HR 2510 — To amend the Internal Revenue Code of 1986 to make the credit for the adoption of special needs children refundable.

(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. (4) Portion of credit refundable So much of the credit allowed under paragraph (1) as does not exceed $5,000 shall be treated as a credit allowed under subpart C and not as a credit allowed under this subpart. (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. (c) Carryforwards of unused credit (1) In general If the portion of the credit allowable under subsection (a) which is allowed under this subpart 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 and section 25D), such excess shall be carried to the succeeding taxable year and added to the portion of the credit allowable under subsection (a) which is allowed under this subpart for such taxable year. (2) 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 ...