Provide a credit for increasing wages paid to child care providers.

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

For purposes of section 38, the amount of the child care supply credit determined under this section with respect to any employer for any taxable year is an amount equal to the lesser of—

(1) the applicable percentage of the qualified child care wages paid or incurred by the employer for such taxable year, or

(2) the excess (if any) of—

(A) the qualified child care wages paid or incurred by the employer for such taxable year, over

(B) the qualified child care wages paid or incurred by the employer for the preceding taxable year.

No credit shall be determined under subsection (a) with respect to any employer for any taxable year unless such employer’s average hourly child care wage for such taxable year exceeds such employer’s average hourly child care wage for the preceding taxable year.

For purposes of this subsection, the term average hourly child care wage means, with respect to any employer for any taxable year, the ratio of—

(A) the qualified child care wages paid or incurred by such employer for such taxable year, divided by

(B) the total number of hours of service for which such wages were paid or incurred.

For purposes of this section—

Except as provided in paragraph (2), the applicable percentage is 5 percent.

In the case of qualified child care wages paid or incurred with respect to employment at an eligible childcare facility which is located in a rural area, the applicable percentage is 7 percent.

For purposes of this paragraph, the term rural area means any area other than an urban area (as defined in section 101(a)(35) of title 23, United States Code).

For purposes of this section—

The term qualified child care wages means wages paid to qualified child care workers.

The term wages has the meaning given such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). Such term shall not include any amount taken into account for purposes of determining any other credit allowed under this subpart.

The term qualified child care worker means any employee who—

(i) is employed at an eligible child care facility, and

(ii) provides child care services.

The term eligible child care facility means any facility which—

(A) provides child care services for at least 6 individuals,

(B) receives a fee, payment, or grant for providing such services, and

(C) complies with all applicable laws and regulations of a State or unit of local government.

The term child care services means the providing of care, education, protection, supervision, or guidance to children.

A taxpayer may elect to have this section not apply for any taxable year.

Rules similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes of this subsection.

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (40), by striking the period at the end of paragraph (41) and inserting, plus, and by adding at the end the following new paragraph:

(42) the child care supply credit determined under section 45BB(a).

Section 6417(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(13) The child care supply credit determined under section 45BB(a).

Section 280C(a) of the Internal Revenue Code of 1986 is amended by inserting 45BB(a), after 45S(a),.

The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.