Child Care and Development Block Grant to provide child care assistance to needy families in lieu of TANF funds, thereby reducing the amount of funds available to other families, including families that utilize KLC's child care centers. 6.1.18 A termination or reduction of tax credits for child care could have a material adverse effect on KLC’s business KLC may enjoy heightened demand for its services because of tax incentives for child care programs. Section 21 of the Internal Revenue Code of 1986, as amended (referred to herein as the "Code"), provides a federal income tax credit ranging from 20% to 35% of specified child care expenses with maximum eligible expenses of $3,000 for one child and $6,000 for two or more children. The fees paid to KLC by eligible taxpayers for child care services qualify for these tax credits, subject to the limitations of Section 21 of the Code. However, these tax incentives are subject to change. Code Section 45F provides incentives to employers to offset costs related to employer provided child care facilities. Costs related to (a) acquiring or constructing property used as a qualified child care center, (b) operating an existing child care center, or (c) contracting with an independent child care operator io care for the children of the taxpayer's employees will qualify for the credit. The credit amount is 25% of the qualified costs. An additional credit of 10% of qualified expenses for child care resource and referral services has also been enacted. The maximum credit available for any taxpayer is $150,000 per tax year. Many states offer tax credits in addition to the federal credits discussed above. Credit programs vary by state and may apply fo both the individual taxpayer and the employer. A termination or reduction of such tax credits could have a material adverse effect on KLC's business. 6.1.19 Material weaknesses in KLC’s internal controls were discovered during KLC’s 2005 audit For a discussion of certain m