Keep Calm and Play On: United States House of Representatives Proposes a New Bill to Reimburse American Families for Youth Recreational Sports Expenses

By: Kaitlyn Furst*                                                                          Posted: 02/08/2024

On August 18, 2023, Representatives Mike Lawler (NY-17) and Josh Gottheimer (NJ-5) introduced the Promoting Lifelong Activity for Youth Act (“Act”) in the United States House of Representatives.[1]  This Act amends the Internal Revenue Code of 1986 and develops a grant program for recreational youth sports.[2]  The Act permits families to use the Child and Dependent Care Tax Credit (“CDCTC”) towards youth sports expenses, which will assist families in paying for league registration fees and sports equipment.[3]  The Act intends to make recreational youth sports more affordable for American families as the cost of these activities has increased in recent years.[4]  Although this Act received bipartisan support, it will change guidelines under the Internal Revenue Code of 1986, which will affect American families.[5]

Impact of the Internal Revenue Code of 1986

The Internal Revenue Code (“IRC”) codifies federal tax laws that Congress enacts under Article I, Section 8, Clause 1 of the Constitution.[6]  The Internal Revenue Service then administers these laws.[7]  Under Section 21, the IRC provides a nonrefundable partial tax credit for dependent care expenses while a taxpayer is working or searching for work.[8]  This tax credit was enacted in 1997 to decrease the financial burden a working family may face when they have any dependents under their care.[9]

To qualify for the CDCTC, a taxpayer must have an individual in their household who meets the definition of a qualifying individual.[10]  The taxpayer must also illustrate that any expenses paid are related to enabling the taxpayer to remain employed or look for employment.[11]  If the taxpayer meets this criteria, then they receive a percentage credit based on their adjusted gross income that relates to the amount of employment-related expenses they paid to a caregiver.[12]  The Act proposes amending Section 21 to include expenses for youth physical activities to be permitted and increasing the amount of expenses considered for the tax credit to $4,000 for one dependent and $7,000 for two or more dependents.[13]  These respective amounts are $1,000 more than the current expense limitations in the IRC.[14]

In 2020, the “average national cost of childcare for one child was $10,174,” which would be at least 10 percent of the average household income in the United States.[15]  Lower-income families in the United States are reported to spend more than a third of their income on childcare.[16]  Additionally, since the CDCTC is currently nonrefundable, many low-income families do not derive any benefit from it.[17]

The American Rescue Plan was the first time the CDCTC has been expanded, greatly benefiting lower-income families.[18]  Although the Plan increased the limitations for the CDCTC to $4,000 for one dependent and $8,000 for two or more dependents and made the credit refundable, this Plan is set to expire in 2025. [19]  Therefore, whether the Act would be affected is still being determined.[20]

Goal Behind Implementing the Act

The Act was proposed in response to the “affordability crisis” facing constituents in New York and New Jersey, along with Americans across the country.[21]  Representatives Lawler and Gottheimer stated in their proposal that the “average family pays $883 annually for one child’s primary sport” and “children from lower-income families are half as likely to play sports as children from homes with higher incomes.”[22]  Since the COVID-19 pandemic, youth participation has been at an all-time low, and the numbers have not increased to pre-pandemic levels.[23] 

Despite low participation in youth sports across the country, Representatives Lawler and Gottheimer promoted the significant benefits of recreational participation.[24]  Recent studies have illustrated that there is a direct link between participation in recreational youth sports and a decrease in mental health and physical health problems, as participation has been shown to improve self-esteem and confidence.[25]  Therefore, the Act strives to expand opportunities for children to participate in these recreational sports programs by lowering the financial burden on families.[26]

Suggestions to Improve the Act

While the Act attempts to make youth recreational sports programs accessible by lowering the cost for American families, it will also change the CDCTC that many working American families exclusively rely upon for childcare expenses.[27]  The childcare costs covered under the CDCTC can range for expenses from daycares, preschool, day camps, or even babysitters or paid family members.[28]  The Act would finally permit sporting costs to be included among these expenses, which would assist families in paying for things such as proper equipment.[29]  However, the Act would no longer permit expenses for sports camps to be covered, which could present a problem for families who previously sent their dependents to these camps during the summer while they were working.[30]

Although the Act might look like a positive change on paper, Congress needs to consider its effects on lower-income families and whether it will encourage them to sign their kids up for youth recreational programs.[31]  By increasing the maximum qualifying expenses by $1,000, this could instead encourage higher-income families to seek the credit for childcare and sports related expenses, which could affect the longevity of this program.[32]  To combat this issue, Congress should amend the IRC to make the CDCTC refundable instead of increasing the maximum qualifying expenses.[33]  This change would encourage lower-income families to take advantage of this credit for child care and sports related expenses, as many of these families do not meet the maximum qualifying expenses amount during a regular tax year.[34]

Moreover, Congress should look at the legislative schemes of other countries and providences who provide a similar credit for childcare expenses.[35]  Nova Scotia, a Canadian providence, currently provides a $500 per child refundable credit to “offset the cost of children’s sports and arts programs.”[36]  While implementing Nova Scotia’s exact plan would be costly due to the sheer number of American families, Congress should see if any similar elements could be implemented to make sure the goal of their Act is being upheld in promoting participation and encouraging families to enroll their children in these sports programs.[37]  If Congress can implement a program that is conscious of these issues with the current requirements under the CDCTC, then the program is likely to be successful and encourage families to enroll their children in these sporting programs.[38]

* Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2025, Villanova University Charles Widger School of Law.

[1] See H.R. 5238, 118th Cong. (Aug. 18, 2023) (presenting Promoting Lifelong Activity for Youth Act and its proposed modifications to Child and Dependent Care Tax Credit with “increase in dollar amount of election for dependent care flexible spending arrangements,” new definition of youth physical activities, and emergence of youth recreational sport grant program); see also Lawler Joins Gottheimer in Introducing Bipartisan Legislation Providing Tax Credits for Families to Lower the Cost of Little League, Youth Rec Sports, Equipment, (Aug. 22, 2023), https://lawler.house.gov/news/documentsingle.aspx?documentID=692 (explaining Representative Lawler and Gottheimer' introduced bipartisan federal legislation as their motivation for this legislation was to provide incentives to American families to have their children participate in youth recreational sports programs).

[2] See H.R. 5238 (illustrating Act would amend Internal Revenue Code of 1986 to allow families to use Child and Dependent Tax Credit for youth sports expenses and further establish federal grant program for recreational youth sports programs, which would expand youth sports opportunities for children).

[3] See Michael Popke, Proposed Federal Legislation Would Lower Cost of Youth Sports, Sports Destination Mgmt. (Sept. 1, 2023), https://www.sportsdestinations.com/management/economics/proposed-federal-legislation-would-lower-cost-32776 (explaining Act would assist American families with paying for youth sports expenses, such as registration fees and sports equipment, and would increase maximum qualifying expenses threshold).  A 2022 survey indicated that six in ten parents found youth sports to be a "financial strain." See id. (illustrating importance of this legislation to American families).

[4] See Release: Gottheimer Announces Bipartisan Legislation Providing Tax Credits for Families to Lower the Cost of Little League, Youth Rec Sports, and Equipment, Josh Gottheimer (Aug. 16, 2023), https://gottheimer.house.gov/posts/release-gottheimer-announces-bipartisan-legislation-providing-tax-credits-for-families-to-lower-the-cost-of-little-league-youth-rec-sports-and-equipment (speculating increased costs for sports equipment has affected costs of Little League and other youth sports).

[5] For further discussion of the Act’s impact on American families, see supra notes 21-30.

[6] See Title 26, U.S. Code, Census, https://www.census.gov/history/www/reference/privacy_confidentiality/title_26_us_code_1.html  (last visited Nov. 12, 2023) (stating Congress’s authority for enacting federal laws under Internal Revenue Code).

[7] See id.(noting how federal tax laws are enforced in United States).

[8] See 26 U.S.C. § 21 (2021) (introducing statute enacting Child and Dependent Care Tax Credit) This Act permits a tax credit during a taxable year for an “amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by such individual during the taxable year.”  See id. (outlining overall goal of CDCTC and Section 21 of IRC); see also Allan J. Samasky, Child Care Expenses and the Income Tax, 50 Fla. L. Rev. 245, 249 (April 1998) (explaining both Section 21 and 129 in Internal Revenue Code permit tax benefits for employment related childcare expenses).

[9] See Margot L. Crandall-Hollick, The Child Tax Credit: How it Works & Who Receives it, Cong. Rsch. Serv. 1, 2 (Jan. 12, 2021), https://crsreports.congress.gov/product/pdf/R/R41873 (describing numerous amendments made to CDCTC since its enactment in 1997).  This 2017 amendment “doubled the maximum credit amount and more than tripled the income level at which the credit [began] to phase out” and increased the refundable credit amount by $400.  See id. (summarizing most recent expansion of CDCTC since 1997).  Since 1997, the IRS has indicated that the total amount of the CDCTC has increased from $23 billion in 1998 to $118 billion in 2018.  See id. (reporting impact of CDCTC since its enactment in 1997).

[10] See 26 U.S.C. § 21(b)(1)(a)-(c) (2021) (defining qualified individual to qualify for tax credit).  A qualifying individual means a dependent of the taxpayer who has not turned thirteen yet or an individual who is “physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.”  See § 21(b)(1)(a)-(b) (2021) (providing definitions for taxpayer to receive CDCTC).  A qualified individual could also be a spouse of the taxpayer who is “physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.”  See § 21(b)(1)(c) (2021) (noting another definition of qualified individual for taxpayer to receive a tax credit under Section 21 of IRC).

[11] See 26 U.S.C. § 21(b)(2) (2021) (defining employment-related expenses to receive tax credits).  These expenses may contain household services and care taking expenses.  See id. (stating types of expenses which are covered under CDCTC).

[12] See Topic N0. 602, Child and Dependent Care Credit, IRS (Jan. 12, 2024), https://www.irs.gov/taxtopics/tc602 (describing CDCTC is based upon percentage of amount of work-related expenses” paid to child-care while individual was working).

[13] See H.R. 5238, 118th Cong. (Aug. 18, 2023) (announcing maximum qualifying expenses will be increased to include sporting expenses).

[14] See 26 U.S.C. § 21(c)(1)-(2) (2021) (noting current maximum qualifying expenses for taxable year for one qualifying individual and two or more qualifying individuals).

[15] See Improving the Child and Dependent Care Tax Credit Would Help More Working Families with the High Cost of Child Care, Nat’l Women’s L. Ctr. (July 13, 2023), https://nwlc.org/resource/improving-the-child-and-dependent-care-tax-credit-would-help-more-working-families-with-the-high-cost-of-child-care/ (citing ChildCare Aware, Demanding Change: Repairing our Child Care System (2022)). The CDCTC can assist families in paying for child-care expenses, which would greatly assist lower-income families and women across the nation.  See id. (arguing cost of child-care has substantially increased, which has illustrated need in expanding CDCTC to benefit more Americans).

[16] See id. (citing Rasheed Malik, 60 Percent of Families are Spending More than Twice as Much on Child Care as What the U.S. Government Considers Affordable, (June 2019)). Currently, the CDCTC is “theoretically worth a maximum of $2,100, for a family with an AGI under $15,000 who had spent $6,000 on child or dependent care.”  See id. (providing examples of current effect of CDCTC under current terms).  Many of these lower-income families receive absolutely no tax credit from it in its current state.  See id. (illustrating effect CDCTC has on lower income families and that refundable credit would allow lower-income families to derive benefits from CDCTC).

