ASSEMBLY, No. 766

 

STATE OF NEW JERSEY

 

Introduced Pending Technical Review by Legislative Counsel

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblywoman BUONO

 

 

An Act providing a gross income tax credit for certain dependent care expenses and a refundable gross income tax credit for certain child care expenses, supplementing chapter 4 of Title 54A of the New Jersey Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. a. A taxpayer shall be allowed a credit against the tax otherwise due under N.J.S.54A:1-1 et seq. for the expenses for household and dependent care services necessary for the taxpayer's gainful employment in an amount equal to 25% of the credit allowed the taxpayer for such expenditures for the taxable year pursuant to section 21 of the federal Internal Revenue Code of 1986, 26 U.S.C. §21.

    b. A taxpayer shall be allowed a credit against the tax otherwise due under N.J.S.54A:1-1 et seq. for the expenses for the care of a dependent child at a child care center accredited by the National Academy of Early Childhood Programs necessary for the taxpayer's gainful employment in an amount equal to 50% of the credit allowed the taxpayer for such expenses for the taxable year pursuant to section 21 of the federal Internal Revenue Code of 1986, 26 U.S.C. §21. If the credit allowed pursuant to this subsection reduces the tax liability otherwise due to zero, any amount of credit remaining shall be an overpayment of tax for the purposes of N.J.S.54A:1-1 et seq.

    c. A taxpayer may not claim the credit allowed pursuant to subsection a. of this section and the credit allowed pursuant to subsection b. of this section for the same taxable year.

 

    2. This act shall take effect immediately and apply to taxable years beginning on or after January 1, 1996.

 

STATEMENT

 

    This bill provides two alternative credits under the gross income tax for the expenses of dependent care that enable taxpayers to be gainfully employed.

    The first credit is allowed to taxpayers based on a percentage of their expenses for the care of their adult dependents who are physically or mentally incapable of caring for themselves, their spouse who is physically or mentally incapable of self-care and their dependent children under the age of 13. The expenses of care, either in the home or outside the home, are allowed only if the care expenses enable the taxpayer to be gainfully employed.

    The dependent care expense credit allowed under this bill is based on a similar federal credit which establishes maximum limits on the amount of care expenditures that will be counted towards the credit. The federal credit also decreases the percentage of expenses counted toward the credit amount as the federal adjusted gross income of the taxpayer increases. This bill allows a gross income tax dependent care expense credit equal to 25% of the federal credit amount. This bill will allow taxpayers with a single dependent a maximum credit of $180 annually and taxpayers with two or more dependents $360 annually for dependent care expenditures that allow the taxpayer to be gainfully employed.

    This bill also singles out the care provided to dependent children under the age of 13 and provides a separate, heightened credit for the expenses of child care provided by a child care center accredited by the National Academy of Early Childhood Programs. Such accreditation is in addition to the licensing requirements of New Jersey law and is based on the child care center meeting high standards of staffing, staff training, program quality, health and safety. The expenses of care are allowed only if the care expenses enable the taxpayer to be gainfully employed. This bill allows a refundable credit equal to 50% of the similar federal credit, which will allow taxpayers with a single child in a program meeting these standards a maximum credit of $360 annually and taxpayers with two or more dependents $720 annually. The heightened credit for child care in an accredited center is a refundable credit, and any amount of that credit in excess of the taxpayer's liability will be refunded to the taxpayer. This heightened level of refundable credit will not only inform and encourage parents to seek quality child care programs but will also serve as an incentive for unaccredited child care providers to upgrade their facilities and programs to compete for business.

    The dependent care credit and the heightened child care credit are alternatives, and only one is allowed to a taxpayer for a given taxable year.


 

Allows credit against gross income tax liability for dependent care expenses or a heightened credit for the expenses of child care provided by a nationally accredited child care center.