Summary
Increases the maximum tax credit and exclusion for employer-provided benefits to $13,170 per eligible child. Extends the credit through 2011 and makes it refundable. Effective in taxable years beginning after December 31, 2009.
Implementation Status
As noted in a September 29, 2010 press release (that was subsequently updated on March 10, 2011 to account for the release of the revised Form 8839, Qualified Adoption Expenses), the IRS issued guidance on the expanded adoption tax credit for 2010. This included interim guidance on the adoption credit in Notice 2010-66 including “rules for computing the adoption credit for a taxable year beginning in 2010 and for substantiating claims for the adoption credit.”
Furthermore, Revenue Procedure 2010-31 “provides safe harbors for determining the finality of foreign adoptions for purposes of the adoption credit,” the IRS said, and Revenue Procedure 2010-35 modifies previous guidance to reflect the ACA statutory language.
As noted in a general IRS FAQ on adoption benefits, the American Taxpayer Relief Act of 2012 permanently extended the credit and the adoption assistance programs; this applies to tax years beginning after December 31, 2012.
Statutory Text
SEC. 10909. EXPANSION OF ADOPTION CREDIT AND ADOPTION ASSISTANCE PROGRAMS. (a) INCREASE IN DOLLAR LIMITATION.— (1) ADOPTION CREDIT.— (A) IN GENERAL.—Paragraph (1) of section 23(b) of the Internal Revenue Code of 1986 (relating to dollar limitation) is amended by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’. (B) CHILD WITH SPECIAL NEEDS.—Paragraph (3) of section 23(a) of such Code (relating to $10,000 credit for adoption of child with special needs regardless of expenses) is amended— (i) in the text by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’, and (ii) in the heading by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’. (C) CONFORMING AMENDMENT TO INFLATION ADJUSTMENT.—Subsection (h) of section 23 of such Code (relating to adjustments for inflation) is amended to read as follows: ‘‘(h) ADJUSTMENTS FOR INFLATION.— ‘‘(1) DOLLAR LIMITATIONS.—In the case of a taxable year beginning after December 31, 2010, each of the dollar amounts in subsections (a)(3) and (b)(1) shall be increased by an amount equal to— ‘‘(A) such dollar amount, multiplied by ‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2009’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10. ‘‘(2) INCOME LIMITATION.—In the case of a taxable year beginning after December 31, 2002, the dollar amount in subsection (b)(2)(A)(i) shall be increased by an amount equal to— ‘‘(A) such dollar amount, multiplied by ‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2001’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.’’. (2) ADOPTION ASSISTANCE PROGRAMS.— (A) IN GENERAL.—Paragraph (1) of section 137(b) of the Internal Revenue Code of 1986 (relating to dollar limitation) is amended by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’. (B) CHILD WITH SPECIAL NEEDS.—Paragraph (2) of section 137(a) of such Code (relating to $10,000 exclusion for adoption of child with special needs regardless of expenses) is amended— (i) in the text by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’, and (ii) in the heading by striking ‘‘$10,000’’ and inserting ‘‘$13,170’’. (C) CONFORMING AMENDMENT TO INFLATION ADJUSTMENT.—Subsection (f) of section 137 of such Code (relating to adjustments for inflation) is amended to read as follows: ‘‘(f) ADJUSTMENTS FOR INFLATION.— ‘‘(1) DOLLAR LIMITATIONS.—In the case of a taxable year beginning after December 31, 2010, each of the dollar amounts in subsections (a)(2) and (b)(1) shall be increased by an amount equal to— ‘‘(A) such dollar amount, multiplied by ‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2009’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10. ‘‘(2) INCOME LIMITATION.—In the case of a taxable year beginning after December 31, 2002, the dollar amount in subsection (b)(2)(A) shall be increased by an amount equal to— ‘‘(A) such dollar amount, multiplied by ‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2001’ for ‘calendar year 1992’ in subparagraph thereof. If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.’’. (b) CREDIT MADE REFUNDABLE.— (1) CREDIT MOVED TO SUBPART RELATING TO REFUNDABLE CREDITS.—The Internal Revenue Code of 1986 is amended— (A) by redesignating section 23, as amended by subsection (a), as section 36C, and (B) by moving section 36C (as so redesignated) from subpart A of part IV of subchapter A of chapter 1 to the location immediately before section 37 in subpart C of part IV of subchapter A of chapter 1. (2) CONFORMING AMENDMENTS.—(A) Section 24(b)(3)(B) of such Code is amended by striking ‘‘23,’’. (B) Section 25(e)(1)(C) of such Code is amended by striking ‘‘23,’’ both places it appears. (C) Section 25A(i)(5)(B) of such Code is amended by striking ‘‘23, 25D,’’ and inserting ‘‘25D’’. (D) Section 25B(g)(2) of such Code is amended by striking ‘‘23,’’. (E) Section 26(a)(1) of such Code is amended by striking ‘‘23,’’. (F) Section 30(c)(2)(B)(ii) of such Code is amended by striking ‘‘23, 25D,’’ and inserting ‘‘25D’’. (G) Section 30B(g)(2)(B)(ii) of such Code is amended by striking ‘‘23,’’. (H) Section 30D(c)(2)(B)(ii) of such Code is amended by striking ‘‘sections 23 and’’ and inserting ‘‘section’’. (I) Section 36C of such Code, as so redesignated, is amended— (i) by striking paragraph (4) of subsection (b), and (ii) by striking subsection (c). (J) Section 137 of such Code is amended— (i) by striking ‘‘section 23(d)’’ in subsection (d) and inserting ‘‘section 36C(d)’’, and (ii) by striking ‘‘section 23’’ in subsection (e) and inserting ‘‘section 36C’’. (K) Section 904(i) of such Code is amended by striking ‘‘23,’’. (L) Section 1016(a)(26) is amended by striking ‘‘23(g)’’ and inserting ‘‘36C(g)’’. (M) Section 1400C(d) of such Code is amended by striking ‘‘23,’’. (N) Section 6211(b)(4)(A) of such Code is amended by inserting ‘‘36C,’’ before ‘‘53(e)’’. (O) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code of 1986 is amended by striking the item relating to section 23. (P) Paragraph (2) of section 1324(b) of title 31, United States Code, as amended by this Act, is amended by inserting ‘‘36C,’’ after ‘‘36B,’’. (Q) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by this Act, is amended by inserting after the item relating to section 36B the following new item: ‘‘Sec. 36C. Adoption expenses.’’. (c) APPLICATION AND EXTENSION OF EGTRRA SUNSET.—Notwithstanding section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001, such section shall apply to the amendments made by this section and the amendments made by section 202 of such Act by substituting ‘‘December 31, 2011’’ for ‘‘December 31, 2010’’ in subsection (a)(1) thereof. (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2009.