MODEL BILLS

Dependent Care Tax Credit Act

Summary: The Dependent Care Tax Credit Act provides low-income taxpayers with a tax credit for dependent care, calculated on a sliding scale.

SECTION 1. SHORT TITLE

This Act shall be called the “Dependent Care Tax Credit Act.”

SECTION 2. DEPENDENT CARE TAX CREDIT

Section XXXX of the Code is amended by adding the following new section:

DEPENDENT CARE TAX CREDIT

(A) A taxpayer shall be allowed a tax credit based on a percentage of the dependent care credit

allowed under section 21 of the Internal Revenue Code for the same taxable year, without regard to whether the taxpayer claimed this federal credit.

(B) The applicable percentage for a taxpayer is:

1. 100 percent of the allowable federal credit if state Adjusted Gross Income is $24,999 or less.

2. 80 percent of the allowable federal credit if state Adjusted Gross Income is $25,000-34,999.

3. 60 percent of the allowable federal credit if state Adjusted Gross Income is $35,000-44 ,999.

4. 40 percent of the allowable federal credit if state Adjusted Gross Income is $45,000-54,999.

5. 20 percent of the allowable federal credit if state Adjusted Gross Income is $55,000-64,999.

(C) The credit under this section shall be allowed against the taxes imposed by this article for the taxable year, reduced by the credits permitted by this article. If the credit exceeds the tax as so reduced, the taxpayer may receive, and the comptroller shall pay as an overpayment, without interest, the amount of such excess.

SECTION 3. EFFECTIVE DATE

This Act shall take effect for taxable years beginning on January 1, 20XX.