Chamber Presses Treasury for Rules on Expanded Child Care Credit

The U.S. Chamber of Commerce is pressing the Treasury Department to move quickly on regulations for the expanded employer-provided child care credit, arguing that clear rules will determine whether businesses actually use the newly enlarged benefit.

In a September 11 letter to Kevin M. Salinger, acting assistant secretary for tax policy, the Chamber's senior vice president for tax policy, Watson M. McLeish, laid out priority guidance recommendations for section 45F of the Internal Revenue Code as amended by the One Big Beautiful Bill Act.

The stakes are substantial. The OBBBA increased the maximum credit from $150,000 to $500,000 and raised the share of qualified child care expenditures covered from 25% to 40%, according to the letter's citations to Public Law 119-21. Eligible small businesses gained more: a $600,000 maximum and a 50% credit rate. Both amounts are now permanently authorized and indexed for inflation.

The original credit, added to the Code in 2001, attracted few takers. A 2022 Government Accountability Office report cited in the letter found the credit had "only a minimal impact on encouraging employers to provide child care." Lawmakers cited that low take-up rate — along with the credit's modest size and restrictions — when they rewrote the provision during the OBBBA's legislative process.

The Chamber's recommendations focus on two qualitative changes Congress made alongside the dollar increases.

Third-party intermediaries. The OBBBA expanded the definition of a "qualified child care expenditure" to cover amounts paid under a contract with an intermediate entity that in turn contracts with one or more qualified child care facilities. The Chamber says this matters because the complexity of planning and administering on-site child care has discouraged many employers, especially small businesses, from offering it.

The Chamber wants Treasury guidance to define what counts as "child care services" an intermediary may provide. At minimum, the letter says, qualifying services should include identifying or securing child care slots at qualified facilities, offering on- or off-site back-up care on an as-needed basis, and coordinating relationships between employers and providers. The Chamber asks for "clear, expansive guidance — with real-world examples."

Child care deserts. The letter highlights an emerging model in communities the Chamber describes as "child care deserts" — census tracts with limited or no access to quality care. In some of these areas, two or more businesses now contribute time, money, or expertise to a third-party "resource hub" that identifies and facilitates child care solutions for their employees. The Chamber asks Treasury to confirm that payments under such hub contracts count as qualified child care expenditures under section 45F(c)(1)(A)(iii).

Joint ownership. The OBBBA also expanded the definition of a "qualified child care facility" to include facilities jointly owned or operated by the taxpayer and other persons. The staff of the Senate Committee on Finance, in its post-enactment section-by-section summary, said the change "allows for small businesses to pool their resources to provide child care to their employees."

The Chamber asks Treasury to define "jointly owned or operated" and to clarify, with examples, how businesses can pool resources. It also wants the guidance to establish that there is no minimum ownership requirement and no restriction on whom an employer may partner with.

On dollar limits, the Chamber requests examples confirming that the limitation in section 45F(b) applies separately to each taxpayer — and that an eligible small business keeps its 50% credit rate even if it jointly owns a facility with a larger company.

The OBBBA included an express delegation of authority directing Treasury to issue regulations necessary to carry out section 45F's purposes, including the two definitional expansions. The Chamber praised Treasury's methodical approach to OBBBA implementation and noted the department's commitment to releasing section 45F guidance by the end of this year.

"With the right guidance, the OBBBA promises to substantially increase the efficacy of section 45F as a tool to help American employers of all sizes address persistent workforce challenges, allowing them to hire, invest, and grow," McLeish wrote. How Treasury defines hubs, intermediaries, and joint ownership in that year-end package will largely determine whether the credit moves from rarely claimed to widely used.