Scope DC KCCATC to child-only expenses to prevent disabled-adult leak

dc_kccatc read the disability-broadened tax_unit_childcare_expenses, so a
disabled adult dependent sharing an SPM unit with an under-4 child could
inflate this strictly child-only credit (DC Code § 47-1806.15). Distribute
the SPM childcare pool by each tax unit's share of children instead. DC's
§ 21-conforming credit (dc_cdcc, § 47-1806.04(c)) and the federal CDCC keep
the broadened base.

Convert the existing dc_kccatc tests to feed childcare_expenses through the
SPM unit and add a multi-tax-unit regression case (one under-4 child plus a
disabled adult dependent) that pins the child-only base.

Co-Authored-By: Claude Opus 4.8 (1M context) <noreply@anthropic.com>

Author: hua7450

changelog.d/cdcc-disabled-dependent-expenses.fixed.md

@@ -1 +1 @@
-Fix the Child and Dependent Care Credit (and its state mirrors) for households whose qualifying individual is a disabled adult: attribute childcare expenses to disabled dependents and spouses of any age, count a disabled spouse who is modeled as the tax unit head, and apply the IRC section 21(d)(2) deemed earned income for a student or incapacitated spouse.
+Fix the Child and Dependent Care Credit (and its state mirrors) for households whose qualifying individual is a disabled adult: attribute childcare expenses to disabled dependents and spouses of any age, count a disabled spouse who is modeled as the tax unit head, and apply the IRC section 21(d)(2) deemed earned income for a student or incapacitated spouse. Also scope the DC Keep Child Care Affordable Tax Credit to child-only care expenses, so a disabled adult dependent sharing a household with an eligible child does not inflate this under-4 child credit.

policyengine_us/tests/policy/baseline/gov/states/dc/tax/income/dc_kccatc.yaml

@@ -17,10 +17,10 @@
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
-        tax_unit_childcare_expenses: 2_000
     spm_units:
       spm_unit:
         members: [person1, person2, person3]
+        childcare_expenses: 2_000
     households:
       household:
         members: [person1, person2, person3]
@@ -47,10 +47,10 @@
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
-        tax_unit_childcare_expenses: 2_000
     spm_units:
       spm_unit:
         members: [person1, person2, person3]
+        childcare_expenses: 2_000
     households:
       household:
         members: [person1, person2, person3]
@@ -77,10 +77,10 @@
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
-        tax_unit_childcare_expenses: 2_000
     spm_units:
       spm_unit:
         members: [person1, person2, person3]
+        childcare_expenses: 2_000
     households:
       household:
         members: [person1, person2, person3]
@@ -107,10 +107,10 @@
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
-        tax_unit_childcare_expenses: 800
     spm_units:
       spm_unit:
         members: [person1, person2, person3]
+        childcare_expenses: 800
     households:
       household:
         members: [person1, person2, person3]
@@ -136,14 +136,14 @@
         age: 3
       person4:
         is_tax_unit_dependent: true
-        age: 1        
+        age: 1
     tax_units:
       tax_unit:
         members: [person1, person2, person3, person4]
-        tax_unit_childcare_expenses: 1_600
     spm_units:
       spm_unit:
         members: [person1, person2, person3, person4]
+        childcare_expenses: 1_600
     households:
       household:
         members: [person1, person2, person3, person4]
@@ -173,13 +173,72 @@
     tax_units:
       tax_unit:
         members: [person1, person2, person3, person4]
-        tax_unit_childcare_expenses: 1_600
     spm_units:
       spm_unit:
         members: [person1, person2, person3, person4]
+        childcare_expenses: 1_600
     households:
       household:
         members: [person1, person2, person3, person4]
         state_code: DC
   output:
     dc_kccatc: 800
+
+# Regression test for the disabled-adult expense leak (review finding C1).
+# An SPM unit contains two tax units: tax_unit1 has an under-4 child AND a
+# disabled adult dependent; tax_unit2 has an under-4 child only. The $1,600 of
+# SPM childcare must be split between the two under-4 children ($800 each), so
+# each KCCATC is $800. The disabled adult is NOT a KCCATC-eligible child and
+# must not pull extra expense share into tax_unit1's child-only credit.
+# Before the fix (dc_kccatc read the disability-broadened
+# tax_unit_childcare_expenses), tax_unit1 leaked up to $1,020 and tax_unit2
+# dropped to $533.33; after the fix (child-scoped distribution) both are $800.
+- name: dc_kccatc regression - disabled adult does not inflate child-only credit
+  absolute_error_margin: 0.01
+  period: 2021
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        age: 35
+        employment_income: 40_000
+      person2:
+        is_tax_unit_dependent: true
+        age: 3
+      person3:
+        is_tax_unit_dependent: true
+        age: 25
+        is_incapable_of_self_care: true
+      person4:
+        is_tax_unit_head: true
+        age: 35
+        employment_income: 40_000
+      person5:
+        is_tax_unit_dependent: true
+        age: 3
+    marital_units:
+      marital_unit1:
+        members: [person1]
+      marital_unit2:
+        members: [person2]
+      marital_unit3:
+        members: [person3]
+      marital_unit4:
+        members: [person4]
+      marital_unit5:
+        members: [person5]
+    tax_units:
+      tax_unit1:
+        members: [person1, person2, person3]
+      tax_unit2:
+        members: [person4, person5]
+    spm_units:
+      spm_unit:
+        members: [person1, person2, person3, person4, person5]
+        childcare_expenses: 1_600
+    households:
+      household:
+        members: [person1, person2, person3, person4, person5]
+        state_code: DC
+  output:
+    dc_kccatc: [800, 800]

policyengine_us/variables/gov/states/dc/tax/income/credits/dc_kccatc.py

@@ -31,7 +31,25 @@ def formula(tax_unit, period, parameters):
         cdcc_eligible_count = tax_unit.sum(cdcc_age_eligible)
         # calculate KCCATC amount
         max_kccatc = kccatc_eligible_count * p.kccatc.max_amount
-        total_care_expenses = tax_unit("tax_unit_childcare_expenses", period)
+        # The KCCATC is a child-only credit: DC Code § 47-1806.15 limits it to
+        # dependents under age 4. Distribute the SPM unit's childcare expenses
+        # by each tax unit's share of CHILDREN, rather than reading
+        # tax_unit_childcare_expenses, which distributes by the broader
+        # dependent-care recipient set (children plus disabled dependents and
+        # spouses) used by the federal-conforming dc_cdcc. Using the child
+        # share keeps disabled-adult dependent-care dollars out of this
+        # child-only credit when a disabled adult shares an SPM unit with an
+        # eligible child.
+        spm_unit = tax_unit.spm_unit
+        spm_unit_childcare = spm_unit("childcare_expenses", period)
+        spm_unit_count_children = add(spm_unit, period, ["is_child"])
+        tax_unit_count_children = add(tax_unit, period, ["is_child"])
+        child_ratio = np.zeros_like(spm_unit_count_children)
+        child_mask = spm_unit_count_children > 0
+        child_ratio[child_mask] = (
+            tax_unit_count_children[child_mask] / spm_unit_count_children[child_mask]
+        )
+        total_care_expenses = spm_unit_childcare * child_ratio
         ratio = np.zeros_like(cdcc_eligible_count)
         mask = cdcc_eligible_count > 0
         ratio[mask] = kccatc_eligible_count[mask] / cdcc_eligible_count[mask]