SB 622

This bill creates a nonrefundable individual income tax credit based on the

federal tax credit for expenses for household and dependent care services necessary

for gainful employment. Under the bill, an individual who is eligible for and claims

the federal tax credit for expenses for household and dependent care services may

claim the same amount as a nonrefundable credit on his or her Wisconsin income tax

return. Under the bill, the Wisconsin credit may not be claimed by a part-year

resident or nonresident of this state.

This bill also sunsets the current-law individual income tax subtract

modification that allows a taxpayer a deduction for the same expenses for which the

credit may be claimed.

Generally, the federal credit is a nonrefundable individual income tax credit

that may be claimed by an individual for employment-related expenses for

household services and dependent care services for a qualifying individual. Because

the credit is nonrefundable, it may be claimed only up to the amount of a taxpayer's

tax liability. Under federal law, a qualifying individual is someone who has the same

principal place of abode as the claimant for more than one-half the year, is the

claimant's dependent, and is 1) a child 12 or under; 2) a child 13 or older who is

incapable of self-care; or 3) the claimant's spouse who is incapable of self-care.

The federal credit may be claimed for expenses incurred to enable the claimant

to be gainfully employed or to actively search for gainful employment. Generally,

allowable expenses for a qualifying individual under federal law include costs for

in-home care or daycare, nursery school or preschool programs, and before-school

and after-school care for school-age children. Depending on the claimant's adjusted

gross income, the credit may be worth between 20 percent and 35 percent of the

claimant's allowable expenses, up to a maximum annual amount of $3,000 if there

is one qualifying individual and up to $6,000 if there are two or more qualifying

individuals.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.