{"id":3374,"date":"2021-01-15T17:46:29","date_gmt":"2021-01-15T17:46:29","guid":{"rendered":"https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/?p=3374"},"modified":"2021-01-15T17:46:29","modified_gmt":"2021-01-15T17:46:29","slug":"work-or-child-care-what-employers-can-do-to-alleviate-burdens-on-working-mothers","status":"publish","type":"post","link":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/2021\/01\/15\/work-or-child-care-what-employers-can-do-to-alleviate-burdens-on-working-mothers\/","title":{"rendered":"Work or Child Care: What Employers Can Do to Alleviate Burdens on Working Mothers"},"content":{"rendered":"\n

(Source<\/em><\/a>)<\/p>\n\n\n\n

Facebook<\/em><\/a>\nand Twitter<\/em><\/a>\nhave announced that they will allow their employees to work from home\nindefinitely, and other\ncompanies are considering<\/em><\/a> adopting a similar policy. Remote work can\nbenefit both employees and employers as employees\nno longer have to commute<\/em><\/a> and employers\ncan cut costs in rent.<\/a><\/em> <\/p>\n\n\n\n

However, remote work can also be a source of issues. For example, it can exacerbate<\/em><\/a> what is already an unequal distribution of domestic work on women<\/em><\/a>. Prior to the stay-at-home orders in response to COVID-19, women consistently spent more hours<\/a><\/em> on housework and child care than men. In addition, when women have children, they are less likely to be hired for jobs and likely to be paid less than their male colleagues<\/a><\/em>. This is referred to as the motherhood penalty<\/em><\/a> and exists not because mothers become less productive but because employers expect to them to be. <\/p>\n\n\n\n

The impact of COVID-19 on the distribution of domestic work\nisn\u2019t clear, although one survey<\/em><\/a>\nfound that the distribution of housework and child care has not become more\nequitable as a result of stay-at-home orders. Additionally, McKinsey &\nCompany released a report<\/em><\/a>\ndocumenting the effects of COVID-19 on working women and found that one in four\nwomen are contemplating downshifting their careers or leaving the workforce\nentirely. Despite the rise in women representation in corporate America in the\nlast decade, companies risk losing current women in leadership and women on\ntrack to be in leadership roles as a result of COVID-19. The report suggests,\nhowever, that this crisis represents an opportunity for companies to make\ninvestments that can alleviate the effects of COVID-19 and create more\nopportunities for women in the long term. <\/p>\n\n\n\n

One of the investments that companies can make is to\nalleviate the costs and pressures of child care for their employees. This is\nespecially helpful now as center-based child care providers are facing an average\nincrease of 47% in operating costs<\/em><\/a> as a result of the pandemic. In\naddition, some\nschool districts started school virtually<\/em><\/a> while others\nhave fluctuated between in-person and online instruction throughout the\npandemic<\/em><\/a>, requiring parents to juggle both their jobs and remote\nlearning for their children.  <\/p>\n\n\n\n

Under the current tax code, an employer may help its employees with child care costs by offering a Dependent Care Flexible Spending Account<\/em><\/a> (\u201cFSA\u201d). This FSA allows employees to use pre-tax dollars to pay for eligible child care expenses. Because these funds are deducted from an employees\u2019 paycheck prior to tax deductions, employees are able to reduce their income tax and Social Security and Medicare taxes. While employees contributing pre-tax dollars is the most common way to fund the FSA<\/em><\/a>, employers can directly contribute to the FSA<\/em><\/a> without deducting any pay. However, employer\u2019s and employee\u2019s contributions cannot exceed the limit of $5,000<\/em><\/a> for individuals or married couples filing jointly. Unfortunately, by 2014, only 39% of civilian workers had access<\/em><\/a> to a Dependent Care FSA. One way that employers can help alleviate the rising costs of child care is by offering access to Dependent Care FSAs and contributing directly to those FSAs.<\/p>\n\n\n\n

Another way employers could help their employees is by\noffering child care themselves. Under \u00a7 45F<\/em><\/a>of\nthe United States tax code, employers can receive a general business credit by\nproviding child care for their employees. This provision has not been widely\nused though, as only\n4% of employers offered subsidized child care for their employees<\/em><\/a> and\nonly an\nadditional 4% offering non-subsidized care through their on-site facility<\/em><\/a>.\nIt is unclear why employers have not taken advantage of the provision. It may\nbe that the demand for such services have been low; however, COVID-19 may\nsignificantly increase the desirability of subsidized child care. In fact, a survey<\/em><\/a>\nconducted during COVID-19 found that 26% of employees would more likely stay at\ntheir current jobs if subsidized back-up child care was offered, and 13% would\nleave their current job if a different, comparably-paying job offered\nsubsidized back-up child care, making it one of the most desired family-friendly\nbenefits.<\/p>\n\n\n\n

It is also possible that the demand for subsidized child\ncare services have been low because the fair market value of the care provided\nto employees is considered\ntaxable compensation for the employee<\/em><\/a>. Benefits that are considered\ntaxable compensation are not as attractive to the employees as benefits that\nare non-taxable. A common example of taxable compensation is a paycheck that an\nemployee receives from his or her employer. The employee is then taxed on the\npaycheck. Likewise, because subsidized child care services are considered\ntaxable compensation, the employee who takes advantages of such services will\nbe taxed on the fair market value of the care as if he or she received a\npaycheck of that value. <\/p>\n\n\n\n

Under \u00a7 132<\/em><\/a> of the\ntax code, \u201cany\nproperty or services provided to an employee \u2026 to the extent that, if the\nemployee paid for such property or services, such payment would be allowable as\na [business expense] deduction<\/em><\/a>\u201d is not considered taxable compensation.\nIn other words, if an employee can deduct the cost of a service as a business\nexpense, then the employer can provide the service to the employee, and the\nservice would be considered non-taxable. However, if the employee cannot deduct\nthe cost, the service will be considered as a taxable compensation. Section 262<\/em><\/a>\nstates that personal expenses cannot be deducted as a business expense. Thus,\nif any employer provides its employee with a service that would be considered a\npersonal expense, then it is considered a taxable compensation. <\/p>\n\n\n\n

The distinction between a business expense and a personal\nexpense can be difficult to draw. The IRS defines business\nexpense as the ordinary and necessary expense incurred in carrying on a\nbusiness<\/em><\/a>whereas IRS does not expressly define personal expense.\nRather, it provides a non-exhaustive\nexamples of personal expenses<\/em><\/a>, which include rent, costs of commuting,\nand expenditures made to obtain education. Despite the ambiguity, the United\nStates Board of Tax Appeals in Smith\nv. Commissioner<\/a> <\/em>explicitly held that child care costs are\nnon-deductible personal expenses. <\/em>Petitioners in Smith<\/em> proposed\nthat the court adopt the \u201cbut for\u201d test in determining whether an expense was a\nbusiness expense. The \u201cbut for\u201d test would ask: but for child care expense\nincurred, would the taxpayer be able to carry on a business? If the answer is\nno, then the test would find that such expense is a business expense. The\ncourt, however, rejected the test because it would be too broad and include what\nhad been traditionally considered personal expense as business. Although Smith\n<\/em>was decided in 1939, the holding in Smith<\/em> still remains to be good\nlaw as the court in Kuntz\nv. Commissioner<\/em><\/a> in 2011 relied on it to find that caregiver expense was\na personal expense. <\/p>\n\n\n\n

Although the court in Smith <\/em>rejected\nthe \u201cbut for\u201d test, it did not provide much guidance to taxpayers on how to\ndistinguish between personal expense and business expense. As a result,\nscholars have analogized\nchild care costs<\/em><\/a> to other nondeductible personal expenses such as commuting costs<\/em><\/a>\nwhere the \u201calready at work\u201d test applies. The \u201calready\nat work\u201d test<\/em><\/a> delineates the boundary between business and personal\nexpenses by characterizing expenses that incur once the taxpayer is already at\nwork as business expenses. For example, commuting costs between a taxpayer\u2019s\nhome and work are\ngenerally considered nondeductible personal expenses<\/em><\/a>. However,\ntransportation costs incurred by a taxpayer\nbetween two specific business locations are considered business expenses<\/em><\/a>\nbecause, once the taxpayer is \u201calready at work,\u201d expenses incurred after are\nconsidered business expenses. <\/p>\n\n\n\n

