Over-simply stated, a tax credit is available for expenses related to an international adoption only if the adoption becomes final, but the same finality rule does not apply to expenses for a U.S. adoption.What do you think? Is the disparate tax treatment justified? If you go to China to adopt, and while there the adoption falls through -- the child has unexpected issues the family felt it could not handle, or the child has died and the government offers a substitute referral the family isn't prepared to accept -- should the expenses be deductible? If not, how is this different from a domestic adoption that falls through in the U.S.?
What might be the policy reasons for this tax discrimination? Is it because significant tax revenue is at stake? According to U.S. State Department figures, the number of international adoptions has increased steadily. In 1999, there were 167,369. [gotta be a typo] In 2000, there were 18,477. In 2001, there were 19,237. If there were a correlation between completed adoptions and failed adoptions, one could make a rough estimate of the number of taxpayers who could have benefitted from an adoption tax credit, but for the fact they could not or did not finalize their international adoption.
Alternately, is the different tax treatment of U.S. and international adoptions just one more example of attempts to influence social policy through the tax laws? Maybe, but I wonder whether tax credits factor significantly into a decision to adopt a U.S. citizen versus a non-U.S. citizen.
Thursday, November 25, 2010
The Faculty Lounge Talks Adoption Tax Credits
The Faculty Lounge is a law professor website that usually focuses on law school issues, but also talks general law at times. A new post talks about the different treatment of domestic and international adoption for purposes of the adoption tax credit: