Child and Dependent Care Tax Credit Enhancement Act of 2021

II 117TH CONGRESS 1ST SESSION S. 271 To amend the Internal Revenue Code of 1986 to enhance the Child and Dependent Care Tax Credit and make the credit fully refundable. IN THE SENATE OF THE UNITED STATES FEBRUARY 8, 2021 Mr. CASEY (for himself, Mr. WYDEN, Mrs. MURRAY, Mr. MENENDEZ, Mr. CARDIN, Mr. BROWN, Mr. BENNET, Mr. WHITEHOUSE, Ms. HASSAN, Ms. CORTEZ MASTO, Ms. STABENOW, Ms. CANTWELL, Ms. SMITH, Mr. BLUMENTHAL, Mr. MURPHY, Mr. DURBIN, Ms. HIRONO, Mr. LEAHY, Ms. KLOBUCHAR, Mr. BOOKER, Mr. REED, Ms. BALDWIN, Mrs. GILLI- BRAND, Mr. HEINRICH, Mr. MERKLEY, Mr. VAN HOLLEN, Ms. DUCKWORTH, and Mr. LUJA´N) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to enhance the Child and Dependent Care Tax Credit and make the credit fully refundable. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Child and Dependent 4 Care Tax Credit Enhancement Act of 2021’’. 5 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 271 IS SEC. 2. ENHANCEMENT OF CHILD AND DEPENDENT CARE 1 TAX CREDIT. 2 (a) IN GENERAL.—Paragraph (2) of section 21(a) of 3 the Internal Revenue Code of 1986 is amended to read 4 as follows: 5 ‘‘(2) APPLICABLE PERCENTAGE.— 6 ‘‘(A) IN GENERAL.—For purposes of para- 7 graph (1), the term ‘applicable percentage’ 8 means 50 percent reduced (but not below the 9 phaseout percentage) by 1 percentage point for 10 each $2,000 (or fraction thereof) by which the 11 taxpayer’s adjusted gross income for the taxable 12 year exceeds $125,000. 13 ‘‘(B) PHASEOUT PERCENTAGE.—For pur- 14 poses of subparagraph (A), the term ‘phaseout 15 percentage’ means 20 percent reduced (but not 16 below zero) by 1 percentage point for each 17 $2,000 (or fraction thereof) by which the tax- 18 payer’s adjusted gross income for the taxable 19 year exceeds $400,000.’’. 20 (b) INCREASE IN DOLLAR LIMIT ON AMOUNT CRED- 21 ITABLE.—Subsection (c) of section 21 of the Internal Rev- 22 enue Code of 1986 is amended— 23 (1) in paragraph (1), by striking ‘‘$3,000’’ and 24 inserting ‘‘$8,000’’; and 25 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 271 IS (2) in paragraph (2), by striking ‘‘$6,000’’ and 1 inserting ‘‘$16,000’’. 2 (c) SPECIAL RULE FOR MARRIED COUPLES FILING 3 SEPARATE RETURNS.—Paragraph (2) of section 21(e) of 4 the Internal Revenue Code of 1986 is amended to read 5 as follows: 6 ‘‘(2) MARRIED COUPLES FILING SEPARATE RE- 7 TURNS.— 8 ‘‘(A) IN GENERAL.—In the case of married 9 individuals who do not file a joint return for the 10 taxable year— 11 ‘‘(i) the applicable percentage under 12 subsection (a)(2) and the number of quali- 13 fying individuals and aggregate amount ex- 14 cludable under section 129 for purposes of 15 subsection (c) shall be determined with re- 16 spect to each such individual as if the indi- 17 vidual had filed a joint return with the in- 18 dividual’s spouse, and 19 ‘‘(ii) the aggregate amount of the 20 credits allowed under this section for such 21 taxable year with respect to both spouses 22 shall not exceed the amount which would 23 have been allowed under this section if the 24 individuals had filed a joint return. 25 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 271 IS ‘‘(B) REGULATIONS.—The Secretary shall 1 prescribe such regulations or other guidance as 2 is necessary to carry out the purposes of this 3 subsection.’’. 4 (d) ADJUSTMENT FOR INFLATION.