Adoption Promotion Act of 1996 - Amends the Internal Revenue Code to allow an individual a tax credit of up to $5,000 for qualified adoption expenses paid or incurred during the taxable year. Provides a limitation based on modified adjusted gross income. Permits unused credit to be carried forward to the succeeding taxable year on a first-in first-out basis, but prohibits carrying forward credit to any taxable year following the fifth taxable year after the taxable year in which the credit arose.
Allows distributions from an individual retirement plan to be used without penalty to pay for adoption expenses.
Excludes from gross income aggregate amounts of up to $5,000 ($7,500 in the case of a child with special needs) paid or expenses incurred by the employee for qualified adoption expenses in connection with the adoption of a child if such amounts are received under an employer's adoption assistance program. Provides a limitation based on modified adjusted gross income.
[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1715 Introduced in Senate (IS)]
2d Session
S. 1715
To amend the Internal Revenue Code of 1986 to provide a credit for
adoption expenses, to allow penalty-free IRA withdrawals for adoption
expenses, and to allow tax-free treatment for employer provided
adoption assistance.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 29, 1996
Mr. Specter (for himself, Mr. Santorum, Mr. Jeffords, Mr. Lugar, Mr.
Harkin, Mr. Inouye, Mr. Leahy, Mr. Campbell, Mr. Cochran, Mr. Hatfield,
Mr. Stevens, and Mr. Bond) introduced the following bill; which was
read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide a credit for
adoption expenses, to allow penalty-free IRA withdrawals for adoption
expenses, and to allow tax-free treatment for employer provided
adoption assistance.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Adoption Promotion Act of 1996''.
SEC. 2. CREDIT FOR ADOPTION EXPENSES.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to nonrefundable
personal credits) is amended by inserting after section 22 the
following new section:
``SEC. 23. ADOPTION EXPENSES.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year the amount of the qualified adoption expenses paid
or incurred by the taxpayer with respect to the adoption of a child.
``(b) Limitations.--
``(1) Dollar limitation.--The aggregate amount of qualified
adoption expenses which may be taken into account under
subsection (a) with respect to the adoption of a child shall
not exceed $5,000 ($7,500, in the case of a child with special
needs).
``(2) Income limitation.--The amount allowable as a credit
under subsection (a) for any taxable year shall be reduced (but
not below zero) by an amount which bears the same ratio to the
amount so allowable (determined without regard to this
paragraph but with regard to paragraph (1)) as--
``(A) the amount (if any) by which the taxpayer's
adjusted gross income (determined without regard to
sections 911, 931, and 933) exceeds $65,000, bears to
``(B) $30,000.
``(3) Denial of double benefit.--
``(A) In general.--No credit shall be allowed under
subsection (a) for any expense for which a deduction or
credit is allowable under any other provision of this
chapter.
``(B) Grants.--No credit shall be allowed under
subsection (a) for any expense to the extent that funds
for such expense are received under any Federal, State,
or local program.
``(C) Reimbursement.--No credit shall be allowed
under subsection (a) for any expense to the extent that
such expense is reimbursed and the reimbursement is
excluded from gross income under section 138.
``(c) Carryforwards of Unused Credit.--If the credit allowable
under subsection (a) for any taxable year exceeds the limitation
imposed by section 26(a) for such taxable year reduced by the sum of
the credits allowable under this subpart (other than this section),
such excess shall be carried to the succeeding taxable year and added
to the credit allowable under subsection (a) for such taxable year. No
credit may be carried forward under this subsection to any taxable year
following the fifth taxable year after the taxable year in which the
credit arose. For purposes of the preceding sentence, credits shall be
treated as used on a first-in first-out basis.
``(d) Definitions.--For purposes of this section--
``(1) Qualified adoption expenses.--The term `qualified
adoption expenses' means--
``(A) reasonable and necessary adoption fees, court
costs, attorney fees, and other expenses--
``(i) which are directly related to, and
the principal purpose of which is for, the
legal and finalized adoption of an eligible
child by the taxpayer, and
``(ii) which are not incurred in violation
of State or Federal law or in carrying out any
surrogate parenting arrangement, and
``(B) in the case of the adoption of a child with
special needs, any other expenses.
