IRS would create Business Child Care Liaison under new bill

The wide-ranging Taxpayer Assistance and Service Act that the Senate Finance Committee voted to approve last week includes, among its many provisions, a requirement for the Internal Revenue Service to establish a Business Child Care Liaison to educate businesses about child care tax breaks and help implement them.

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The provision originates from a bipartisan bill, the Child Care Tax Benefit Outreach and Assistance Act, which was introduced in March by Sen. Maggie Hasan, D-New Hampshire, and Dan Sullivan, R-Alaska (not to be confused with the other Dan Sullivan who is currently running against him in the Republican primary). 

The Child Care Tax Benefit Outreach and Assistance Act would direct the IRS to appoint a Business Child Care Liaison who would be responsible for building relationships between the child care sector and business community, coordinating with other federal agencies to educate employers about child care tax incentives, and identify and recommend to Congress potential legislative and administrative changes to improve the utilization of these incentives.

The Business Child Care Liaison would have the following duties: 

1. Act as a liaison between the IRS, employer-provided child care benefit advocates, businesses considering providing or expanding child care benefits for their employees, state workforce boards, state economic development agencies, child care resource and referral agencies, tribal organizations, and other stakeholders, including child development experts; 

2. Provide public education and assistance related to the expansion of employer-provided child care benefits through the establishment and maintenance of practices that promote employer-provided child care benefits, including the use of dependent care assistance programs such as dependent care FSAs, on-site or subsidized child care, child care stipends, near-site child care partnerships, shared and pooled childcare arrangements, backup child care, and resource and referral services; 

3. Issue a fact sheet for use by tax return preparers listing the different tax benefits for employer-provided child care and the appropriate rules for each such benefit; 

4. Help facilitate communication between businesses and the IRS about the operational challenges and opportunities that exist to improve the use of Federally incentivized child care benefits such as dependent care FSAs and other dependent care assistance programs and the credit under Section 45F of the Internal Revenue Code; 

5. In collaboration with the General Services Administration, within 120 days of the date of the enactment, establish a link on the homepage of SAM.gov that allows website visitors to access a landing page on the SAM.gov website that is tailored to helping businesses learn about utilizing dependent care FSAs and other dependent care assistance programs and the credit under Section 45F, resources for understanding the rules and regulations with these programs, and the benefits of utilizing these programs on worker recruitment, retention, productivity, and well-being.

The U.S. Congress Joint Economic Committee – Minority issued a report in June calculating the potential savings for businesses and their employees through increased usage of child care tax breaks. In some hypothetical scenarios, a sample business could achieve $820,000 in direct tax savings over the first five years that it provides child care benefits to its employees and see an $8 million return-on-investment. A parent working at such a company could save nearly $10,000 in child care expenses over that same time period.

“Families, businesses, and the strength of America’s workforce all suffer when hardworking parents can’t afford the child care that they need for their kids,” Hassan said in a statement when the report was issued in June. “This new report lays out the significant, concrete savings that parents and businesses alike could get if they use child care tax cuts that are already on the books. The creation of a dedicated liaison at the IRS to expand awareness about these tax cuts and remove barriers to accessing them would be a meaningful, commonsense step to lower costs and strengthen the workforce.”

It’s just one of the provisions in the sprawling Taxpayer Assistance and Service Act, which contains over 60 provisions, many of which affect tax professionals, including increased penalties on so-called “ghost preparers” who don’t provide a Preparer Tax Identification Number on returns, as well as requirements for continuing education for uncredentialed preparers.

The bill has won support from the American Institute of CPAs. the National Association of Enrolled Agents, the National Taxpayers Union, the American Coalition for Taxpayer Rights, National Taxpayer Advocate Erin Collins, Jackson Hewitt, Bipartisan Policy Action and more.

“Many important provisions included in the legislation represent noncontroversial reforms to the way taxpayers exchange information with the IRS,” said three officials with the National Taxpayers Union in a letter to the Senate Finance Committee. “The public expects a baseline level of expedient online access to information, a standard the private sector has met for decades but one the IRS rarely delivers. Technological upgrades included in this legislation would provide taxpayers with real-time information about call wait times, broader callback availability, and the option to view and respond to more information through online accounts. In addition, digitization of more correspondence should help IRS agents review and process information more efficiently and respond more quickly to taxpayer inquiries.”