Internal Revenue Code:Sec. 23. Adoption expenses
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart A - Nonrefundable Personal Credits
Statute
Sec. 23. Adoption expenses
(a) Allowance of credit
(1) In general.--In the case of an individual, there shall
be allowed as a credit against the tax imposed by this chapter
the amount of the qualified adoption expenses paid or incurred
by the taxpayer.
(2) Year credit allowed
The credit under paragraph (1) with respect to any expense
shall be allowed -
(A) in the case of any expense paid or incurred before the
taxable year in which such adoption becomes final, for the
taxable year following the taxable year during which such
expense is paid or incurred, and
(B) in the case of an expense paid or incurred during or
after the taxable year in which such adoption becomes final,
for the taxable year in which such expense is paid or incurred.
(3) $10,000 credit for adoption of child with special
needs regardless of expenses.--In the case of an adoption of a
child with special needs which becomes final during a taxable
year, the taxpayer shall be treated as having paid during such
year qualified adoption expenses with respect to such adoption
in an amount equal to the excess (if any) of $10,000 over the
aggregate qualified adoption expenses actually paid or incurred
by the taxpayer with respect to such adoption during such
taxable year and all prior taxable years.
(b) Limitations
(1) Dollar limitation
The aggregate amount of qualified adoption expenses which may
be taken into account under subsection (a)for all taxable
years with respect to the adoption of a child by the taxpayer
shall not exceed $10,000.
(2) Income limitation
(A) In general
The amount allowable as a credit under subsection (a) for any
taxable year (determined without regard to subsection (c))
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 -
(i) the amount (if any) by which the taxpayer's adjusted
gross income exceeds $150,000, bears to
(ii) $40,000.
(B) Determination of adjusted gross income
For purposes of subparagraph (A), adjusted gross income shall
be determined without regard to sections 911, 931, and 933.
(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 allowed 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.
(4) Limitation based on amount of tax
In the case of a taxable year to which section 26(a)(2) does
not apply, the credit allowed under subsection (a) for any
taxable year shall not exceed the excess of -
(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
(B) the sum of the credits allowable under this subpart
(other than this section) and section 27 for the taxable year.
(c) Carryforwards of Unused Credit.--
(1) Rule for years in which all personal credits allowed
against regular and alternative minimum tax.--In the case of a
taxable year to which section 26(a)(2) applies, if the credit
allowable under subsection (a) for any taxable year exceeds the
limitation imposed by section 26(a)(2) for such taxable year
reduced by the sum of the credits allowable under this subpart
(other than this section and sections 25D and 1400C), such
excess shall be carried to the succeeding taxable year and added
to the credit allowable under subsection (a) for such taxable
year.
(2) Rule for other years.--In the case of a taxable year
to which section 26(a)(2) does not apply, if the credit
allowable under subsection (a) for any taxable year exceeds the
limitation imposed by subsection (b)(4) for such taxable year,
such excess shall be carried to the succeeding taxable
year and added to the credit allowable under subsection (a) for
such taxable year.
(3) Limitation.--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 reasonable and
necessary adoption fees, court costs, attorney fees, and other
expenses -
(A) which are directly related to, and the principal purpose
of which is for, the legal adoption of an eligible child by the
taxpayer,
(B) which are not incurred in violation of State or Federal
law or in carrying out any surrogate parenting arrangement,
(C) which are not expenses in connection with the adoption by
an individual of a child who is the child of such individual's
spouse, and
(D) which are not reimbursed under an employer program or
otherwise.
(2) Eligible child
The term ''eligible child'' means any individual who -
(A) has not attained age 18, or
(B) is physically or mentally incapable of caring for
himself.
(3) Child with special needs
The term ''child with special needs'' means any child if -
(A) a State has determined that the child cannot or should
not be returned to the home of his parents,
(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, and
(C) such child is a citizen or resident of the United States
(as defined in section 217(h)(3)).
(e) Special rules for foreign adoptions
In the case of an adoption of a child who is not a citizen or
resident of the United States (as defined in section 217(h)(3)) -
(1) subsection (a) shall not apply to any qualified adoption
expense with respect to such adoption unless such adoption
becomes final, and
(2) any such expense which is paid or incurred before the
taxable year in which such adoption becomes final shall be taken
into account under this section as if such expense were paid or
incurred during such year.
