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1 (January 21, 2005)

handle is hein.crs/crsuntaahup0001 and id is 1 raw text is: Order Code RS21466 Updated January 21, 2005 CRS Report for Congress Received through the CRS Web Dependent Care: Current Tax Benefits and Legislative Issues Christine Scott Specialist in Tax Economics Domestic Social Policy Division Summary In the 2000 census, for over 60% of the households with children under 6, all parents in the household worked. For families with both parents working or a single working parent family, care for young children and individuals who are physically or mentally unable to care for themselves is critical to maintaining participation in the workforce. To assist these families current law provides two tax benefits related to dependent care: the dependent care credit and the exclusion from income for employer- provided dependent care assistance programs. Both provisions are for employment- related expenses for the care of dependents under the age of 13, or dependents (or a spouse) who are physically or mentally incapable of caring for themselves. Several bills were introduced in the 108'h Congress that would have clarified the tax treatment of dependent care programs for military personnel. H.R. 3365 passed both houses and was signed into law (P.L. 108-121) on November 11, 2003. Several other bills introduced in the 108'h Congress would have provided a uniform definition of a child. The Working Families Tax Relief Act of 2004, (H.R. 1308, P.L. 108-311) created a more uniform definition of a child for tax purposes and altered the dependent care expense tax provisions beginning in tax year 2005. Other legislation introduced in the 108th Congress would have eliminated the 2010 sunset for the dependent care provisions of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA, P.L. 107-16); made the credit refundable; expanded the credit; simplified the calculation of the credit; or expanded the exclusion from income for employer-provided dependent care assistance programs. This report will be updated as legislative activity warrants. Current Tax Benefits for Dependent Care There are two current law tax provisions for dependent care: the dependent care tax credit (DCTC) and the exclusion from income for employer-provided dependent care assistance programs (DCAP). Both provisions use the same definitions of qualified Congressional Research Service **o The Library of Congress

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