S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    322
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                                (PREFILED)
 
                              January 4, 2023
                                ___________
 
 Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
   printed to be committed to the Committee on Investigations and Govern-
   ment Operations
 
 AN ACT to amend the tax law, in relation to employer-provided child care
   credits

   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Section 44 of the tax law, as amended by section 1 of  part
 L  of  chapter  59 of the laws of 2019 and subdivision (a) as amended by
 section 5 of part D of chapter 59 of the laws of  2021,  is  amended  to
 read as follows:
   §  44.  Employer-provided  child  care credit. (a) General. A taxpayer
 subject to tax under article nine-A, twenty-two, or thirty-three of this
 chapter shall be allowed a credit against such tax in an amount equal to
 [two hundred percent of the portion of the credit that is allowed to the
 taxpayer under section 45F of the internal  revenue  code]  THE  SUM  OF
 FIFTY  PERCENT  OF  THE  QUALIFIED  CHILD  CARE  EXPENDITURES AND TWENTY
 PERCENT OF THE QUALIFIED CHILD CARE RESOURCE AND  REFERRAL  EXPENDITURES
 FOR  THE  TAXPAYER  FOR  SUCH  TAXABLE YEAR, that is attributable to (i)
 qualified child care expenditures paid or incurred  with  respect  to  a
 qualified  child  care facility with a situs in the state, [and to] (ii)
 qualified child care resource and referral expenditures paid or incurred
 with respect to the taxpayer's employees working  in  the  state,  (III)
 QUALIFIED IN-HOME CARE EXPENDITURES PAID OR INCURRED WITH RESPECT TO THE
 TAXPAYER'S  EMPLOYEES  WORKING  IN  THE STATE, AND (IV) QUALIFIED BACKUP
 CARE EXPENDITURES PAID  OR  INCURRED  WITH  RESPECT  TO  THE  TAXPAYER'S
 EMPLOYEES WORKING IN THE STATE. The credit allowable under this subdivi-
 sion  for  any  taxable  year  shall  not  exceed  five hundred thousand
 dollars. If the entity operating the qualified child care facility is  a
 partnership  or a New York S corporation, then such cap shall be applied
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD02280-01-3
 S. 322                              2
 
 at the entity level, so the aggregate credit allowed to all the partners
 or shareholders of such entity in a taxable year does  not  exceed  five
 hundred thousand dollars.
   (b)  Credit  recapture.  (I)  If  there is a cessation of operation or
 change in ownership[, as defined by section 45F of the internal  revenue
 code]  relating  to  a qualified child care facility with a situs in the
 state, the taxpayer shall add back the applicable  recapture  percentage
 of  the credit allowed under this section, in accordance with the recap-
 ture provisions of [section 45F of the internal revenue  code,  but  the
 recapture  amount  shall  be  limited  to  the credit allowed under this
 section] THIS SUBDIVISION.
   (II) IF, AS OF THE CLOSE OF ANY TAXABLE YEAR,  THERE  IS  A  RECAPTURE
 EVENT WITH RESPECT TO ANY QUALIFIED CHILD CARE FACILITY OF THE TAXPAYER,
 THEN  THE  TAX  OF THE TAXPAYER UNDER THIS CHAPTER FOR SUCH TAXABLE YEAR
 SHALL BE INCREASED BY AN AMOUNT EQUAL TO THE PRODUCT OF:
   (A) THE APPLICABLE RECAPTURE PERCENTAGE; AND
   (B) THE AGGREGATE DECREASE IN THE CREDITS ALLOWED UNDER SECTION 38  OF
 THE  INTERNAL  REVENUE CODE FOR ALL PRIOR TAXABLE YEARS WHICH WOULD HAVE
 RESULTED IF THE QUALIFIED CHILD CARE EXPENDITURES OF THE  TAXPAYER  WITH
 RESPECT TO SUCH FACILITY HAD BEEN ZERO.
   (III)  (A) FOR THE PURPOSES OF THIS SUBDIVISION, THE APPLICABLE RECAP-
 TURE PERCENTAGE SHALL BE DETERMINED FROM THE FOLLOWING TABLE:
 
      IF THE RECAPTURE    THE APPLICABLE RECAPTURE
      EVENT OCCURS IN:    PERCENTAGE IS:
 
      YEARS ONE--THREE    ONE HUNDRED
      YEAR FOUR           EIGHTY-FIVE
      YEAR FIVE           SEVENTY
      YEAR SIX            FIFTY-FIVE
      YEAR SEVEN          FORTY
      YEAR EIGHT          TWENTY-FIVE
      YEARS NINE--TEN     TEN
      YEAR ELEVEN OR      ZERO.
      THEREAFTER
 
