June 2002
2002 Tax Credit to Businesses Offering Child Care Assistance
A new tax credit opportunity became available January 1, 2002, for companies offering certain types of child care assistance to employees.
Section 205 of H.R. 1836, the Economic Growth and Tax Relief Reconciliation Act of 2001, now provides a tax credit of up to $150,000 to employers for the provision of child care resources or facilities (although such expenses may be deductible as ordinary and necessary business expenses in some instances).
Effective with the 2002 tax year, employers may receive a tax credit equal to 25 percent of qualified expenses for employee child care and 10 percent of qualified expenses for child care resources and referral services, up to a maximum credit of $150,000 per taxable year.
The 10 percent tax credit is for any amount paid or incurred under a contract to provide child care resource and referral services to an employee of the taxpayer. Such contracts could include parenting seminars; enhanced resource and referral; parent packets; purchasing child care slots; or forming a consortium of providers.
Allowable expenditures for the 25 percent tax credit include:
Any contract with a qualified child care facility to provide child care services to employees of the taxpayer;
Any reimbursements to an employee for expenses for child care which enables the employee to be gainfully employed including expenses related to basic child care; before/after school care; transportation associated with such care; holiday programs including educational, recreational and camp programs.
Any amount paid or incurred to acquire, construct, rehabilitate or expand property that will be used as part of a qualified licensed child care facility of the taxpayer. The facility can not constitute part of the principal residence of the taxpayer or any employee of the taxpayer. Also included are the operating costs of a qualified child care facility of the taxpayer, including costs related to the training of employees, to scholarship programs, and to the providing of increased compensation to employees with higher levels of child care training.
For more information on providing child care assistance to your employees, call Charlene Speicher, Business Partnership Specialist for the Indiana Association of Child Care Resource and Referral, at 574-271-0256.
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