This document reviews the legal propriety of offering child care to employees and addresses the post-1981 federal income tax consequences of a child care benefit. One issue at hand involves the legal mandate to promote equal opportunity in employment. However, not all employees have the need for child care, and legal questions have been raised regarding whether child care benefits can be offered to a select group of employees. Anti-discrimination laws are analyzed in terms of California state laws, Title VII of the 1964 Civil Rights Act, and two executive orders which prohibit discrimination and require affirmative action. Distinctions in the laws protecting against discrimination are noted, as is the maximum flexibility granted employers in California to provide child care benefits. Various types of benefit programs are considered legal, and selective availability of child care is also permitted under the law. The income tax aspects of child care benefits are reviewed in terms of employer, employee, and provider requirements of Dependent Care Assistance Programs. Key components of the new tax laws include increased expense limits and a sliding credit percentage. The "cafeteria plan," whereby employees may choose appropriate benefits, is also outlined. (Author/DB)