   (B) FOR THE PURPOSES OF SUBPARAGRAPH (A) OF THIS PARAGRAPH,  YEAR  ONE
 SHALL  BEGIN ON THE FIRST DAY OF THE TAXABLE YEAR IN WHICH THE QUALIFIED
 CHILD CARE FACILITY IS PLACED IN SERVICE BY THE TAXPAYER.
   (IV) (A) THE TAX FOR THE TAXABLE YEAR SHALL BE INCREASED  UNDER  PARA-
 GRAPH  (II)  OF THIS SUBDIVISION ONLY WITH RESPECT TO CREDITS ALLOWED BY
 REASON OF THIS SECTION WHICH WERE USED TO REDUCE TAX LIABILITY.
   (B) ANY INCREASE IN TAX UNDER THIS SUBDIVISION SHALL NOT BE TREATED AS
 A TAX IMPOSED BY THIS CHAPTER FOR PURPOSES OF DETERMINING THE AMOUNT  OF
 ANY CREDIT UNDER THIS CHAPTER.
   (C)  THE  INCREASE  IN TAX UNDER THIS SUBDIVISION SHALL NOT APPLY TO A
 CESSATION OF OPERATION OF THE FACILITY AS A QUALIFIED CHILD CARE FACILI-
 TY BY REASON OF A CASUALTY LOSS TO THE EXTENT SUCH LOSS IS  RESTORED  BY
 RECONSTRUCTION  OR REPLACEMENT WITHIN A REASONABLE PERIOD ESTABLISHED BY
 THE COMMISSIONER.
   (c) SPECIAL RULES. FOR THE PURPOSES OF THIS SECTION:
   (I)  ALL  PERSONS  WHICH  ARE  TREATED  AS  A  SINGLE  EMPLOYER  UNDER
 SUBSECTIONS (A) AND (B) OF SECTION 52 OF THE INTERNAL REVENUE CODE SHALL
 BE TREATED AS A SINGLE TAXPAYER.
 S. 322                              3

   (II)  UNDER  REGULATIONS PRESCRIBED BY THE COMMISSIONER, RULES SIMILAR
 TO THE RULES OF SUBSECTION (D) OF SECTION 52  OF  THE  INTERNAL  REVENUE
 CODE SHALL APPLY.
   (III) IN THE CASE OF PARTNERSHIPS, THE CREDIT SHALL BE ALLOCATED AMONG
 PARTNERS UNDER REGULATIONS PRESCRIBED BY THE COMMISSIONER.
   (D) NO DOUBLE BENEFIT. (I) FOR PURPOSES OF THIS CHAPTER:
   (A)  IF  A CREDIT IS DETERMINED UNDER THIS SECTION WITH RESPECT TO ANY
 PROPERTY BY REASON OF QUALIFIED CHILD CARE EXPENDITURES,  THE  BASIS  OF
 SUCH  PROPERTY  SHALL  BE  REDUCED BY THE AMOUNT OF THE CREDIT SO DETER-
 MINED.
   (B) IF, DURING ANY TAXABLE YEAR, THERE IS A  RECAPTURE  AMOUNT  DETER-
 MINED  WITH RESPECT TO ANY PROPERTY THE BASIS OF WHICH WAS REDUCED UNDER
 SUBPARAGRAPH (A) OF THIS PARAGRAPH, THE BASIS OF  SUCH  PROPERTY  (IMME-
 DIATELY BEFORE THE EVENT RESULTING IN SUCH RECAPTURE) SHALL BE INCREASED
 BY  AN  AMOUNT  EQUAL  TO  SUCH  RECAPTURE  AMOUNT. FOR PURPOSES OF THIS
 SUBPARAGRAPH, THE TERM "RECAPTURE AMOUNT" SHALL MEAN ANY INCREASE IN TAX
 DETERMINED UNDER SUBDIVISION (B) OF THIS SECTION.
   (II) NO DEDUCTION OR CREDIT SHALL BE ALLOWED UNDER ANY OTHER PROVISION
