SENATE FILE 47

BY  KETTERING

A BILL FOR

An Act increasing the amount and extending the availability of the child and dependent care and early childhood development tax credits and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 422.12C, subsection 1, Code 2011, is amended to read as follows:
   1.  The taxes imposed under this division, less the amounts of nonrefundable credits allowed under this division, shall be reduced by a child and dependent care credit equal to the following percentages of the federal child and dependent care credit provided in section 21 of the Internal Revenue Code:
   a.  For a taxpayer with net income of less than ten thousand dollars, seventy-five one hundred percent.
   b.  For a taxpayer with net income of ten thousand dollars or more but less than twenty thousand dollars, sixty-five seventy-five percent.
   c.  For a taxpayer with net income of twenty thousand dollars or more but less than twenty-five thirty thousand dollars, fifty-five sixty-five percent.
   d.  For a taxpayer with net income of twenty-five thirty thousand dollars or more but less than thirty-five forty thousand dollars, fifty fifty-five percent.
   e.  For a taxpayer with net income of thirty-five forty thousand dollars or more but less than forty fifty thousand dollars, forty fifty percent.
   f.  For a taxpayer with net income of forty fifty thousand dollars or more but less than forty-five sixty thousand dollars, thirty forty percent.
   g.  For a taxpayer with net income of forty-five sixty thousand dollars or more, zero but less than eighty thousand dollars, thirty percent.
   h.  For a taxpayer with net income of eighty thousand dollars or more, zero percent.
   Sec. 2.  Section 422.12C, subsection 2, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   The taxes imposed under this division, less the amounts of nonrefundable credits allowed under this division, may be reduced by an early childhood development tax credit equal to twenty-five percent of the first one thousand dollars which the taxpayer has paid to others for each dependent, as defined in the Internal Revenue Code, ages three through five for early childhood development expenses. In determining the amount of early childhood development expenses for the tax year beginning in the 2006 calendar year only, such expenses paid during November and December of the previous tax year shall be considered paid in the tax year for which the tax credit is claimed. This credit is available to a taxpayer whose net income is less than forty-five eighty thousand dollars. If the early childhood development tax credit is claimed for a tax year, the taxpayer and the taxpayer’s spouse shall not claim the child and dependent care credit under subsection 1. As used in this subsection, “early childhood development expenses”means services provided to the dependent by a preschool, as defined in section 237A.1, materials, and other activities as follows:
   Sec. 3.  RETROACTIVE APPLICABILITY DATE.  This Act applies retroactively to January 1, 2011, for tax years beginning on or after that date.
EXPLANATION
   This bill extends the availability of the child and dependent care tax credit and the early childhood development tax credit to taxpayers with net incomes of less than $80,000. Currently, the credits are available to taxpayers with net incomes of less than $45,000.
   The bill also changes the schedule for determining the amount of the child and dependent care tax credit. The credit is equal to a percent of the federal child and dependent care tax credit as follows:
Net Income Between  Percentage

0 — $10,000            75

 $10,000 — $20,000            65

 $20,000 — $25,000            55

 $25,000 — $35,000            50

 $35,000 — $40,000            40

 $40,000 — $45,000            30

 $45,000 or more            0
   The bill provides a new schedule as follows:
Net Income Between  Percentage

0 — $10,000            100

 $10,000 — $20,000            75

 $20,000 — $30,000            65

 $30,000 — $40,000            55

 $40,000 — $50,000            50

 $50,000 — $60,000            40

 $60,000 — $80,000            30

 $80,000 or more            0
   The bill applies retroactively to January 1, 2011, for tax years beginning on or after that date.