House File 2268 - Introduced HOUSE FILE 2268 BY COMMITTEE ON HUMAN RESOURCES (SUCCESSOR TO HF 2082) 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 5163HV (2) 85 mm/sc

H.F. 2268 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 state of 4 an eligible individual by the department of human services, by 5 a licensed agency under chapter 238, by an agency that meets 6 the provisions of the interstate compact in section 232.158, or 7 by a person making an independent placement according to the 8 provisions of chapter 600. 9 b. “Child with special needs” means an individual, 10 regardless of citizenship, who is under the age of eighteen 11 years and who has been determined by the department of human 12 services prior to the finalization of the adoption to be a 13 child with physical or mental disabilities or an older or 14 otherwise hard-to-place child. A child shall not fail to 15 qualify as a child with special needs because the person 16 adopting the child does not receive financial assistance 17 pursuant to section 600.17. 18 c. “Eligible individual” means an individual who is under 19 the age of eighteen years, or an individual who is unable, by 20 reason of physical or mental disability, to live independently. 21 d. “Qualified adoption expenses” means unreimbursed 22 expenses paid or incurred in connection with the adoption 23 of an eligible individual, including medical and hospital 24 expenses of the biological mother which are incident to the 25 eligible individual’s birth, welfare agency fees, legal fees, 26 and all other fees and costs which relate to the adoption of 27 an eligible individual. “Qualified adoption expenses” does not 28 include expenses paid or incurred in violation of state or 29 federal law. 30 2. The taxes imposed under this division, less the credits 31 allowed under section 422.12, shall be reduced by an adoption 32 tax credit equal to the amount of qualified adoption expenses 33 paid or incurred by the taxpayer during the tax year in 34 connection with the adoption of an eligible individual by the 35 -1- LSB 5163HV (2) 85 mm/sc 1/ 4

H.F. 2268 taxpayer, not to exceed two thousand five hundred dollars per 1 adoption, or five thousand dollars if the adopted eligible 2 individual is a child with special needs. 3 3. Any credit in excess of the tax liability is refundable. 4 In lieu of claiming a refund, the taxpayer may elect to have 5 the overpayment shown on the taxpayer’s final, completed return 6 credited to the tax liability for the following tax year. 7 4. The department of revenue and the department of human 8 services shall each adopt rules to jointly administer this 9 section. 10 Sec. 2. Section 422.9, subsection 2, paragraph c, Code 2014, 11 is amended to read as follows: 12 c. Add the amount by which expenses paid or incurred 13 in connection with the adoption of a child by the taxpayer 14 exceed three percent of the net income of the taxpayer, or of 15 the taxpayer and spouse in the case of a joint return. The 16 expenses may include medical and hospital expenses of the 17 biological mother which are incident to the child’s birth and 18 are paid by the taxpayer, welfare agency fees, legal fees, and 19 all other fees and costs relating to the adoption of a child if 20 the child is placed by a child-placing agency licensed under 21 chapter 238 or by a person making an independent placement 22 according to the provisions of chapter 600 . If the taxpayer 23 claims an adoption tax credit under section 422.12A, the 24 taxpayer shall recompute for purposes of this subsection the 25 amount of the deduction by excluding the amount of qualified 26 adoption expenses, as defined in section 422.12A, used in 27 computing the adoption tax credit. 28 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 29 retroactively to January 1, 2014, for tax years beginning on 30 or after that date. 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 This bill provides an individual income tax credit equal to 35 -2- LSB 5163HV (2) 85 mm/sc 2/ 4

H.F. 2268 the amount of qualified adoption expenses paid or incurred by a 1 taxpayer during the tax year in connection with the adoption of 2 an eligible individual. The tax credit cannot exceed $2,500 3 per adoption, or $5,000 if the adopted eligible individual is a 4 child with special needs. 5 The adoption of a person qualifies for the tax credit if 6 the adoption is completed by the department of human services, 7 a child-placing agency licensed under Code chapter 238, an 8 agency complying with the interstate compact on placement of 9 children in Code section 232.158, or a person petitioning 10 for an independent placement according to the provisions of 11 Code chapter 600, and if the person to be adopted is to be 12 permanently placed in this state and is either less than 18 13 years old or unable to live independently because of physical 14 or mental disability. 15 “Child with special needs” means an individual, regardless 16 of citizenship, who is under 18 years of age and who has been 17 determined by the department of human services prior to the 18 finalization of the adoption to be a child with physical or 19 mental disabilities or an older or otherwise hard-to-place 20 child, regardless of whether the person adopting the child 21 receives financial assistance pursuant to Code section 600.17. 22 In order to be “qualified adoption expenses” the expenses 23 must be paid or incurred by the taxpayer during the tax year, 24 unreimbursed, and connected with the adoption. “Qualified 25 adoption expenses” include medical and hospital expenses of 26 the biological mother which are incident to the birth of 27 the adopted individual, welfare agency and legal fees, and 28 all other fees and costs relating to the adoption of the 29 individual. “Qualified adoption expenses” does not include 30 expenses paid or incurred in violation of state or federal law. 31 Under Iowa law, a taxpayer may claim an itemized deduction 32 for the amount of adoption expenses that exceed 3 percent 33 of the net income of the taxpayer. The bill provides that 34 taxpayers who claim the itemized deduction are required 35 -3- LSB 5163HV (2) 85 mm/sc 3/ 4

H.F. 2268 to reduce that deduction by the amount of expenses used to 1 calculate the adoption tax credit. 2 Any credit in excess of the taxpayer’s liability is 3 refundable or may be carried forward one tax year at the 4 election of the taxpayer. 5 The bill applies retroactively to tax years beginning on or 6 after January 1, 2014. 7 -4- LSB 5163HV (2) 85 mm/sc 4/ 4