(f) Filing requirements
(1) 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.
(2) Taxpayer must include TIN
(A) In general
No credit shall be allowed under this section with respect to
any eligible child unless the taxpayer includes (if known) the
name, age, and TIN of such child on the return of tax for the
taxable year.
(B) Other methods
The Secretary may, in lieu of the information referred to in
subparagraph (A), require other information meeting the
purposes of subparagraph (A), including identification of an
agent assisting with the adoption.
(g) Basis adjustments
For purposes of this subtitle, if a credit is allowed under this
section for any expenditure with respect to any property, the
increase in the basis of such property which would (but for this
subsection) result from such expenditure shall be reduced by the
amount of the credit so allowed.
(h) Adjustments for inflation
In the case of a taxable year beginning after December 31, 2002,
each of the dollar amounts in subsection (a)(3) and paragraphs
(1) and (2)(A)(i) of subsection (b) shall be increased by an amount
equal to -
(1) such dollar amount, multiplied by
(2) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
determined by substituting ''calendar year 2001'' for ''calendar
year 1992'' in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $10, such amount shall be rounded to the nearest
multiple of $10.''.
(i) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out this section and section 137, including
regulations which treat unmarried individuals who pay or incur
qualified adoption expenses with respect to the same child as 1
taxpayer for purposes of applying the dollar amounts in subsections (a)(3)
and (b)(1) of this section and in section 137(b)(1).
<<NOTE: 26 USC 23 note.>> Expenses paid or
incurred during any taxable year beginning before
January 1, 2002, may be taken into account in
determining the credit under section 23 of the Internal
Revenue Code of 1986 only to the extent the aggregate of
such expenses does not exceed the applicable limitation
under section 23(b)(1) of such Code as in effect on the
day before the date of the enactment of the Economic
Growth and Tax Relief Reconciliation Act of 2001.
(P.L. 107-147 Technical Correction)
Sources
(Added Pub. L. 104-188, title I, Sec. 1807(a), Aug. 20, 1996, 110
Stat. 1899; amended Pub. L. 105-34, title XVI, Sec. 1601(h)(2)(A),
(B), Aug. 5, 1997, 111 Stat. 1092; Pub. L. 105-206, title VI, Sec.
6008(d)(6), 6018(f)(1), July 22, 1998, 112 Stat. 812, 823; Pub. L.
107-16, title II, Sec. 201(b)(2)(E), 202(a)(1), (b)(1)(A), (2)(A),
(c), (d)(1), (e)(1), (f)(1), (2)(A), June 7, 2001, 115 Stat.
46-49.)
Amendment of Section
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
Miscellaneous
PRIOR PROVISIONS
A prior section 23, added Pub. L. 95-618, title I, Sec. 101(a),
Nov. 9, 1978, 92 Stat. 3175, Sec. 44C; amended Pub. L. 96-223,
title II, Sec. 201, 202(a)-(d), 203(a), Apr. 2, 1980, 94 Stat. 256,
258; renumbered Sec. 23 and amended Pub. L. 98-369, div. A, title
IV, Sec. 471(c), 474(e), title VI, Sec. 612(e)(2), July 18, 1984,
98 Stat. 826, 831, 912, related to residential energy credit, prior
to repeal by Pub. L. 101-508, title XI, Sec. 11801(a)(1), Nov. 5,
1990, 104 Stat. 1388-520.
AMENDMENTS
2005 - Pub.L.109-135:
(3)(A)(i) The matter preceding subparagraph (A) of section
23(b)(4) is amended by striking ``The credit'' and inserting
In the case of a taxable year to which section 26(a)(2) does
not apply, the credit''.
(ii) Subsection (c) of section 23 is amended to read as
follows:
(c) Carryforwards of Unused Credit.--
(1) Rule for years in which all personal credits allowed
against regular and alternative minimum tax.--In the case of a
taxable year to which section 26(a)(2) applies, if the credit
allowable under subsection (a) for any taxable year exceeds the
limitation imposed by section 26(a)(2) for such taxable year
reduced by the sum of the credits allowable under this subpart
(other than this section and sections 25D and 1400C), such
excess shall be carried to the succeeding taxable year and added
to the credit allowable under subsection (a) for such taxable
year.