—Section 21 of 5 the Internal Revenue Code of 1986 is amended— 6 (1) by redesignating subsection (f) as sub- 7 section (g); and 8 (2) by inserting after subsection (e) the fol- 9 lowing new subsection: 10 ‘‘(f) INFLATION ADJUSTMENT.— 11 ‘‘(1) IN GENERAL.—In the case of a calendar 12 year beginning after 2022, the $125,000 amount in 13 paragraph (2) of subsection (a) and the dollar 14 amounts in subsection (c) shall each be increased by 15 an amount equal to— 16 ‘‘(A) such dollar amount, multiplied by 17 ‘‘(B) the cost-of-living adjustment deter- 18 mined under section 1(f)(3) for the calendar 19 year in which the taxable year begins, deter- 20 mined by substituting ‘calendar year 2021’ for 21 ‘calendar year 2016’ in subparagraph (A)(ii) 22 thereof. 23 ‘‘(2) ROUNDING.—If any dollar amount, after 24 being increased under paragraph (1), is not a mul- 25 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 271 IS tiple of $100, such dollar amount shall be rounded 1 to the next lowest multiple of $100.’’. 2 (e) CREDIT TO BE REFUNDABLE.— 3 (1) IN GENERAL.—The Internal Revenue Code 4 of 1986 is amended— 5 (A) by redesignating section 21 as section 6 36C; and 7 (B) by moving section 36C, as so redesig- 8 nated, from subpart A of part IV of subchapter 9 A of chapter 1 to the location immediately be- 10 fore section 37 in subpart C of part IV of sub- 11 chapter A of chapter 1. 12 (2) TECHNICAL AMENDMENTS.— 13 (A) Paragraph (1) of section 23(f) of the 14 Internal Revenue Code of 1986 is amended by 15 striking ‘‘21(e)’’ and inserting ‘‘36C(e)’’. 16 (B) Paragraph (6) of section 35(g) of such 17 Code is amended by striking ‘‘21(e)’’ and in- 18 serting ‘‘36C(e)’’. 19 (C) Paragraph (1) of section 36C(a) of 20 such Code (as redesignated by paragraph (1)) 21 is amended by striking ‘‘this chapter’’ and in- 22 serting ‘‘this subtitle’’. 23 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 271 IS (D) Subparagraph (C) of section 129(a)(2) 1 of such Code is amended by striking ‘‘section 2 21(e)’’ and inserting ‘‘section 36C(e)’’. 3 (E) Paragraph (2) of section 129(b) of 4 such Code is amended by striking ‘‘section 5 21(d)(2)’’ and inserting ‘‘section 36C(d)(2)’’. 6 (F) Paragraph (1) of section 129(e) of 7 such Code is amended by striking ‘‘section 8 21(b)(2)’’ and inserting ‘‘section 36C(b)(2)’’. 9 (G) Subsection (e) of section 213 of such 10 Code is amended by striking ‘‘section 21’’ and 11 inserting ‘‘section 36C’’. 12 (H) Subparagraph (H) of section 13 6213(g)(2) of such Code is amended by striking 14 ‘‘section 21’’ and inserting ‘‘section 36C’’. 15 (I) Subparagraph (L) of section 16 6213(g)(2) of such Code is amended by striking 17 ‘‘section 21, 24, or 32,’’ and inserting ‘‘section 18 24, 32, or 36C,’’. 19 (J) Paragraph (2) of section 1324(b) of 20 title 31, United States Code, is amended by in- 21 serting ‘‘36C,’’ after ‘‘36B,’’. 22 (K) The table of sections for subpart C of 23 part IV of subchapter A of chapter 1 of the In- 24 ternal Revenue Code of 1986 is amended by in- 25 VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 271 IS serting after the item relating to section 36B 1 the following: 2 ‘‘Sec. 36C. Expenses for household and dependent care services necessary for gainful employment.’’. (L) The table of sections for subpart A of 3 such part IV is amended by striking the item 4 relating to section 21. 5 (f) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to taxable years beginning after 7 December 31, 2021. 8 Æ VerDate Sep 11 2014 17:05 Feb 21, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\S271.IS S271 pamtmann on DSKBC07HB2PROD with BILLS