SB 426

This bill requires the Department of Financial Institutions to establish a child

care reimbursement account program under which a parent or other legal guardian

may create a tax-advantaged account to pay qualifying expenses of a qualifying

child. A “qualifying child” is a dependent who is less than 13 years of age.

“Qualifying expenses” are, with limitations, expenses for the care of a qualifying

child or household services incurred to enable the parent or legal guardian to be

gainfully employed.

Under the bill, after a parent or legal guardian (account owner) of a qualifying

child has established a child care reimbursement account (account), any person, with

the account owner's permission, may contribute to the account, but the maximum

total contribution per account per calendar year is $10,000. Persons may deduct

contributions to an account for state income tax purposes. A person may not

establish an account if the person or the person's spouse participates in an

employer-sponsored dependent care assistance program that for federal income tax

purposes excludes any amount of income used to pay dependent care expenses. Only

an account owner may withdraw funds held in an account, and the account owner

may withdraw these funds only to pay for the qualifying expenses of a qualifying

child. Generally, if funds contributed to an account are not expended for qualifying

expenses in the calendar year they were contributed, the funds are forfeited.

The bill requires DFI to contract with a vendor to administer the program. The

program vendor may charge fees to account owners to cover the cost of administering

the program and may retain any unused contributions that are forfeited at the end

of the year. The contract between DFI and the vendor must require the vendor, upon

request, to provide information to the Department of Revenue for purposes of

verifying account contributions and withdrawals.

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.