Senate File 6 - Introduced SENATE FILE BY KETTERING Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the child and dependent care and early 2 childhood development tax credits and including a retroactive 3 applicability date provision. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1175XS 82 6 mg/je/5 PAG LIN 1 1 Section 1. Section 422.12C, subsection 1, Code 2007, is 1 2 amended to read as follows: 1 3 1. The taxes imposed under this division, less the amounts 1 4 of nonrefundable credits allowed under this division, shall be 1 5 reduced by a child and dependent care credit equal to the 1 6 following percentages of the federal child and dependent care 1 7 credit provided in section 21 of the Internal Revenue Code: 1 8 a. For a taxpayer with net income of less thantentwenty 1 9 thousand dollars, seventy=five percent. 1 10 b. For a taxpayer with net income oftentwenty thousand 1 11 dollars or more but less thantwentyforty thousand dollars, 1 12 sixty=five percent. 1 13 c. For a taxpayer with net income oftwentyforty thousand 1 14 dollars or more but less thantwenty=fivefifty thousand 1 15 dollars, fifty=five percent. 1 16 d. For a taxpayer with net income oftwenty=fivefifty 1 17 thousand dollars or more but less thanthirty=fiveseventy 1 18 thousand dollars, fifty percent. 1 19 e. For a taxpayer with net income ofthirty=fiveseventy 1 20 thousand dollars or more but less thanfortyeighty thousand 1 21 dollars, forty percent. 1 22 f. For a taxpayer with net income offortyeighty thousand 1 23 dollars or more but less thanforty=fiveninety thousand 1 24 dollars, thirty percent. 1 25 g. For a taxpayer with net income offorty=fiveninety 1 26 thousand dollars or more, zero percent. 1 27 Sec. 2. Section 422.12C, subsection 2, unnumbered 1 28 paragraph 1, Code 2007, is amended to read as follows: 1 29 The taxes imposed under this division, less the amounts of 1 30 nonrefundable credits allowed under this division, may be 1 31 reduced by an early childhood development tax credit equal to 1 32 twenty=five percent of the first one thousand dollars which 1 33 the taxpayer has paid to others for each dependent, as defined 1 34 in the Internal Revenue Code, ages three through five for 1 35 early childhood development expenses. In determining the 2 1 amount of early childhood development expenses for the tax 2 2 year beginning in the 2006 calendar year only, such expenses 2 3 paid during November and December of the previous tax year 2 4 shall be considered paid in the tax year for which the tax 2 5 credit is claimed. This credit is available to a taxpayer 2 6 whose net income is less thanforty=fiveninety thousand 2 7 dollars. If the early childhood development tax credit is 2 8 claimed for a tax year, the taxpayer and the taxpayer's spouse 2 9 shall not claim the child and dependent care credit under 2 10 subsection 1. As used in this subsection, "early childhood 2 11 development expenses" means services provided to the dependent 2 12 by a preschool, as defined in section 237A.1, materials, and 2 13 other activities as follows: 2 14 Sec. 3. RETROACTIVE APPLICABILITY DATE. This Act applies 2 15 retroactively to January 1, 2007, for tax years beginning on 2 16 or after that date. 2 17 EXPLANATION 2 18 This bill increases the child and dependent care credit 2 19 under the individual income tax by doubling the income limit 2 20 in each credit bracket. Thus, a taxpayer with less than 2 21 $90,000 in net income is eligible for the credit, while under 2 22 present law, a taxpayer with less than $45,000 in net income 2 23 is eligible. The maximum credit bracket under the bill is 2 24 expanded to include taxpayers with net incomes of less than 2 25 $20,000, while under present law, taxpayers may only have net 2 26 incomes of less than $10,000 to receive the maximum credit. 2 27 The bill also doubles the amount of net income that a 2 28 taxpayer may have, from $45,000 to $90,000, and still qualify 2 29 for the early childhood development tax credit. 2 30 The bill applies retroactively to January 1, 2007, for tax 2 31 years beginning on or after that date. 2 32 LSB 1175XS 82 2 33 mg:sc/je/5