Enhancement of employer-provided child care credit

(a) Increase of amount of qualified child care expenditures taken into account Section 45F(a)(1) is amended by striking 25 percent and inserting 40 percent (50 percent in the case of an eligible small business). (b) Increase of maximum credit amount Subsection (b) of section 45F is amended to read as follows: (b) Dollar limitation (1) In general The credit allowable under subsection (a) for any taxable year shall not exceed $500,000 ($600,000 in the case of an eligible small business). (2) Inflation adjustment In the case of any taxable year beginning after 2026, the $500,0000 and $600,000 amounts in paragraph (1) 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 2025 for calendar year 2016 in subparagraph (A)(ii) thereof.. (c) Eligible small business Section 45F(c) is amended by adding at the end the following new paragraph: (4) Eligible small business The term eligible small business means a business that meets the gross receipts test of section 448(c), determined— (A) by substituting 5-taxable-year for 3-taxable-year in paragraph (1) thereof, and (B) by substituting 5-year for 3-year each place such term appears in paragraph (3)(A) thereof.. (d) Credit allowed for third-party intermediaries Section 45F(c)(1)(A)(iii) is amended by inserting, or under a contract with an intermediate entity that contracts with one or more qualified child care facilities to provide such child care services before the period at the end. (e) Treatment of jointly owned or operated child care facility Section 45F(c)(2) is amended by adding at the end the following new subparagraph: (C) Treatment of jointly owned or operated child care facility A facility shall not fail to be treated as a qualified child care facility of the taxpayer merely because such facility is jointly owned or operated by the taxpayer and other persons.. (f) Regulations and guidance Section 45F is amended by adding at the end the following new subsection: (g) Regulations and guidance The Secretary shall issue such regulations or other guidance as may be necessary to carry out the purposes of this section, including guidance to carry out the purposes of paragraphs (1)(A)(iii) and (2)(C) of subsection (c).. (g) Effective date The amendments made by this section shall apply to amounts paid or incurred after December 31, 2025.