Dear Chairman Crapo, Chairman Smith, Ranking Member Wyden and Ranking Member Neal:
The National Conference of State Legislatures, the bipartisan organization representing the legislatures of our nation's states, territories, commonwealths and the District of Columbia, urges you to consider the following recommendations to update tax credits related to child care to help address widespread concerns about child care access and affordability. These issues are a priority for state legislatures and our recommendations were developed with unanimous agreement by NCSL's bipartisan child care working group, which has been meeting over the last six months.
Child Tax Credit
NCSL supports the child tax credit as an effective way to help parents afford child care and other basic necessities that support healthy child development. We encourage Congress to provide tiered maximum credit amounts for the CTC based on the age of the child, with the highest credit available for the youngest children. We also encourage Congress to offer parents the option to receive the credit in multiple payments during the year instead of once per year to support more economic consistency for low-income families.
Child and Dependent Care Tax Credit
NCSL supports the child and dependent care tax credit as an opportunity to help parents afford child care. We encourage Congress to make the following changes to the CDCTC to make it more accessible to low- and middle-income families and to account for inflation and the increasing cost of child care.
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Update the credit amount and index the credit to inflation to ensure the credit reflects the current cost of child care and offers a meaningful benefit to families as the cost of living increases.
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Make the credit fully refundable so the lowest-income families can receive the credit for child care costs they have already incurred.
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Phase out the credit for high-income families who are less likely to have child care costs impact their financial stability.
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Separate the Dependent Care Assistance Program from the child and dependent care tax credit so that parents who contribute to a DCAP can receive up to the maximum tax credit for the amount they spend on child care above their DCAP contribution.
45F Credit for Employer-Provided Child Care
NCSL supports the 45F tax credit for employers that establish, operate, supply and/or support child care programs. These tax credits should incentivize employers to consider child care supports that benefit both their employees and the community. NCSL encourages Congress to make it easier for small- and medium-sized businesses to make use of the credit.
The child tax credit, the child and dependent care tax credit and the 45F tax credit can help make child care more affordable and accessible; however, all need updates to better reach families, particularly those with low incomes and younger children. NCSL looks forward to working with you on these issues and would welcome the opportunity to further discuss child care tax credits with the committee.
Thank you for your consideration.
Sincerely,
Rep. April Berg
Co-Chair, NCSL Budgets and Revenue Standing Committee
Washington House of Representatives
Sen. Tim Reed
Co-Chair, NCSL Budgets and Revenue Standing Committee
South Dakota State Senate
Sen. Lisa Reynolds
Co-Chair, NCSL Children, Families and Human Services Standing Committee
Oregon State Senate
Sen. Julie VanOrden
Co-Chair, NCSL Children, Families and Human Services Standing Committee
Idaho State Senate