Page:United States Statutes at Large Volume 95.djvu/225

 PUBLIC LAW 97-34—AUG. 13, 1981

95 STAT. 199

as section 130 and inserting after section 128 the following new section: "SEC. 129. DEPENDENT CARE ASSISTANCE PROGRAMS.

"(a) IN GENERAL.—Gross income of an employee does not include amounts paid or incurred by the employer for dependent care assistance provided to such employee if the assistance is furnished pursuant to a program which is described in subsection (d). "(b) EARNED INCOME LIMITATION.—

"(1) IN GENERAL.—The amount excluded from the income of an employee under subsection (a) for any taxable year shall not exceed— "(A) in the case of an employee who is not married at the close of such taxable year, the earned income of such employee for such taxable year, or (B) in the case of an employee who is married at the close of such taxable year, the lesser of^ "(i) the earned income of such employee for such taxable year, or "(ii) the earned income of the spouse of such employee for such taxable year. "(2)

SPECIAL RULE FOR CERTAIN SPOUSES.—For purposes of

paragraph (1), the provisions of section 44A(e)(2) shall apply in determining the earned income of a spouse who is a student or incapable of caring for himself. "(c) PAYMENTS TO RELATED INDIVIDUALS.—No amount paid or incurred during the taxable year of an employee by an employer in providing dependent care assistance to such employee shall be excluded under subsection (a) if such amount was paid or incurred to an individual— "(1) with respect to whom, for such taxable year, a deduction is allowable under section 151(e) (relating to personal exemptions for dependents) to such employee or the spouse of such employee, or "(2) who is a child of such employee (within the meaning of section 151(e)(3)) under the age of 19 at the close of such taxable year. "(d) DEPENDENT CARE ASSISTANCE PROGRAM.—

"(1) IN GENERAL.—For purposes of this section a dependent care assistance program is a separate written plan of an employer for the exclusive benefit of his employees to provide such employees with dependent care assistance which meets the requirements of paragraphs (2) through (6) of this subsection. (2) ELIGIBILITY.—The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are officers, owners, or highly compensated, or their dependents. For purposes of this paragraph, there shall be excluded from consideration employees not included in the program who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that dependent care benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. (3) PRINCIPAL SHAREHOLDERS OR OWNERS.—Not more than 25 percent of the amounts paid or incurred by the employer for dependent care assistance during the year may be provided for

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15:QL3

26 USC 129.

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