On Wednesday, April 15 Senator Bob Casey (D-PA) and Senator Roy Blunt (R-MO) introduced the Adoption Tax Credit Refundability Act of 2015.  It makes the current adoption tax credit fully refundable. The adoption tax credit was made permanent in the American Taxpayer Relief Act in January 2013 but the law did not extend the refundability provisions that applied to the adoption tax credit in 2010 and 2011. Refundability means that a tax credit would be provided to a taxpayer even if their total federal income tax was eliminated (although the FICA/Social Security tax is never refunded).  Many families who adopt from foster care are low income and they take on enormous expenses in adopting a child.  In many instances the family may be adopting a sibling group of children and the tax credit, without refundablity, is of limited help.

Casey, who has sponsored the bill in past congresses said, “Providing a vulnerable child with a permanent, loving adoptive home makes a significant impact in the life of that child but adoption is expensive, and financial considerations should not prevent a family from adopting a child in need of a home. This legislation is a commonsense approach that ensures more families will be able to claim the adoption tax credit.” He was joined by Senator Blunt who said that “Every day, families in Missouri and nationwide provide loving and safe homes for children in need through adoption, but unfortunately, many families do not have enough income to benefit from the adoption tax credit.”

The senators cited HHS data that indicates one-third of all adopted children live in families with annual household income at or below 200 percent of the poverty level. Nearly 46 percent of families adopting from foster care are at or below 200 percent of the federal poverty level with many families’ tax burdens low enough to not benefit from the adoption tax credit at all unless it is refundable. The HHS information indicates that a refundable adoption tax credit plays a significant role in lower-income families’ ability to adopt and support a child from foster care with data from a 2006 study demonstrating a significant financial benefit to society, as well: the cost of adoption and permanency is significantly lower than the cost to federal, state and local governments to provide long-term foster care.

To learn more about the adoption tax credit, click here to access an important fact sheet.