Small businesses would be able to offer dependent care flexible spending accounts (DCFSAs) to their employees under a bipartisan bill sponsored on March 12 by U.S. Rep. Adrian Smith (R-NE).
The Small Business Dependent Care FSA Opportunity Act, H.R. 7922, which is cosponsored by U.S. Rep. Danny Davis (D-IL), would create a tax credit for small businesses to assist with the startup and administrative costs of establishing DCFSAs, making it easier for them to provide childcare benefits to working families.
“Small businesses are the backbone of communities across the nation, and their ability to thrive depends on attracting and retaining talented employees. Yet the startup and administrative costs make providing competitive benefits challenging,” Rep. Smith said. “Our bipartisan bill will empower small businesses to offer DCFSAs, easing the financial burden of child care for working families while helping these businesses remain competitive in today’s hiring landscape.
“I am proud to lead this effort and look forward to working with my colleagues to turn this commonsense legislation into law,” he added.
Specifically, H.R. 7922 would incentivize small businesses to offer DCFSAs to their employees by creating a tax credit for small businesses with 100 or fewer employees earning at least $5,000 annually to establish and administer DCFSAs; covering the startup and administrative costs, as well as employee education about the benefit; providing a credit of up to $250 per non-highly compensated employee; and setting a minimum credit of $500 and a maximum credit of $5,000 per year.
Employers would be allowed to claim the credit for the first three years they offer a DCFSA plan under the bill, as well, according to a bill summary provided by Rep. Smith’s staff.
“This change will work together with essential childcare grants and childcare tax credits to give a tax break to families to help them thrive,” said Rep. Davis.
H.R. 7922 has been referred for consideration to the U.S. House Ways and Means Committee.