The Employer Child Care Credit (IRC Sec 45F) was created as an incentive for businesses to provide child care for their employees. The credit is comprised of two parts:

However, the total credit allowed for any giventax yearcannot exceed $150,000 (IRC Sec 45F(b)).

Form 8882 is used to compute the credit. The credit is part of, and subject to, the limitation and carryover provisions of theIRC Sec 38 general business credit (see Big Book Chapter 9.00). The credit is permanent with no expiration date.

Qualified Child Care Expenditure - In general, the term “qualified child care expenditure” means any amount paid or incurred to acquire, construct, rehabilitate, or expand property which is to be used as part of a qualified child care facility of the taxpayer, with respect to which a deduction for depreciation (or amortization in lieu of depreciation) is allowable, and which does not constitute part of the principal residence (within the meaning of IRC Sec 121) of the taxpayer or any employee of the taxpayer, for the operating costs of a qualified child care facilityof the taxpayer, including costs related to the training of employees, to scholarship programs, and to the providing of increased compensation to employees with higher levels of child care training, or, under a contract with aqualified child care facility to provide child care services to employees of the taxpayer. The term shall not include expenses more than the fair market value of such care.

Qualified Child Care Facility - In general, the term “qualified child care facility” means a facility, the principal use of which is to provide child care assistance, and which meets the requirements of all applicable laws and regulations of the State or local government in which it is located, including the licensing of the facility as a child care facility. The definition shall not apply to a facility which is the principal residence (within the meaning of IRC Sec 121) of the operator of the facility.

A facility shall not be treated as aqualified child care facilitywith respect to a taxpayer unless enrollment in the facility is open to employees of the taxpayer during the taxable year. If the facility is the principal trade or business of the taxpayer, at least 30% of the enrollees of such facility are dependents of employees of the taxpayer, and the use of such facility (or the eligibility to use such facility) does not discriminate in favor of employees of the taxpayer who are highly compensated employees within the meaning ofIRC Sec 414(q), $150,000 for 2023, up from $135,000 in 2022.

Qualified Child Care Resource and Referral Expenditure - In general, the term “qualified child care resource and referral expenditure” means any amount paid or incurred under a contract to provide child care resource and referral services to an employee of the taxpayer. The services shall not be treated as qualified unless the provision of such services (or the eligibility to use such services) does not discriminate in favor of employees of the taxpayer who are highly compensated employees (see above).

If, as of the close of any taxable year, there is arecapture eventwith respect to anyqualified child care facilityof the taxpayer, then the tax of the taxpayer under this chapter for such taxable year shall be increased by an amount equal to the product of:

A recapture event includes:

The basis of such property shall be reduced by the amount of the credit.

California has no equivalent credit.  Thus, there would be no basis adjustments for CA.