Flexible spending accounts that allow parents to use pre-tax money to pay for child care are back in the GOP tax plan, thanks to a change endorsed Monday by the powerful chairman of the House's tax-writing Ways and Means Committee.
The initial draft of the House GOP's tax bill eliminated the popular accounts, which allow parents to save up to $5,000 worth of pre-tax dollars in flex spending accounts that employers offer.
A new version of the bill released late Monday reversed the repeal of the accounts and extended them for five years. It also preserved the existing child care tax credit.
The changes are likely to survive, since it’s included in a plan introduced by committee chairman Kevin Brady, R-Texas. The Republican-dominated committee spent Monday afternoon reviewing the legislation, which details the first major overhaul of the U.S. tax code since 1986. The panel plans to continue discussing the bill, and voting on potential changes, throughout the week.
Rep. Lynn Jenkins, R-Kansas, a Ways and Means member who had fought for the flex accounts, was pleased. “This is critical to working families,” she tweeted after it was restored in the bill. “Proud our communities were able to preserve this tax relief in our bill.”
The child care provisions are expected to provide important political help to a handful of vulnerable Ways and Means members. Rep. Kevin Yoder, R-Kansas, who faces a tough re-election battle in suburban Kansas City district, had been pushing to save and expand the accounts.
Joining him in lobbying House leadership over the weekend to save the accounts were Rep. Kristi Noem, R-S.D., who is seeking her state’s governorship, and Rep. Jason Smith, R-Mo.
“This is for families who can barely make ends meet,” Noem said Monday.
Yoder is among those proposing to increase the amount of money parents can stash in flex spending accounts by $2,500 in a separate bill co-sponsored with Democratic Rep. Stephanie Murphy of Florida — the Promoting Affordable Childcare for Everyone Act, or PACE Act. The latest version of the GOP’s tax plan doesn’t go that far, but it keeps the accounts from being eliminated.
Yoder and Murphy also has been pressing Republican leaders and the White House to boost a different tax credit to ease child care costs, the child and dependent care credit.
With this credit, taxpayers can claim expenses of between $3,000 and $6,000 to provide child care. It aims to make it easier for parents or guardians to work or look for work.
Yoder and Murphy’s bill would have made the credits refundable, meaning they would benefit low-income families, whose incomes keep them from taking advantage of the credit under current law.
Yoder hasn’t gotten the increase he wanted, but the credit survives in its current form in the latest version of the GOP tax bill.