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December 15, 2021

Build Back Better Act reconciliation bill would enhance existing workforce-related credits and create new ones

The Senate Finance Committee's updated text of the Build Back Better Act reconciliation bill (BBBA bill), released on December 11, 2021, includes workforce-related credits that may benefit certain employers. Specifically, the BBBA bill would (1) temporarily enhance the existing IRC Section 45F general business credit for employer-provided childcare, (2) create a refundable payroll tax credit for employers of local news journalists and (3) create a new general business credit for corporations that have an active trade or business in US possessions (American Samoa, the Northern Mariana Islands, Puerto Rico, Guam, the Virgin Islands) and meet certain sourcing and income qualifications.

The BBBA bill would also modify rules for the base erosion and anti-abuse tax (BEAT) to exclude general business credits from the BEAT amount and allow taxpayers to use those credits to offset their BEAT liability. Additionally, the BBBA bill would terminate the IRC Section 45S credit for paid family and medical leave for wages paid after December 31, 2023 (instead of December 31, 2025, under current law).

Temporary enhancement of the employer-provided childcare credit

The BBBA bill would make several temporary changes to the IRC Section 45F credit, including:

  • Increasing the credit percentage for an employer's qualified childcare expenditures from 25% to 50% (the credit percentage for childcare resource and referral expenditures would remain at 10%)
  • Increasing the annual credit amount from $150,000 to $500,000 per employer (the maximum annual amount of qualified childcare resource and referral expenditures an employer could claim would be limited to $1.5 million)

These enhancements would apply to tax years beginning after December 31, 2021, and before January 1, 2026. The aggregation rules in IRC Section 52(a) and 52(b) would continue to apply in determining the annual credit and resource and referral expenditure limitations per employer.

Payroll credit for employers of local news journalists

The BBBA bill would establish a new five-year refundable payroll credit for certain employers of local news journalists. The credit would be 50% of wages paid to a local news journalist (not to exceed $12,500 per employee per quarter) for the first four calendar quarters the credit is available, decreasing to 30% thereafter. The maximum credit per employee during the first year would be $25,000 and then $15,000 for each subsequent year. An employer could only use the credit for up to 1,500 local news journalists in any calendar quarter. Thus, qualifying employers may be eligible for up to $127.5m in credits over five years.

The credit would apply against the IRC Section 3111(b) Medicare tax on wages paid to all employees of the eligible employer. To the extent the credit in any calendar quarter exceeds this amount, the excess credit would be refunded.

To be eligible for the credit in any quarter, an employer would have to be an eligible local news organization or a qualifying broadcast station and pay wages to local news journalists. Key terms are defined as follows:



Eligible local news organization

An employer (other than a disqualified organization) that publishes, during a calendar quarter, one or more qualifying publications and derives 50% or less of its gross receipts (as defined in IRC Sections 448(c) and 6033) from disqualified organizations

Qualifying broadcast station

An employer (other than a disqualified organization) that owns or operates a broadcast station (as defined in Section 3 of the Communications Act of 1934), derives 50% or less of its gross receipts for the calendar quarter from disqualified organizations and discloses its ownership to the public

Qualifying publication

A publication that has the primary purpose of providing local news to a community and:

  • Is published during the calendar quarter and for the preceding four calendar quarters
  • Is covered by media liability insurance
  • Discloses its ownership to the public
  • Receives services from 1,500 or less persons during the calendar quarter

Local news journalist

An employee who:

  • Is full-time (as defined in IRC Section 4980H(c)(4))
  • Provides qualified services (i.e., gathering, preparing, directing the recording of, producing, collecting, photographing, recording, writing, editing, reporting, presenting or publishing original local community news for the local community) to a qualifying publication or the broadcast station for an average of at least 30 hours per week
  • Resides within 50 miles of the local community served by the qualifying publication or broadcast station

Local community

For a qualifying broadcast station, the geographically contiguous area the station is licensed to serve

For a qualifying publication, the geographically contiguous metropolitan or micropolitan statistical area (MSA) in which the publication is primarily distributed (if not distributed in an MSA, a state political subdivision or state)

For digital publications, the area where they are primarily consumed

Disqualified organization

An IRC Section 501(c)(4) or 527 organization (including any organizations owned or controlled by those organizations)

Certain other rules would apply for purposes of the credit, including that:

  • All persons treated as a single employer under IRC Sections 52(a), 52(b), 414(m) or 414(o) are treated as one employer
  • Employers taking advantage of the credit must reduce their deduction for wages or salaries by the amount of the credit (similar to the rule in IRC Section 280C(a))
  • Employers may not take the credit for the same employees for whom they claim the IRC Section 51 work opportunity tax credit
  • Wages used for the credit may not be taken into account for purposes of credits under IRC Section 41 (research and development), IRC Section 45A (Indian employment), IRC Section 45P (differential wage payment), IRC Section 45S (paid family and medical leave) or IRC Section 1396 (federal empowerment zone)
  • Eligible employers may reduce deposits in anticipation of the credit

The credit would be available for wages paid in calendar quarters beginning after the BBBA is enacted.

Possessions economic activity credit

The BBBA bill would create a new general business credit of 20% of the sum of qualified possession wages (capped at $50,000 per employee per year for large employers) and fringe benefits (not to exceed 15% of qualified possession wages) paid or incurred by a qualified domestic corporation on behalf of an employee principally employed in a possession in a tax year.

A "qualified corporation" is defined as a corporation that:

  • Is a US corporation or a US shareholder of a foreign qualified corporation that is wholly owned by the same US group
  • Satisfies source-of-income and active-conduct-of-a-trade-or-business tests

In general, the credit would be available for tax years beginning after the BBBA is enacted. For more information on the source-of-income and trade-or-business tests, the enhanced credit for small employers and the definition of qualified fringe benefits, see Tax Alert 2021-1866.


While focusing heavily on green credits, the BBBA bill also contains potential workforce-related credit opportunities for employers that offer on-site childcare, are in the business of providing local news, or operate in the US possessions.

If enacted, the enhancements to the IRC Section 45F employer-provided childcare credit would represent the first increase since its enactment in 2001, likely in response to ongoing childcare disruptions resulting from the COVID-19 pandemic. Employers considering offering on-site childcare as an incentive to encourage employees to return to work should consider the credit as a way to offset those costs.

Both the local news journalist employer credit and the possessions economic activity credit would provide significant credit opportunities for eligible employers but contain complex rules that would require further examination of sources of income and ownership structure. Although not specifically stated in the BBBA bill, the local news journalist employer credit should be available to eligible employers that employ local news journalists in US possessions.

Regarding BEAT modifications, the utilization of workforce-related general business credits would no longer impact the BEAT amount, and employers would be able to use such credits (e.g., the WOTC and credits for employer-provided childcare, federal empowerment zones, differential wage payment and paid family or medical leave) to reduce their BEAT liability.

Finally, the expiration of the general business credit for paid family and medical leave after 2023 likely depends on the proposed universal comprehensive paid leave (see Subtitle A of the Senate Finance Committee's title of the BBBA bill) becoming law. If this program is not included in the final version of the BBBA bill, the credit for paid family and medical leave could instead continue to remain available through December 31, 2025.


Contact Information
For additional information concerning this Alert, please contact:
Global Location Investment, Credits & Incentives
   • Brian Smith (
   • Tim Parrish (
EY Puerto Rico
   • Pablo Hymovitz Cardona (
   • Rosa M. Rodríguez (