A new report from Congress’ Joint Economic Committee offers a bipartisan path for businesses and employees to effectively utilize childcare tax credits to address this challenge.
The report makes the economic case for the Child Care Tax Benefit Outreach and Assistance Act, led by Ranking Member Senator Maggie Hassan (D-NH) and Senator Dan Sullivan (R-AK). Introduced on March 12, the bill would create an IRS point person to help more employers understand and take advantage of childcare-related tax incentives—the Business Child Care Liaison would serve as a needed bridge between childcare providers, federal agencies, and the business community while advising Congress on ways to make these incentives easier to use.
Recent enhancements to the Employer-Provided Child Care Credit (45F) represent just one of these tax incentives. The Chamber has advocated strongly for these reforms, but these upgrades will make little headway if businesses do not know they exist or how to use them.
However, the report finds that simply raising awareness of childcare incentives—through a dedicated liaison—can translate into significant savings for both businesses and employees using two scenarios:
Scenario 1: Business A seeks to provide on-site childcare for employees. The estimated sticker price of $2.8 million over a five-year period is a daunting figure that may dissuade businesses from moving forward. But after consulting with the liaison, Business A learns it may be able to use the 45F program, resulting in $820,000 in tax savings.
Scenario 2: Business B hopes to make childcare more accessible for its employees. If it were to cover $4,000 worth of childcare costs each year for 274 qualifying employees, it would be confronted with nearly $1.1 million in annual costs—an eyebrow-raising number. Conversations with the liaison, however, help Business B understand that using 45F could result in $440,000 in tax savings.
Further, for every $1 a business spends on childcare, it reportedly receives a $2.90 ROI from reduced employee turnover and increased productivity. Put simply, Business A’s $2.8 million investment would yield roughly $8.1 million in benefits, and Business B’s $1.1 million investment would yield roughly $3.2 million. In a world where ROI reigns supreme, these numbers make a convincing case for employers to view childcare investments as a practical workforce solution.
Bottom Line
Childcare-related incentives are both unfamiliar and underutilized. If the Child Care Tax Benefit Outreach and Assistance Act were to come to fruition, programs like 45F would receive much-needed attention and encourage businesses to make serious investments in their employees’ childcare needs. That's a win-win for employers, parents, and the workforce writ large.