(2) Rule for other years.--In the case of a taxable year
to which section 26(a)(2) does not apply, if the credit
allowable under subsection (a) for any taxable year exceeds the
limitation imposed by subsection (b)(4) for such taxable year,
such excess shall be carried to the succeeding taxable
year and added to the credit allowable under subsection (a) for
such taxable year.
(3) Limitation.--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.''.
2004 - Subsec.312(b)(2), Pub.L.108-311, adds a note as follows:
The amendments made by sections 201(b), 202(f), and 618(b)
of the Economic Growth and Tax Relief Reconciliation Act of
2001 shall not apply to taxable years beginning during 2004 or
2005.
2002 - Pub. L. 107-147, Section 601(b)(2). The amendments
made by sections 201(b), 202(f), and 618(b) of the Economic
Growth and Tax Relief Reconciliation Act of 2001 shall not
apply to taxable years beginning during 2002 and 2003.
2002 - Subsec. 26 USC 23(a). The amendments made by Pub. L. 107-147,
Section 411(c), subsections (1)(A), (1)(B),(1)(E), and(1)(F) shall
apply to taxable years beginning after December 31, 2002. The
amendments made by Pub. L. 107-147, Sec 411(c), subsections (1)(C)
and (1)(D) shall apply to taxable years beginning after December 31, 2001.
2001 - Subsec. (a)(1). Pub. L. 107-16, Sec. 202(a)(1), 901,
temporarily amended heading and text of par. (1) generally. Prior
to amendment, text read as follows: ''In the case of an individual,
there shall be allowed as a credit against the tax imposed by this
chapter the amount of the qualified adoption expenses paid or
incurred by the taxpayer.'' See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (a)(2). Pub. L. 107-16, Sec. 202(c), 901, temporarily
inserted concluding provisions. See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (b)(1). Pub. L. 107-16, Sec. 202(b)(1)(A), 901,
temporarily substituted ''subsection (a)(1)(A)'' for ''subsection
(a)'' and ''$10,000'' for ''$5,000'' and struck out ''($6,000, in
the case of a child with special needs)'' before period at end.
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b)(2)(A)(i). Pub. L. 107-16, Sec. 202(b)(2)(A), 901,
temporarily substituted ''$150,000'' for ''$75,000''. See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (b)(4). Pub. L. 107-16, Sec. 202(f)(1), 901, temporarily
added par. (4). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c). Pub. L. 107-16, Sec. 202(f)(2)(A), 901, temporarily
substituted ''subsection (b)(4)'' for ''section 26(a)'' and struck
out ''reduced by the sum of the credits allowable under this
subpart (other than this section and sections 24 and 1400C)''
before '', such excess''. See Effective and Termination Dates of
2001 Amendment note below.
Pub. L. 107-16, Sec. 201(b)(2)(E), 901, temporarily substituted
''and sections 24 and 1400C'' for ''and section 1400C''. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(2). Pub. L. 107-16, Sec. 202(d)(1), 901, temporarily
amended heading and text of par. (2) generally. Prior to
amendment, text read as follows: ''The term 'eligible child' means
any individual -
''(A) who -
''(i) has not attained age 18, or
''(ii) is physically or mentally incapable of caring for
himself, and
''(B) in the case of qualified adoption expenses paid or
incurred after December 31, 2001, who is a child with special
needs.''
See Effective and Termination Dates of 2001 Amendment note below.
Subsecs. (h), (i). Pub. L. 107-16, Sec. 202(e)(1), 901,
temporarily added subsec. (h) and redesignated former subsec. (h)
as (i). See Effective and Termination Dates of 2001 Amendment note
below.
1998 - Subsec. (b)(2)(A). Pub. L. 105-206, Sec. 6018(f)(1),
inserted ''(determined without regard to subsection (c))'' after
''for any taxable year'' in introductory provisions.
Subsec. (c). Pub. L. 105-206, Sec. 6008(d)(6), inserted ''and
section 1400C'' after ''other than this section''.