[17] See id. (arguing Congress should amend CDCTC to make it fully refundable on permanent basis so it is accessible for all American families).  A refundable credit would allow all American families with “out-of-pocket childcare expenses” to access the credit.  See id. (stating refundable credits would also “reduce child poverty by 9.2 percent over ten years”).

[18] See American Rescue Plan Act of 2021, Pub. L. No. 117-2, 135 Stat. 4 (observing American Rescue Plan was enacted in January 2021 to alleviate economic impact from COVID-19 pandemic); see also Katherine Paschall & Dana Thomson, The Expanded Child and Dependent Care Tax Credit Can Reduce Families’ Child Care Burden, Child Trends (Feb. 9, 2022), https://www.childtrends.org/blog/the-expanded-child-and-dependent-care-tax-credit-can-reduce-families-child-care-burden (stating “tax credit is especially beneficial to lowest-income working families in our country, who pay upwards of 33 percent of their income out of pocket on child care, a figure 4.5 times greater than 7 percent benchmark for low-income working families suggested by Department of Health and Human Services.”).  The changes made to the CDCTC under the American Rescue Plan greatly benefitted lower-income families.  See id. (describing reduced financial strain felt by American families because of CDCTC expansion).

[19] See Paschall & Thomson, supra note 18 (noting American Rescue Plan made CDCTC fully refundable and provided larger credit with increasing maximum qualifying expenses to families with adjusted gross income of $125,000 or less).  Providing the CDCTC to a wider range of incomes promotes full workforce participation, which benefits the American economy.  See id. (acknowledging expansion of CDCTC provided benefits to American economy).

[20] For further discussion of Act’s changes to Internal Revenue Code, infra notes 15-22.

[21] See Lawler Joins Gottheimer in Introducing Bipartisan Legis. Providing Tax Credits for Families to Lower the Cost of Little League, Youth Rec Sports, Equipment, Mike Lawler (Aug. 22, 2023), https://lawler.house.gov/news/documentsingle.aspx?DocumentID=692#:~:text=Pearl%20River%2C%20NY%2C%20August%2022%2C%202023&text=The%20bipartisan%20Promoting%20Lifelong%20Activity,sports%20and%20other%20physical%20activities (stating “[u]nfortunately, with the affordability crisis families in New York, New Jersey, and across the nation are struggling to pay bills and that often means after school and summer programs like youth sports are on the chopping block”).

[22] See Popke, supra note 3 (detailing statistics supporting implementation of Act).  Some of these statistics indicated that kids from lower-income families are “half as likely to play sports as ones from homes with higher incomes,” which supports enactment of the Act. See id. (providing support for motivation to expand CDCTC to provide children from lower-income families more opportunities to participate in youth recreational sports programs).

[23] See Release: Gottheimer Announces Bipartisan Legislation Providing Tax Credits for Families to Lower the Cost of Little League, Youth Rec Sports, and Equipment, supra note 3 (arguing youth sports participation has decreased since COVID-19 pandemic and has not increased to pre-pandemic numbers).  While there is an issue with youth and screen time, many American families also cannot afford the increasing costs to allow their children to participate in these youth sports programs.  See id. (arguing additional reasons as to why youth participation in recreational sports has not increased since pandemic).

[24] See id. (stating “through rec sports, my daughter and son have learned so much, had so much fun, and made friendships that will last a lifetime”).

[25] See Matt D. Hoffmann, Joel D. Barnes, Mark S. Tremblay, & Michelle D. Guerrero, Associations Between Organized Sport Participation and Mental Health Difficulties: Data From Over 11,000 US Child. and Adolescents, PLOS ONE 17(6) 1, 11-12 (June 1, 2022) https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0268583 (arguing youth sports participation leads to mental health benefits in children).  Participation on a sports team improves “self-esteem and confidence” and has been linked to fewer mental health challenges.  See id. (providing evidence regarding benefits of youth sports participation); see also What are the Surprising Benefits of Youth Sports Programs? Scripps (Mar. 16, 2023) (stating “[a]dolescents who play sports are eight times more likely to be physically active at age 24 than those who do not play”).

