Compute the Arkansas CDCC from IRC § 21 as in effect January 2, 2013 (Form AR2441)

[hua7450]

Summary

Implements Arkansas's static conformity to the 2013 IRC for its Child and Dependent Care Credit, fixing the TY2021 ARPA leak found in the #8826 verification — plus a base correction proven by the state's own form during implementation.

Closes #8880

Regulatory basis (all primary sources read directly)

Ark. Code Ann. § 26-51-502:

• (b)(1): "Title 26 U.S.C. § 21, as in effect on January 2, 2013, is adopted for purposes of determining the allowable credit…"
• (b)(2): "The amount of credit shall be twenty percent (20%) of the federal credit allowable."

2021 Form AR2441 (read from the rendered form): line 3 caps qualified expenses at "$3,000 for one qualifying person or $6,000 for two or more" (not ARPA's $8,000/$16,000); the line 8 rate table runs $0–15,000: .35 down to "43,000 – No limit: .20" (not ARPA's 50%); line 10: "Multiply line 9 by .20"; the header applies the § 21(e)(2)/(4) married-filing-separately rules. Arkansas computed its own pre-ARPA credit in 2021 — the 2021 AR1000F instructions (Line 35) direct filers to AR2441, not the federal form.

2022 Form AR2441: structurally identical — and, like the 2021 form, contains no federal tax liability limitation line. The state base is the § 21 credit allowable (pre-cap), matching (b)(2), not the liability-capped federal credit.

Changes

1. New ar_federal_cdcc — the pre-ARPA § 21 replica for 2021, computed from federal CDCC parameters pinned at the 2020 instant (the same pinning pattern as va_child_dependent_care_deduction_cdcc_limit, id_cdcc_limit, and the CA 2021 replica): expenses including disabled-adult care_expenses, per-qualifying-person caps, the head/spouse earnings cap (§ 21(d)(2) deeming included — the $250/$500 monthly amounts are unchanged since 2003), the 35→20% AGI-phased rate, and the cdcc_filing_status_eligible gate. second_start is .inf at the 2020 instant, so no ARPA second phase-out leaks in.
2. ar_cdcc_potential — 2021 uses the replica; all other years use cdcc_potential (pre-liability-cap) instead of the liability-capped cdcc, per the form and statute. In non-2021 years the 2013 and current § 21 produce identical values, so the pin itself only binds in 2021. Also converts the deprecated documentation field to reference and documents the unmodeled § 26-51-502(c) refundable credit (care at a Department of Education-approved early-childhood facility, Form AR1000EC; mutually exclusive with this credit — we don't track facility approval at the moment).

Reproductions (hand-computed on Form AR2441)

Scenario	Before	After
TY2021, AGI $50,000, one child, $4,000 expenses	$400 (20% × ARPA $2,000)	$120 (AR2441: $3,000 × .20 × .20)
TY2021, AGI $14,000, $3,000 expenses	inflated	$210 ($3,000 × .35 × .20)
TY2021, MFS not separated	positive	$0 (AR2441 header rule)
TY2022+, federal credit zeroed by federal liability, $1,000 potential	$0	$200 (no liability line on AR2441)

Tests

New ar_cdcc_potential.yaml with the four cases above (line-by-line AR2441 comments); existing ar_cdcc.yaml inputs updated to the corrected base. Full AR income tax tree passes locally: 198 tests.

Independent of #8855/#8878/#8884 — no shared files.

🤖 Generated with Claude Code

[codecov]

Codecov Report

✅ All modified and coverable lines are covered by tests.
✅ Project coverage is 100.00%. Comparing base (f9e58e7) to head (aae81ca).
⚠️ Report is 121 commits behind head on main.

Additional details and impacted files

@@            Coverage Diff            @@
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  Files            3         2    -1     
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- Hits            55        38   -17     

Flag	Coverage Δ
unittests	100.00% <100.00%> (ø)

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[MaxGhenis]

Completion review (rebased onto main, statute-verified, tests green) — plus one scope question

Rebased onto main at c2efd5a0 (clean; MERGEABLE). Reverted the stray uv.lock self-version bump.

Statutory verification against primary sources

• Ark. Code Ann. § 26-51-502 (read verbatim): (b)(1) "Title 26 U.S.C. § 21, as in effect on January 2, 2013, is adopted…"; (b)(2) "The amount of credit shall be twenty percent (20%) of the federal credit allowable." — "allowable" (pre-liability-cap) ✅ confirms cdcc_potential over cdcc. (c) is a separate refundable approved-facility credit, mutually exclusive ("cannot claim both") ✅ correctly documented as unmodeled.
• Form AR2441 (2021 & 2022): read the rendered forms. Header carries the § 21(e)(2)/(4) MFS rule ✅; line 3 caps at $3,000/$6,000 (not ARPA's $8,000/$16,000) ✅; line 8 is the 35%→20% AGI-phased decimal table ✅; line 10 multiplies by the .20 state rate ✅; no federal-tax-liability limitation line on either form ✅ (justifies cdcc_potential).
• The "2020 pin ≡ 2013 law" claim: verified against the federal CDCC parameter time series — max ($3k), phase_out.start ($15k), phase_out.max (0.35), min (0.20), increment ($2k), second_start (.inf) are identical from 2013-01-01 through 2020 (next change is 2021's ARPA bump). So pinning 2021 to the 2020 instant reproduces the 2013 snapshot exactly. ✅