1997 - Subsec. (a)(2). Pub. L. 105-34, Sec. 1601(h)(2)(A),
amended heading and text of par. (2) generally. Prior to
amendment, text read as follows: ''The credit under paragraph (1)
with respect to any expense shall be allowed -
''(A) for the taxable year following the taxable year during
which such expense is paid or incurred, or
''(B) in the case of an expense which is paid or incurred
during the taxable year in which the adoption becomes final, for
such taxable year.''
Subsec. (b)(2)(B). Pub. L. 105-34, Sec. 1601(h)(2)(B),
substituted ''determined without regard to sections 911, 931, and
933.'' for ''determined -
''(i) without regard to sections 911, 931, and 933, and
''(ii) after the application of sections 86, 135, 137, 219, and
469.''
EFFECTIVE DATE OF 2005 AMENDMENT
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall take effect as if
included in the provisions of the Energy Policy Act of 2005 to
which they relate.
(2) Repeal of public utility holding company act of 1935.--
The amendments made by subsection (a) shall not apply with
respect to any transaction ordered in compliance with the Public
Utility Holding Company Act of 1935 before its repeal.
(3) Coordination of personal credits.--The amendments made
by subsection (i)(3) shall apply to taxable years beginning
after December 31, 2005.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by section 201(b)(2)(E) of Pub. L. 107-16 applicable to
taxable years beginning after Dec. 31, 2001, see section 201(e)(2)
of Pub. L. 107-16, set out as a note under section 24 of this
title.
Pub. L. 107-16, title II, Sec. 202(g), June 7, 2001, 115 Stat.
49, provided that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (amending this section and sections
24, 26, 137, 904, and 1400C of this title) shall apply to taxable
years beginning after December 31, 2001.
''(2) Subsection (a). - The amendments made by subsection (a)
(amending this section and section 137 of this title) shall apply
to taxable years beginning after December 31, 2002.''
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-206, title VI, Sec. 6018(h), July 22, 1998, 112 Stat.
823, provided that: ''The amendments made by this section (amending
this section and sections 219, 408, 414, and 679 of this title and
amending provisions set out as notes under sections 167 and 4091 of
this title) shall take effect as if included in the provisions of
the Small Business Job Protection Act of 1996 (Pub. L. 104-188) to
which they relate.''
Amendment by section 6008(d)(6) of Pub. L. 105-206 effective,
except as otherwise provided, as if included in the provisions of
the Taxpayer Relief Act of 1997, Pub. L. 105-34, to which such
amendment relates, see section 6024 of Pub. L. 105-206, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1601(j) of Pub. L. 105-34 provided that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (amending this section, sections
30A, 52, 55, 137, 401, 403, 404, 408, 414, 512, 529, 593, 641, 679,
860L, 956, 1361, 1374, 4001, 4041, 4092, 4261, 6039D, 6048, 6050R,
6501, 6693, 7701, and 9503 of this title, section 1055 of Title 29,
Labor, and provisions set out as notes under sections 529 and 4091
of this title) shall take effect as if included in the provisions
of the Small Business Job Protection Act of 1996 (Pub. L. 104-188)
to which they relate.
''(2) Certain administrative requirements with respect to certain
pension plans. - The amendment made by subsection (d)(2)(D)
(amending section 401 of this title) shall apply to calendar years
beginning after the date of the enactment of this Act (Aug. 5,
1997).''
EFFECTIVE DATE
Section 1807(e) of Pub. L. 104-188 provided that: ''The
amendments made by this section (enacting this section and section
137 of this title, renumbering former section 137 of this title as
section 138, and amending sections 25, 86, 135, 219, 469, and 1016
of this title) shall apply to taxable years beginning after
December 31, 1996.''
TAX CREDIT AND GROSS INCOME EXCLUSION STUDY AND REPORT
Section 1807(d) of Pub. L. 104-188 provided that: ''The Secretary
of the Treasury shall study the effect on adoptions of the tax
credit and gross income exclusion established by the amendments
made by this section (enacting this section and section 137 of this
title, renumbering former section 137 of this title as section 138,
and amending sections 25, 86, 135, 219, 469, and 1016 of this
title) and shall submit a report regarding the study to the
Committee on Finance of the Senate and the Committee on Ways and
Means of the House of Representatives not later than January 1,
2000.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 24, 25, 25B, 26, 137,
904, 1016, 1400C of this title.
