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Tax Credit

A direct reduction in the amount of tax owed by a taxpayer. Unlike a deduction, which reduces taxable income, a credit directly lowers the tax bill dollar for dollar.

Qualified Child Care Wages

The specific wages paid to child care workers that can be used to calculate the tax credit. These wages must be for employees working in an eligible child care facility and providing child care services.

Eligible Child Care Facility

A facility that provides child care services for at least six individuals, receives payment for those services, and follows all state and local laws and regulations.

Rural Area

An area that is not considered an urban area, as defined by a specific federal transportation code (section 101(a)(35) of title 23, United States Code).

General Business Credit

A collection of various business tax credits grouped together for tax calculation purposes. This new child care credit would become part of this group.

Elective Payment

An option that allows an eligible entity to treat certain tax credits as a direct payment from the government (similar to a refund), rather than just using them to offset tax liability.