The IRS should reconsider whether\nchild care costs should be characterized as non-deductible personal expenses. First,\nas Grace\nBlumberg argues<\/em><\/a>, the Smith<\/em> court\u2019s analogy between living costs,\nsuch as rent and child care expenses is flawed. While child care is an expense\nthat would not have otherwise been incurred had the taxpayer not been employed,\nrent is an expense that would have been incurred regardless of the taxpayer\u2019s\nemployment. The court could have formulated a \u201cbut for\u201d test that would have\ncharacterized child care expense as business expense without characterizing\nrent and other traditional personal expenses as business expense. In addition, the\ncourt\u2019s reliance on traditional taxation norms may perpetuate traditional\ngender norms. The Smith<\/em> court explicitly states that because \u201cthe\nwife\u2019s services as \u2026 protector of its children are ordinarily rendered without\nmonetary compensation[,] \u2026 the correlative expenditure is personal and not\nsusceptible of deduction<\/em><\/a>.\u201d Although women are now the majority\nof the workforce<\/em><\/a>, by prohibiting a taxpayer from deducting their child\ncare expenses, the tax code could be deterring women from entering or staying\nin the workforce by increasing the costs of child care. <\/p>\n\n\n\n

Even if the IRS continues to reject the \u201cbut for\u201d test disaffirmed in Smith<\/em>, the IRS should nonetheless characterize child care expenses as business expenses by applying the \u201calready at work\u201d test, typically used in the commuting context. As significant portions of the workforce<\/em><\/a> are working from home, for many, COVID-19 has blurred the line<\/a> <\/em>between work and home. Employees feel as if they are constantly at work while children require meals, entertainment, supervision, and attention throughout the day<\/em><\/a>. For many working parents, not only is child care more necessary in order to work than other traditional expenses such as paper and pens, but child care expenses can also incur once they are already at work because their homes have turned into a place of work as a result of COVID-19. <\/p>\n\n\n\n

The long-term consequences of\nCOVID-19 are unclear. Remote work may become more prevalent, giving employers\nand employee more flexibility. It may also come with a cost: working parents\nmay have to choose between child care or work. To alleviate pressures on\nworking parents, employers, with the assistance of the IRS, could help ensure\nthat the benefits and the burdens of consequences of COVID-19 are distributed\nmore equitably by tailoring their benefits to accommodate the rising costs of\nchild care. <\/p>\n\n\n\n

\"\"<\/figure>
\n

About the Author: Justin Park is a J.D candidate in the\nclass of 2022 at Cornell Law School. He graduated from Washington and Lee\nUniversity in 2019. He is interested in issues of litigation and tax law. He is\nan associate for the Cornell Journal of Law and Public Policy and a member of Asian\nPacific American Law Students Association.<\/p>\n<\/div><\/div>\n\n\n\n

Suggested Citation: Justin Park, Work or Child Care: What Employers Can Do to Alleviate Burdens on Working Mothers<\/em>, Cornell J.L. & Pub. Pol\u2019y: The Issue Spotter (Jan. 15, 2020), https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/work-or-child-care-what-employers-can-do-to-alleviate-burdens-on-working-mothers\/.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

(Source) Facebook and Twitter have announced that they will allow their employees to work from home indefinitely, and other companies are considering adopting a similar policy. Remote work can benefit both employees and employers as employees no longer have to commute and employers can cut costs in rent. However, remote work can also be a…<\/p>\n","protected":false},"author":1,"featured_media":3376,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14,15,16,17,18,19,21,25,27,28],"tags":[300,411,879,1496,1673],"class_list":["post-3374","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archives","category-authors","category-blog-news","category-certified-review","category-feature","category-feature-img","category-spotters","category-policycontributor-blogs","category-recent-stories","category-student-blogs","tag-child-care","tag-covid-19","tag-jlpp","tag-tax","tag-wfh"],"acf":[],"_links":{"self":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/3374","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/comments?post=3374"}],"version-history":[{"count":0,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/3374\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media\/3376"}],"wp:attachment":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media?parent=3374"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/categories?post=3374"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/tags?post=3374"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}