Chavez-DeRemer co-sponsors bill to improve tax credit, reduce child care costs and boost availability

WASHINGTON (KTVZ) -- Reps. Lori Chavez-DeRemer (OR-05) and Salud Carbajal (CA-24) unveiled bipartisan child care affordability legislation Monday they said is aimed at lowering the cost of child care for middle-class families and creating new pathways to expand child care availability for small businesses.

The bill would improve a tax credit aimed at helping employers provide child care options to their employees, allow multiple businesses to partner to create a new child care option, and expand federal tax write-offs that already exist to offset child care expenses. This includes updating caps on tax-exempt child care spending accounts to reflect the current cost of care.

“Skyrocketing costs have left affordable child care out of reach for too many families. Unfortunately, this problem often falls on women, who then must decide between staying at home and pursuing a career or education that they are passionate about. It has a far-reaching effect on families, local businesses, and our economy, which is why investing in child care is also an investment in the future growth and success of our communities. As a mom of twin daughters, I’m proud to help lead the bipartisan Child Care Investment Act so mothers and parents don’t have to worry about breaking the bank to find quality care for their children,” Chavez-DeRemer said.

“When I sit down with Central Coast working families or small business owners to talk about what they’re worried about when it comes to making ends meet, there is always one consistent item: the cost and availability of child care. Families can’t find the care they need, or can’t afford it. Businesses can’t hire who they want because there’s not enough care options. And the lack of affordable child care is holding our middle class families and local economies back,” said Carbajal. “That’s why I’ve worked with our local business owners and others to craft a commonsense, bipartisan bill that ensures tax incentives we already have on the books are working correctly to support child care affordability and reflect the realities of child care today.”

The Child Care Investment Act improves three existing child care tax incentives to ensure the federal tax code adequately addresses the current realities of child care costs and availability. 

• The bill expands a tax credit aimed at helping businesses provide child care to their workers by increasing the credit’s rate and caps, allowing businesses to jointly create and operate a child care facility for their employees, and adding in-home services as an eligible use.
  • Currently, the Employer-Provided Child Care Credit only allows for a business to receive tax credits for contracting with an existing child care provider or creating their own facility.
• The bill doubles the amount of money that can be saved by a family in a tax-exempt Dependent Care Flexible Spending Account (DCAP) to cover child care expenses up to $10,000 annually, more accurately reflecting the average cost of child care in the U.S.
  • The bill also allows an additional $2,000 in DCAP savings per each additional dependent.
  • The current $5,000 annual cap has remained unchanged since the 1980s, when the dependent care savings account was first created.
• The bipartisan proposal also improves the Child and Dependent Care Tax Credit, an existing tax write-off for Americans to offset child care expenses.
  • The current rates would be increased for all eligible incomes, with a family with two children eligible to get up to $3,000 in credits for child care expenses.
  • The bill would also make the credit fully refundable and index the bill’s increased tax credits to inflation.

A more detailed summary of the bill’s proposed tax credit changes can be found HERE.

The bill is endorsed by the Bipartisan Policy Center, as well as First Five Years Fund (FFYF), Save the Children, and the Early Care and Education Consortium.

"Federal tax incentives established with the intent of supporting access to child care for the nation's workforce have failed to reach the low- and middle-income families they were established to aid. Unclear federal guidance and strict tax liability thresholds have impeded access to these supports," said Director of Bipartisan Policy Center’s Early Childhood Initiative Linda Smith. “This bipartisan bill corrects years of barriers to access for families most in need. The Child Care Investment Act of 2023 allows states and employers to explore innovative and flexible solutions to meet diverse needs of working families. Further, this bill has something for both parents and employers, which is a critical step in the right direction in supporting access to safe, quality child care for America's workforce.”

“The cost of child care is one of the biggest barriers preventing parents with small children from being able to go to work, hindering many employers' ability to retain a stable workforce,” said FFYF Executive Director Sarah Rittling. “This critical bill focuses on strengthening and expanding the core existing tax credits – to families and through employers – that are dedicated solely to helping address the cost and accessibility of child care. We are so grateful to Reps. Carbajal and Chavez-DeRemer for their bipartisan commitment to families and kids, and we look forward to working with them to get this across the finish line.” 

“We need to take a holistic approach in addressing the child care crisis facing our nation,” said Early Care and Education Consortium Acting Executive Director Sage Schaftel. “The Child Care Investment Act includes critical expansions to three underutilized and outdated child care tax incentives—the CDCTC, DCAP, and the employer-provided child care credit. With the expansions proposed by Congressman Carbajal and Congresswoman Chavez-DeRemer, not only will children and families gain increased access to affordable, accessible, high-quality child care, but businesses will also be able to better support their employees, who are increasingly leaving the workforce due to challenges with accessing care. The Early Care and Education Consortium appreciates this effort to expand childcare access for working families and commends Congressman Carbajal and Congresswoman Chavez-DeRemer for making this issue a priority.”