 OF THIS CHAPTER WITH RESPECT TO THE  AMOUNT  OF  THE  CREDIT  DETERMINED
 UNDER THIS SECTION.
   (E) Reporting requirements. A taxpayer that has claimed a credit under
 this  section  shall  notify the commissioner of any cessation of opera-
 tion, change in ownership, or agreement to  assume  recapture  liability
 [as such terms are defined by section 45F of the internal revenue code],
 in the form and manner prescribed by the commissioner.
   [(d)] (F) Definitions. [The terms "qualified child care expenditures",
 "qualified  child  care  facility",  "qualified  child care resource and
 referral expenditure", "cessation of operation", "change of  ownership",
 and "applicable recapture percentage" shall have the same meanings as in
 section  45F  of  the  internal  revenue code.] FOR THE PURPOSES OF THIS
 SECTION, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   (I) (A) "QUALIFIED CHILD CARE EXPENDITURE" MEANS ANY  AMOUNT  PAID  OR
 INCURRED:
   (1) TO ACQUIRE, CONSTRUCT, REHABILITATE, OR EXPAND PROPERTY:
   (I)  WHICH IS TO BE USED AS PART OF A QUALIFIED CHILD CARE FACILITY OF
 THE TAXPAYER;
   (II) WITH RESPECT TO WHICH A DEDUCTION FOR  DEPRECIATION  (OR  AMORTI-
 ZATION IN LIEU OF DEPRECIATION) IS ALLOWABLE; AND
   (III)  WHICH IS NOT PART OF THE PRINCIPAL RESIDENCE OF THE TAXPAYER OR
 ANY EMPLOYEE OF THE TAXPAYER;
   (2) FOR THE OPERATING COSTS OF A QUALIFIED CHILD CARE FACILITY OF  THE
 TAXPAYER, INCLUDING COSTS RELATED TO THE TRAINING OF EMPLOYEES, TO SCHO-
 LARSHIP  PROGRAMS,  AND  TO  THE  PROVIDING OF INCREASED COMPENSATION TO
 EMPLOYEES WITH HIGHER LEVELS OF CHILD CARE TRAINING; OR
   (3) UNDER A CONTRACT WITH A QUALIFIED CHILD CARE FACILITY  TO  PROVIDE
 CHILD CARE SERVICES TO EMPLOYEES OF THE TAXPAYER.
   (B)  THE  TERM  "QUALIFIED  CHILD CARE EXPENDITURES" SHALL NOT INCLUDE
 EXPENSES IN EXCESS OF THE FAIR MARKET VALUE OF SUCH CARE.
   (II) (A) "QUALIFIED CHILD CARE FACILITY" MEANS A FACILITY:
   (1) THE PRINCIPAL USE OF WHICH IS TO PROVIDE  CHILD  CARE  ASSISTANCE;
 AND
   (2)  WHICH  MEETS  THE  REQUIREMENTS  OF ALL APPLICABLE LAWS AND REGU-
 LATIONS OF THE STATE OR LOCAL GOVERNMENT IN WHICH IT IS LOCATED, INCLUD-
 ING THE LICENSING OF THE FACILITY AS A CHILD CARE FACILITY.  CLAUSE  ONE
 OF  THIS SUBPARAGRAPH SHALL NOT APPLY TO A FACILITY WHICH IS THE PRINCI-
 PAL RESIDENCE OF THE OPERATOR OF THE FACILITY.
 S. 322                              4

