PACE Act

The Internal Revenue Code of 1986 is amended—

(1) by redesignating section 21 as section 36C; and

(2) by moving section 36C, as so redesignated, from subpart A of part IV of subchapter A of chapter 1 to the location immediately before section 37 in subpart C of part IV of subchapter A of chapter 1.

(1) Paragraph (1) of section 23(f) of the Internal Revenue Code of 1986 is amended by striking 21(e) and inserting 36C(e).

(2) Paragraph (6) of section 35(g) of such Code is amended by striking 21(e) and inserting 36C(e).

(3) Paragraph (1) of section 36C(a) of such Code (as redesignated by subsection (a)) is amended by striking this chapter and inserting this subtitle.

(4) Subparagraph (C) of section 129(a)(2) of such Code is amended by striking section 21(e) and inserting section 36C(e).

(5) Paragraph (2) of section 129(b) of such Code is amended by striking section 21(d)(2) and inserting section 36C(d)(2).

(6) Paragraph (1) of section 129(e) of such Code is amended by striking section 21(b)(2) and inserting section 36C(b)(2).

(7) Subsection (e) of section 213 of such Code is amended by striking section 21 and inserting section 36C.

(8) Subparagraph (H) of section 6213(g)(2) of such Code is amended by striking section 21 and inserting section 36C.

(9) Subparagraph (L) of section 6213(g)(2) of such Code is amended by inserting 36C, after 32,.

(10) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36C, after 36B,.

(11) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 36B the following:

(12) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 21.

The amendments made by this section shall apply to taxable years beginning after December 31, 2023.

Section 36C of the Internal Revenue Code of 1986, as redesignated by section 2 of this Act, is amended—

(1) in paragraph (2) of subsection (a), by striking 35 percent reduced (but not below 20 percent) and inserting 50 percent reduced (but not below 35 percent);

(2) by striking subsection (g) and redesignating subsection (f) as subsection (g); and

(3) by inserting after subsection (e) the following new subsection:

In the case of any taxable year beginning after 2023, each of the dollar amounts in subsections (a)(2) and (c) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2022 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any increase determined under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

The amendments made by this section shall apply to taxable years beginning after December 31, 2023.

Subparagraph (A) of section 129(a)(2) of the Internal Revenue Code of 1986 (relating to dependent care assistance programs) is amended by striking $5,000 ($2,500 and inserting $7,500 (half such dollar amount.

Paragraph (2) of section 129(a) of such Code is amended by striking subparagraph (D) and inserting the following new subparagraph:

In the case of any taxable year beginning in a calendar year after 2024, the $7,500 amount in subparagraph (A) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.

The amendments made by this section shall apply to taxable years beginning after December 31, 2023.