60-Month Amortization of Child Care Facilities

§ 419. Treatment of funded welfare benefit plans(a) General ruleContributions paid or accrued by an employer to a welfare benefit fund—(1) shall not be deductible under this chapter, but (2) if they would otherwise be deductible, shall (subject to the limitation of subsection (b)) be deductible under this section for the taxable year in which paid. (b) LimitationThe amount of the deduction allowable under subsection (a)(2) for any taxable year shall not exceed the welfare benefit fund’s qualified cost for the taxable year. (c) Qualified costFor purposes of this section—(1) In generalExcept as otherwise provided in this subsection, the term “qualified cost” means, with respect to any taxable year, the sum of—(A) the qualified direct cost for such taxable year, and (B) subject to the limitation of section 419A(b), any addition to a qualified asset account for the taxable year. (2) Reduction for funds after-tax incomeIn the case of any welfare benefit fund, the qualified cost for any taxable year shall be reduced by such fund’s after-tax income for such taxable year. (3) Qualified direct cost(A) In generalThe term “qualified direct cost” means, with respect to any taxable year, the aggregate amount (including administrative expenses) which would have been allowable as a deduction to the employer with respect to the benefits provided during the taxable year, if—(i) such benefits were provided directly by the employer, and (ii) the employer used the cash receipts and disbursements method of accounting. (B) Time when benefits providedFor purposes of subparagraph (A), a benefit shall be treated as provided when such benefit would be includible in the gross income of the employee if provided directly by the employer (or would be so includible but for any provision of this chapter excluding such benefit from gross income). (C) 60-month amortization of child care facilities(i) In generalIn determining qualified direct costs with respect to any child care facility for purposes of subparagraph (A), in lieu of depreciation the adjusted basis of such facility shall be allowable as a deduction ratably over a period of 60 months beginning with the month in which the facility is placed in service. (ii) Child care facilityThe term “child care facility” means any tangible property which qualifies under regulations prescribed by the Secretary as a child care center primarily for children of employees of the employer; except that such term shall not include any property—(I) not of a character subject to depreciation; or (II) located outside the United States. (4) After-tax income(A) In generalThe term “after-tax income” means, with respect to any taxable year, the gross income of the welfare benefit fund reduced by the sum of—(i) the deductions allowed by this chapter which are directly connected with the production of such gross income, and (ii) the tax imposed by this chapter on the fund for the taxable year.