   (B) A FACILITY SHALL NOT BE A "QUALIFIED  CHILD  CARE  FACILITY"  WITH
 RESPECT TO A TAXPAYER UNLESS:
   (1)  ENROLLMENT  IN  THE FACILITY IS OPEN TO EMPLOYEES OF THE TAXPAYER
 DURING THE TAXABLE YEAR;
   (2) IF THE FACILITY IS THE PRINCIPAL TRADE OR BUSINESS OF THE  TAXPAY-
 ER, AT LEAST THIRTY PERCENT OF THE ENROLLEES OF SUCH FACILITY ARE DEPEN-
 DENTS OF EMPLOYEES OF THE TAXPAYER; AND
   (3) THE USE OF SUCH FACILITY (OR THE ELIGIBILITY TO USE SUCH FACILITY)
 DOES  NOT  DISCRIMINATE  IN  FAVOR  OF EMPLOYEES OF THE TAXPAYER WHO ARE
 HIGHLY COMPENSATED EMPLOYEES, AS DEFINED BY SECTION 414 OF THE  INTERNAL
 REVENUE CODE.
   (III)  "QUALIFIED  CHILD CARE RESOURCE AND REFERRAL EXPENDITURE" MEANS
 ANY AMOUNT PAID OR INCURRED UNDER  A  CONTRACT  TO  PROVIDE  CHILD  CARE
 RESOURCE AND REFERRAL SERVICES TO AN EMPLOYEE OF THE TAXPAYER.
   (IV)  "APPLICABLE  RECAPTURE  PERCENTAGE"  MEANS THE AMOUNT DETERMINED
 UNDER SUBPARAGRAPH (A) OF PARAGRAPH (III) OF  SUBDIVISION  (B)  OF  THIS
 SECTION.
   (V) "RECAPTURE EVENT" MEANS:
   (A)  THE  CESSATION  OF OPERATION OF THE FACILITY AS A QUALIFIED CHILD
 CARE FACILITY; OR
   (B) A CHANGE IN OWNERSHIP OF THE FACILITY.
   (VI) "CHANGE IN OWNERSHIP"  MEANS  THE  DISPOSITION  OF  A  TAXPAYER'S
 INTEREST  IN  A  QUALIFIED CHILD CARE FACILITY WITH RESPECT TO WHICH THE
 CREDIT DESCRIBED IN SUBDIVISION (A) OF THIS SECTION WAS  ALLOWABLE.  THE
 TERM  "CHANGE IN OWNERSHIP" SHALL NOT APPLY IF THE PERSON ACQUIRING SUCH
 INTEREST IN THE FACILITY AGREES  IN  WRITING  TO  ASSUME  THE  RECAPTURE
 LIABILITY OF THE PERSON DISPOSING OF SUCH INTEREST IN EFFECT IMMEDIATELY
 BEFORE  SUCH DISPOSITION. IN THE EVENT OF SUCH AN ASSUMPTION, THE PERSON
 ACQUIRING THE INTEREST IN THE FACILITY SHALL BE TREATED AS THE  TAXPAYER
 FOR  PURPOSES OF ASSESSING ANY RECAPTURE LIABILITY (COMPUTED AS IF THERE
 HAD BEEN NO CHANGE IN OWNERSHIP).
   (VII) "BACKUP CARE" MEANS CARE PROVIDED TO A DEPENDENT WHEN AN EMPLOY-
 EE'S REGULAR CARE CANNOT BE UTILIZED.   A TAXPAYER  MAY  PROVIDE  BACKUP
 CARE IN ANY OF THE FOLLOWING WAYS:
   (A)  BY  CONTRACTING  WITH  A PROVIDER OR A BACKUP CHILD CARE BENEFITS
 PROVIDER AND PROVIDING DIRECT PAYMENTS TO THE QUALIFIED CARE PROVIDER OR
 MAKING PAYMENTS TO A BACKUP CHILD CARE BENEFITS PROVIDER FOR BACKUP CARE
 SERVICES.
   (B) BY DIRECTLY PAYING OR ARRANGING FOR PAYMENT OF BACKUP  CHILD  CARE
 ANNUALLY  TO  A  QUALIFIED CARE PROVIDER OR A BACKUP CHILD CARE BENEFITS
 PROVIDER UPON RECEIPT OF AN INVOICE DETAILING THE NUMBER OF BACKUP  CARE
 HOURS USED BY AN EMPLOYEE.
   (C) BY REIMBURSING AN EMPLOYEE DIRECTLY OR THROUGH A BACKUP CHILD CARE
 BENEFIT PROVIDER FOR BACKUP CHILD CARE PAID DIRECTLY BY THE EMPLOYEE.
   (VIII) "BACKUP CHILD CARE BENEFIT PROVIDER" MEANS A THIRD-PARTY VENDOR
 THAT  OFFERS SERVICES THAT PROVIDE EMPLOYEES OPTIONS FOR LOCATING AND/OR
 ARRANGING FOR THE PROVISION OF BACKUP CHILD CARE, EITHER THROUGH VARIOUS
 BACKUP CHILD CARE PROVIDERS OR THROUGH A REIMBURSEMENT PROGRAM FOR  CARE
 PAID DIRECTLY BY THE EMPLOYEE.
   (IX)  "IN-HOME  CARE  EXPENDITURES"  MEANS  EXPENSES  FOR  CHILD  CARE
 PROVIDED IN THE EMPLOYEE'S HOME, OR EXPENSES FOR CARE ARRANGED THROUGH A
 THIRD-PARTY VENDOR THAT OFFERS SERVICES FOR  LOCATING  AND/OR  ARRANGING
 FOR  THE  PROVISION  OF  CHILD CARE IN THE EMPLOYEE'S HOME, OR THROUGH A
 REIMBURSEMENT PROGRAM FOR CARE PAID DIRECTLY BY THE EMPLOYEE.
 S. 322                              5
 
   (X) "PAID BACKUP CHILD CARE" OR "PAID BACKUP CHILD CARE BENEFIT" MEANS
 AN EMPLOYEE BENEFIT CONSISTING OF THE  EMPLOYER  PAYING  FOR  ALL  OR  A
 PORTION OF BACKUP CHILD CARE FOR AN EMPLOYEE'S DEPENDENT.
   [(e)] (G) Cross-references. For application of the credit provided for
 in this section, see the following provisions of this chapter:
   (1) article 9-A: section 210-B, subdivision 53;
   (2) article 22: section 606(i), subsections (i) and (jjj);
   (3) article 33: section 1511, subdivision (dd).
   § 2. This act shall take effect immediately and shall apply to taxable
 years beginning on or after January 1, 2024.