Tests

• Full AR income-tax tree: 198 passed
• Federal gov/irs/credits/cdcc: 74 passed
• New ar_cdcc_potential.yaml (4 AR2441-line-commented cases) verified: TY2021 $50k/$4k→$120, TY2021 $14k/$3k→$210, TY2021 MFS→$0, TY2022 cdcc_potential=1000, cdcc=0→$200.

⚠️ One scope question for a decision — the 2026+ static-conformity gap

The PR pins only 2021; all other years use live cdcc_potential. That is correct for 2022–2025 (live federal reverts to 2013 values there). But the federal CDCC parameters in this repo schedule a 2026 shift back to phase_out.max = 0.50 / min = 0.35. Because AR is statically conformed to the 2013 IRC, AR's credit should stay 35%→20% permanently — yet under this PR it will track that 2026 federal jump. Confirmed empirically (AGI $15k, one child, $3k expenses):

year	ar_cdcc_potential	note
2025	$210	20% × (35% × $3,000) — correct
2026	$300	20% × (50% × $3,000) — inherits the live federal rate, violating 2013 conformity

This is out of scope for issue #8880 (which scoped "2021 only") and depends on whether those 2026 federal values are intended baseline law. The one-line fix would be to pin all post-2020 years to the 2013 snapshot (if year >= 2021) rather than only 2021. Flagging rather than changing it — it alters projected 2026+ AR values and touches the federal 2026 assumption, so it's a maintainer call. Not a blocker for the 2021 fix this PR delivers.

Independent of #8855/#8878/#8884 — no shared files.

Verdict: complete and statute-faithful for its stated scope (2021 ARPA leak + base correction). Ready to undraft once CI is green. Recommend a follow-up issue for the 2026+ pin if the team wants full static conformity.

(Reviewed and rebased by Claude Fable on Max's behalf.)

[MaxGhenis]

Update — 2026+ static-conformity gap now fixed (per maintainer decision)

Implemented full static conformity rather than pinning only 2021. Ark. Code § 26-51-502(b)(1)'s "§ 21 as in effect on January 2, 2013" is a fixed snapshot governing every year the credit applies to, so the credit must not adopt post-snapshot federal amendments — including the repo's scheduled 2026 CDCC change.

Changes (amended into the branch):

• ar_cdcc_potential: uses ar_federal_cdcc for all years ≥ 2021 (was == 2021). Pre-2021 still uses live cdcc_potential, which equals the 2013 law there.
• ar_federal_cdcc: now pins the federal CDCC parameters to a fixed 2020-01-01 instant for every year (its values are identical to the Jan 2 2013 law — $3,000/$6,000 caps, 35→20% rate, no second phase-out — and predate both ARPA and the 2026 change). Same pinning pattern as va_child_dependent_care_deduction_cdcc_limit / id_cdcc_limit.
• New 2026 regression test: AGI $15,000 / one child / $3,000 expenses → ar_federal_cdcc: 1050, ar_cdcc_potential: 210 (the 2013-law 35% rate), explicitly asserting it is not the $300 the live 2026 federal 50% rate would give.
• Reworked the former liability-cap test to TY2022 with real expense inputs (since 2022 now routes through ar_federal_cdcc), and repointed the two ar_cdcc.yaml mechanical-match cases to drive ar_federal_cdcc.

Verified across 2021/2022/2025/2026/2027: AR credit is a flat $210 on the test case every year — no silent drift. Full AR income-tax tree: 199 passed; federal gov/irs/credits/cdcc: 74 passed. Changelog updated to say "from 2021 onward … adopts neither ARPA's 2021 expansion nor the scheduled 2026 federal change."

The earlier flag is now resolved in-PR; no follow-up issue needed.

(Implemented by Claude Fable on Max's behalf.)

[MaxGhenis]

Fable review + agent verification: Ark. Code §26-51-502(b)(1)/(b)(2)/(c) and Form AR2441 verified verbatim; the 2013-law replica pins to the 2020 instant (identical parameters, pre-ARPA), and per my static-conformity ruling the pin now governs all years ≥2021 with a 2026 regression test asserting the 35→20% schedule ($210, not the live federal $300). I added the pre-2021 live-branch coverage case ($120 hand-checked at 2020 rates), which cleared the genuine codecov patch gap. 199 AR + 74 federal tests green.