``(2) Expenses for adoption of spouse's child not
eligible.--The term `qualified adoption expenses' shall not
include any expenses in connection with the adoption by an
individual of a child who is the child of such individual's
spouse.
``(3) Eligible child.--The term `eligible child' means any
individual who has not attained age 18 as of the time of the
adoption.
``(4) Child with special needs.--The term `child with
special needs' means any eligible child if--
``(A) a State has determined that the child cannot
or should not be returned to the home of his parents,
and
``(B) such State has determined that there exists
with respect to the child a specific factor or
condition (such as his ethnic background, age, or
membership in a minority or sibling group, or the
presence of factors such as medical conditions or
physical, mental, or emotional handicaps) because of
which it is reasonable to conclude that such child
cannot be placed with adoptive parents without
providing adoption assistance.
``(e) Married Couples Must File Joint Returns.--Rules similar to
the rules of paragraphs (2), (3), and (4) of section 21(e) shall apply
for purposes of this section.''.
(b) Conforming Amendments.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 22 the
following new item:
``Sec. 23. Adoption expenses.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1995.
SEC. 3. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT PENALTY TO
PAY ADOPTION EXPENSES.
(a) In General.--Paragraph (2) of section 72(t) of the Internal
Revenue Code of 1986 (relating to exceptions to 10-percent additional
tax on early distributions from qualified retirement plans) is amended
by adding at the end the following new subparagraph:
``(D) Distributions from certain plans for adoption
expenses.--Distributions to an individual from an
individual retirement plan of so much of the qualified
adoption expenses (as defined in section 23(d)) of the
individual as does not exceed $2,000.''.
(b) Conforming Amendment.--Subparagraph (B) of section 72(t)(2) of
the Internal Revenue Code of 1986 is amended by striking ``or (C)'' and
inserting ``, (C) or (D)''.
(c) Effective Date.--The amendments made by this section shall
apply to payments and distributions after December 31, 1995.
SEC. 4. EXCLUSION OF AMOUNTS RECEIVED UNDER EMPLOYER'S ADOPTION
ASSISTANCE PROGRAMS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to items specifically excluded
from gross income) is amended by redesignating section 137 as section
138 and by inserting after section 136 the following new section:
``SEC. 137. ADOPTION ASSISTANCE PROGRAMS.
``(a) In General.--Gross income of an employee does not include
amounts paid or expenses incurred by the employer for qualified
adoption expenses in connection with the adoption of a child by an
employee if such amounts are furnished pursuant to an adoption
assistance program.
``(b) Limitations.--
``(1) Dollar limitation.--The aggregate amount excludable
from gross income under subsection (a) for all taxable years
with respect to the adoption of any single child by the
taxpayer shall not exceed $5,000 ($7,500, in the case of a
child with special needs (as defined in section 23(d)(4))).
``(2) Income limitation.--The amount excludable from gross
income under subsection (a) for any taxable year shall be
reduced (but not below zero) by an amount which bears the same
ratio to the amount so excludable (determined without regard to
this paragraph but with regard to paragraph (1)) as--
``(A) the amount (if any) by which the taxpayer's
adjusted gross income (determined without regard to
this section and sections 911, 931, and 933) exceeds
$75,000, bears to
``(B) $40,000.
``(c) Adoption Assistance Program.--For purposes of this section,
an adoption assistance program is a plan of an employer--
``(1) under which the employer provides employees with
adoption assistance, and
``(2) which meets requirements similar to the requirements
of paragraphs (2), (3), and (5) of section 127(b).
An adoption reimbursement program operated under section 1052 of title
10, United States Code (relating to armed forces) or section 514 of
title 14, United States Code (relating to members of the Coast Guard)
shall be treated as an adoption assistance program for purposes of this
section.
``(d) Qualified Adoption Expenses.--For purposes of this section,
the term `qualified adoption expenses' has the meaning given such term
by section 23(d).''.
(b) Conforming Amendment.--The table of sections for part III of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by striking the item relating to section 137 and inserting the
following:
``Sec. 137. Adoption assistance programs.
``Sec. 138. Cross reference to other
Acts.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1995.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S4323)
Read twice and referred to the Committee on Finance.
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