Design around facts, not marketing labels
Whether a program is called tuition assistance, employer-supported care, backup care, priority access, shared care, or a family benefit does not by itself establish Section 45F treatment. Begin by identifying the statutory path and then validating the contract, facility, employee-access, and documentation facts.
1. Owned or operated qualified facility
This path can include qualifying capital expenditures and operating costs for a qualified child care facility of the taxpayer. Facility compliance, employee access, nondiscrimination, and—for a child care business—the 30% enrollment condition are central. Facility investment has basis-reduction and potential recapture implications.
Design questions
- Which state/local laws and licenses apply?
- How will employee enrollment access be documented?
- Does the benefit design avoid favoring highly compensated employees?
- Who owns / operates the facility and who retains each record?
2. Contract with a qualified child care facility
This path applies when a taxpayer contracts with a qualified child care facility to provide child care services to its employees. The employer should be able to connect the contract, provider qualification, service description, employee access, invoice, and payment evidence.
Design questions
- Does the agreement expressly provide child care services to employees?
- Does the facility meet applicable legal and licensing requirements?
- What evidence connects services to employee eligibility or access?
- How will fair-market-value support be maintained?
3. Contract through an intermediate entity
For amounts paid or incurred after 2025, Section 45F includes amounts paid under a contract with an intermediate entity that contracts with one or more qualified child care facilities to provide child care services to employees. The statutory chain matters: an employer should retain evidence of the employer-to-intermediate-entity contract and the intermediate entity’s contracted qualified facilities.
4. Resource and referral
A contract to provide child care resource-and-referral services to employees is a separate Section 45F category. The published rate is 10%, and the service or eligibility to use it may not discriminate in favor of highly compensated employees. Keep this category separate from qualified child care expenditures in contracts and calculations.
Joint and shared arrangements
A qualifying facility can be jointly owned or operated by the taxpayer and other persons. Shared arrangements may be practical for multiple employers, but each taxpayer needs its own credit analysis. The program should address ownership / operation, allocation, employee access, expense records, rate status, and annual-cap treatment.