AN ACT to reenact the child care tax credit.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑151.11 is reenacted as it existed immediately before its expiration, is recodified as G.S. 105‑153.11, and reads as rewritten:

§ 105‑153.11.  Credit for child care and certain employment‑related expenses.

(a)        Credit. – A person who is allowed a credit against federal income tax for a percentage of employment‑related expenses under section 21 of the Code shall be allowed as a credit against the tax imposed by this Part an amount equal to the applicable percentage of the employment‑related expenses as defined in section 21(b)(2) of the Code. In order to claim the credit allowed by this section, the taxpayer must provide with the tax return the information required by the Secretary.

(a1)      Applicable Percentage. – For employment‑related expenses that are incurred only with respect to one or more dependents who are seven years old or older and are not physically or mentally incapable of caring for themselves, the applicable percentage is the appropriate percentage in the column labeled Percentage A in the table below, based on the taxpayer's adjusted gross income determined under the Code. For employment‑related expenses with respect to any other qualifying individual, the applicable percentage is the appropriate percentage in the column labeled Percentage B in the table below, based on the taxpayer's adjusted gross income determined under the Code.

Filing Status                 Adjusted Gross                      Percentage A                  Percentage B

Income

 

Head of                         Up to $20,000                                 9%                                   13%

Household

Over $20,000

up to $32,000                                 8%                                   11.5%

 

Over $32,000                                 7%                                   10%

 

Surviving

Spouse or

Joint Return                   Up to $25,000                                 9%                                   13%

 

Over $25,000

up to $40,000                                 8%                                   11.5%

 

Over $40,000                                 7%                                   10%

 

Single                            Up to $15,000                                 9%                                   13%

 

Over $15,000

up to $24,000                                 8%                                   11.5%

 

Over $24,000                                 7%                                   10%

 

Married

Filing

Separately                      Up to $12,500                                 9%                                   13%

 

Over $12,500

up to $20,000                                 8%                                   11.5%

 

Over $20,000                                 7%                                   10%

(b)        Employment Related Expenses. – The amount of employment‑related expenses for which a credit may be claimed may not exceed three thousand dollars ($3,000) if the taxpayer's household includes one qualifying individual, as defined in section 21(b)(1) of the Code, and may not exceed six thousand dollars ($6,000) if the taxpayer's household includes more than one qualifying individual. The amount of employment‑related expenses for which a credit may be claimed is reduced by the amount of employer‑provided dependent care assistance excluded from gross income.

(c)        Limitations. – A nonresident or part‑year resident who claims the credit allowed by this section shall reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), G.S. 105‑153.4(b) or (c), as appropriate. No credit shall be allowed under this section for amounts deducted in calculating North Carolina taxable income. The credit allowed by this section may not exceed the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, except for payments of tax made by or on behalf of the taxpayer.

SECTION 2.  This act is effective for taxable years beginning on or after January 1, 2021.