House File 2082 - Introduced HOUSE FILE 2082 BY HESS A BILL FOR An Act providing an individual income tax credit for qualified 1 adoption expenses paid or incurred in connection with 2 certain adoptions and including retroactive applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5163YH (6) 85 mm/sc

H.F. 2082 Section 1. NEW SECTION . 422.12A Adoption tax credit. 1 1. For purposes of this section, unless the context 2 otherwise requires: 3 a. “Adoption” means the permanent placement in this 4 state of an eligible individual by a licensed agency under 5 chapter 238, by an agency that meets the provisions of the 6 interstate compact in section 232.158, or by a person making an 7 independent placement according to the provisions of chapter 8 600. 9 b. “Child with special needs” means the same as defined in 10 section 23 of the Internal Revenue Code. 11 c. “Eligible individual” means an individual who is under 12 the age of eighteen years, or an individual who is unable, by 13 reason of physical or mental disability, to live independently. 14 d. “Qualified adoption expenses” means unreimbursed 15 expenses paid or incurred in connection with the adoption 16 of an eligible individual, including medical and hospital 17 expenses of the biological mother which are incident to the 18 eligible individual’s birth, welfare agency fees, legal fees, 19 and all other fees and costs which relate to the adoption of 20 an eligible individual. “Qualified adoption expenses” does not 21 include expenses paid or incurred in violation of state or 22 federal law. 23 2. The taxes imposed under this division, less the credits 24 allowed under section 422.12, shall be reduced by an adoption 25 tax credit equal to the amount of qualified adoption expenses 26 paid or incurred by the taxpayer during the tax year in 27 connection with the adoption of an eligible individual by the 28 taxpayer, not to exceed two thousand five hundred dollars per 29 adoption, or five thousand dollars if the adopted eligible 30 individual is a child with special needs. 31 3. Any credit in excess of the tax liability is refundable. 32 In lieu of claiming a refund, the taxpayer may elect to have 33 the overpayment shown on the taxpayer’s final, completed return 34 credited to the tax liability for the following tax year. 35 -1- LSB 5163YH (6) 85 mm/sc 1/ 3

H.F. 2082 Sec. 2. Section 422.9, subsection 2, paragraph c, Code 2014, 1 is amended to read as follows: 2 c. Add the amount by which expenses paid or incurred 3 in connection with the adoption of a child by the taxpayer 4 exceed three percent of the net income of the taxpayer, or of 5 the taxpayer and spouse in the case of a joint return. The 6 expenses may include medical and hospital expenses of the 7 biological mother which are incident to the child’s birth and 8 are paid by the taxpayer, welfare agency fees, legal fees, and 9 all other fees and costs relating to the adoption of a child if 10 the child is placed by a child-placing agency licensed under 11 chapter 238 or by a person making an independent placement 12 according to the provisions of chapter 600 . If the taxpayer 13 claims an adoption tax credit under section 422.12A, the 14 taxpayer shall recompute for purposes of this subsection the 15 amount of the deduction by excluding the amount of qualified 16 adoption expenses, as defined in section 422.12A, used in 17 computing the adoption tax credit. 18 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 19 retroactively to January 1, 2014, for tax years beginning on 20 or after that date. 21 EXPLANATION 22 The inclusion of this explanation does not constitute agreement with 23 the explanation’s substance by the members of the general assembly. 24 This bill provides an individual income tax credit equal to 25 the amount of qualified adoption expenses paid or incurred by a 26 taxpayer during the tax year in connection with the adoption of 27 an eligible individual. The tax credit cannot exceed $2,500 28 per adoption, or $5,000 if the adopted eligible individual is a 29 child with special needs. 30 The adoption of a person qualifies for the tax credit if 31 the adoption is completed by a child-placing agency licensed 32 under Code chapter 238, an agency complying with the interstate 33 compact on placement of children in Code section 232.158, or a 34 person petitioning for an independent placement according to 35 -2- LSB 5163YH (6) 85 mm/sc 2/ 3

H.F. 2082 the provisions of Code chapter 600, and if the person to be 1 adopted is to be permanently placed in this state and is either 2 less than 18 years old or unable to live independently because 3 of physical or mental disability. 4 “Child with special needs” means the same as defined in 5 section 23 of the Internal Revenue Code, which generally 6 defines such child to be one who is a United States citizen or 7 resident, for whom the state has determined cannot be returned 8 to the home of the child’s parents, and for whom the state 9 has determined there exists specific conditions that make it 10 reasonable to assume the child cannot be placed with adoptive 11 parents without providing adoption assistance. 12 In order to be “qualified adoption expenses” the expenses 13 must be paid or incurred by the taxpayer during the tax year, 14 unreimbursed, and connected with the adoption. “Qualified 15 adoption expenses” include medical and hospital expenses of 16 the biological mother which are incident to the birth of 17 the adopted individual, welfare agency and legal fees, and 18 all other fees and costs relating to the adoption of the 19 individual. “Qualified adoption expenses” does not include 20 expenses paid or incurred in violation of state or federal law. 21 Under Iowa law, a taxpayer may claim an itemized deduction 22 for the amount of adoption expenses that exceed 3 percent 23 of the net income of the taxpayer. The bill provides that 24 taxpayers who claim the itemized deduction are required 25 to reduce that deduction by the amount of expenses used to 26 calculate the adoption tax credit. 27 Any credit in excess of the taxpayer’s liability is 28 refundable or may be carried forward one tax year at the 29 election of the taxpayer. 30 The bill applies retroactively to tax years beginning on or 31 after January 1, 2014. 32 -3- LSB 5163YH (6) 85 mm/sc 3/ 3