[26] See Press Release, Lawler Joins Gottheimer in Introducing Bipartisan Legis. Providing Tax Credits for Families to Lower the Cost of Little League, Youth Rec Sports, Equipment, supra note 21 (declaring youth recreational sports programs should be accessible to all American children who want to participate as it allows them to stay healthy and active).

[27] See H.R. 5238, 118th Cong. (Aug. 18, 2023) (noting amendment to Section 21 of Internal Revenue Code also would include definition change for expenses).

[28] See Paschall & Thomson, supra note 18 (summarizing costs which are covered under CDCTC).

[29] See H.R. 5238 (summarizing sports expenses that would be covered under CDCTC as some sports expenses would not be covered).

[30] See Deducting Summer Camps and Daycare with the Child and Dependent Care Credit, TurboTax (Dec. 16, 2023), https://turbotax.intuit.com/tax-tips/family/deducting-summer-camps-and-daycare-with-the-child-and-dependent-care-credit/L8aAzvmjB (illustrating daycare camp fees, summer day camps, activity camps, sporting camps, qualify for CDTC if parent was at work when camp or childcare was occurring).

[31] For further discussion of Congress’ goals in implementing the Act, see supra notes 23-28.

[32] See Benjamin Wolters, Linda K. Smith, & Kathlyn McHenry, The Effects of the Child and Dependent Care Tax Credit on Child Care Affordability, Bipartisan Pol’y Ctr. 1, 10 (2021), https://bipartisanpolicy.org/download/?file=/wp-content/uploads/2021/05/BPC_CDCTC_Report_V3.pdf (arguing increasing maximum qualifying expenses would greatly benefit top forty percent of earners as these families typically met this amount with child care expenses).  Lower-income families do not meet or surpass this threshold, and therefore, increasing maximum qualifying expenses would have no impact on them.  See id. (stating “[o]nly the top 20% of taxpayers eligible for the CDCTC in 2014 had average childcare expenses near the existing $6,000 cap for two children.”).

[33] See Margot L. Crandall-Hollick, The Child Tax Credit: How it Works and Who Receives it, Cong. Rsch. Serv. 1, 2 (Jan. 12, 2021), https://crsreports.congress.gov/product/pdf/R/R41873 (stating “a refundable tax credit can exceed a taxpayer’s income tax liability, providing a cash payment to low-and some moderate-income taxpayers who owe little to no income tax.”).

[34] See Wolters et. al, supra note 32 at 11 (arguing CDCTC should be refundable as this would most benefit lower-income American families).  If the CDCTC was refundable, this would “delink the tax credit from a taxpayer’s federal income tax liability.”  See id. (speculating American families with “calculated credit larger than their tax liability” would still receive credit amount if their tax liability was zero if CDCTC was refundable).

[35] See Reminder to Claim Children’s Sports, Arts Tax Credit, Nova Scotia (Feb. 21, 2023, 9:55 AM), https://novascotia.ca/news/release/?id=20230221001 (stating terms of Nova Scotia’s program to offset sports expenses for families).

[36] See id. (indicating tax credit provides $500 towards expenses to help “offset the cost of children’s sports and arts programs”).

[37] See Evan Taylor, Nova Scotia Offers Tax Credit to Support Children’s Sports and Arts Programs, Y95.5 (Feb. 21, 2023, 1:12 PM), https://www.cjls.com/2023/02/21/nova-scotia-offers-tax-credit-to-support-childrens-sports-and-arts-programs/# (noting Nova Scotia’s program is estimated to annually cost $4.7 million).

[38] See id. (arguing $500 reimbursement allows for active participation in sports and arts as families can afford these programs for their children easier).