- 9 sections (b)(1) and (b)(2)) as a qualifying 10 relative described in section 152(d)(1) if— 11 ‘‘(I) in lieu of subparagraphs (B) 12 and (C) thereof the following applied 13 with respect to the individual: 14 ‘‘(aa) the taxpayer has pro- 15 vided over one-half of the individ- 16 ual’s support for the calendar 17 year in which such taxable year 18 begins and each of the preceding 19 4 taxable years, and 20 ‘‘(bb) the individual’s modi- 21 fied adjusted gross income for 22 the calendar year in which such 23 taxable year begins is less than 24 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 258 IH the exemption amount (as de- 1 fined in section 151(d)), 2 ‘‘(II) the individual is physically 3 or mentally incapable of caring for 4 himself or herself, and 5 ‘‘(III) the individual who has the 6 same principal place of abode as the 7 taxpayer for more than one-half of 8 such taxable year. 9 ‘‘(iii) The spouse of the taxpayer who 10 is physically or mentally incapable of car- 11 ing for himself or herself. 12 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 13 The term ‘modified adjusted gross income’ means 14 adjusted gross income determined without regard to 15 section 86. 16 ‘‘(3) EMPLOYMENT-RELATED EXPENSES.— 17 ‘‘(A) IN GENERAL.—The term ‘employ- 18 ment-related expenses’ means amounts paid for 19 the following expenses, but only if such ex- 20 penses are incurred to enable the taxpayer to be 21 gainfully employed for any period for which 22 there are one or more qualifying individuals 23 with respect to the taxpayer: 24 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 258 IH ‘‘(i) expenses for household services, 1 and 2 ‘‘(ii) expenses for the care of a quali- 3 fying individual, including expenses for res- 4 pite care and hospice care. 5 ‘‘(B) EXCEPTION.—Employment-related 6 expenses described in subparagraph (A) which 7 are incurred for services outside the taxpayer’s 8 household shall be taken into account only if in- 9 curred for the care of— 10 ‘‘(i) a qualifying individual described 11 in paragraph (1)(A), or 12 ‘‘(ii) a qualifying individual (not de- 13 scribed in paragraph (1)(A)) who regularly 14 spends at least 8 hours each day in the 15 taxpayer’s household. 16 ‘‘(C) DEPENDENT CARE CENTERS.—Em- 17 ployment-related expenses described in subpara- 18 graph (A) which are incurred for services pro- 19 vided outside the taxpayer’s household by a de- 20 pendent care center (as defined in subpara- 21 graph (D)) shall be taken into account only if— 22 ‘‘(i) such center complies with all ap- 23 plicable laws and regulations of a State or 24 unit of local government, and 25 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 258 IH ‘‘(ii) the requirements of subpara- 1 graph (B) are met. 2 ‘‘(D) DEPENDENT CARE CENTER DE- 3 FINED.—For purposes of this paragraph, the 4 term ‘dependent care center’ means any facility 5 which— 6 ‘‘(i) provides care for more than six 7 individuals (other than individuals who re- 8 side at the facility), and 9 ‘‘(ii) receives a fee, payment, or grant 10 for providing services for any of the indi- 11 viduals (regardless of whether such facility 12 is operated for profit). 13 ‘‘(c) DOLLAR LIMIT ON AMOUNT CREDITABLE.—The 14 amount of the employment-related expenses incurred dur- 15 ing any taxable year which may be taken into account 16 under subsection (a) shall not exceed— 17 ‘‘(1) $3,000 if there is 1 qualifying individual 18 with respect to the taxpayer for such taxable year, 19 or 20 ‘‘(2) $6,000 if there are two or more qualifying 21 individuals with respect to the taxpayer for such tax- 22 able year. 23 The amount determined under paragraph (1) or (2) 24 (whichever is applicable) shall be reduced by the aggregate 25 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 258 IH amount excludable from gross income under section 129 1 for the taxable year. 2 ‘‘(d) EARNED INCOME LIMITATION.—Except as oth- 3 erwise provided in this subsection, the amount of the em- 4 ployment-related expenses incurred during any taxable 5 year which may be taken into account under subsection 6 (a) shall not exceed— 7 ‘‘(1) in the case of an individual who is not 8 married at the close of such year, such individual’s 9 earned income for such year, or 10 ‘‘(2) in the case of an individual who is married 11 at the close of such year, the lesser of such individ- 12 ual’s earned income or the earned income of his 13 spouse for such year. 14 ‘‘(e) SPECIAL RULES.—For purposes of this sec- 15 tion— 16 ‘‘(1) PLACE OF ABODE.—An individual shall 17 not be treated as having the same principal place of 18 abode of the taxpayer if at any time during the tax- 19 able year of the taxpayer the relationship between 20 the individual and the taxpayer is in violation of 21 local law. 22 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE- 23 TURN.—If the taxpayer is married at the close of 24 the taxable year, the credit shall be allowed under 25 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 258 IH subsection (a) only if the taxpayer and his spouse 1 file a joint return for the taxable year. 2 ‘‘(3) MARITAL STATUS.—An individual legally 3 separated from his spouse under a decree of divorce 4 or of separate maintenance shall not be considered 5 as married. 6 ‘‘(4) CERTAIN MARRIED INDIVIDUALS LIVING 7 APART.—If— 8 ‘‘(A) an individual who is married and who 9 files a separate return— 10 ‘‘(i) maintains as his home a house- 11 hold which constitutes for more than one- 12 half of the taxable year the principal place 13 of abode of a qualifying individual, and 14 ‘‘(ii) furnishes over half of the cost of 15 maintaining such household during the 16 taxable year, and 17 ‘‘(B) during the last 6 months of such tax- 18 able year such individual’s spouse is not a mem- 19 ber of such household, such individual shall not 20 be considered as married. 21 ‘‘(5) PAYMENTS TO RELATED INDIVIDUALS.— 22 No credit shall be allowed under subsection (a) for 23 any amount paid by the taxpayer to an individual— 24 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 258 IH ‘‘(A) with respect to whom, for the taxable 1 year, a deduction under section 151(c) (relating 2 to deduction for personal exemptions for de- 3 pendents) is allowable either to the taxpayer or 4 his spouse, or 5 ‘‘(B) who is a child of the taxpayer (within 6 the meaning of section 152(f)(1)) who has not 7 attained the age of 19 at the close of the tax- 8 able year. 9 For purposes of this paragraph, the term ‘taxable 10 year’ means the taxable year of the taxpayer in 11 which the service is performed. 12 ‘‘(6) IDENTIFYING INFORMATION REQUIRED 13 WITH RESPECT TO SERVICE PROVIDER.—No credit 14 shall be allowed under subsection (a) for any amount 15 paid to any person unless— 16 ‘‘(A) the name, address, and taxpayer 17 identification number of such person are in- 18 cluded on the return claiming the credit, or 19 ‘‘(B) if such person is an organization de- 20 scribed in section 501(c)(3) and exempt from 21 tax under section 501(a), the name and address 22 of such person are included on the return 23 claiming the credit. 24 VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 258 IH In the case of a failure to provide the information 1 required under the preceding sentence, the preceding 2 sentence shall not apply if it is shown that the tax- 3 payer exercised due diligence in attempting to pro- 4 vide the information so required. 5 ‘‘(7) IDENTIFYING INFORMATION REQUIRED 6 WITH RESPECT TO QUALIFYING INDIVIDUALS.—No 7 credit shall be allowed under this section with re- 8 spect to any qualifying individual unless the TIN of 9 such individual is included on the return claiming 10 the credit. 11 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 12 such regulations as may be necessary to carry out the pur- 13 poses of this section.’’. 14 (b) CLERICAL AMENDMENT.—The table of sections 15 for subpart A of part IV of subchapter A of chapter 1 16 of the Internal Revenue Code of 1986 is amended by add- 17 ing at the end the following new item: 18 ‘‘Sec. 25E. Expenses for household and elder care services necessary for gainful employment.’’. (c) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to taxable years beginning after 20 the date of the enactment of this Act. 21 Æ VerDate Sep 11 2014 05:42 Feb 05, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\H258.IH H258 kjohnson on DSK79L0C42PROD with BILLS