In all the hullabaloo of the fiscal cliff, you may have missed a seemingly minor provision of the resulting deal: the adoption tax credit, which applies to both domestic and international adoptions, is now a permanent part of our tax code. That means families with incomes of up to $150,000 can receive a credit — worth a maximum of $12,650 in 2012 — for the expenses of raising an adopted child.
The downside? Congress decided not to make the credit refundable, as it had been in 2010 and 2011. Instead of getting a check, families will now have to subtract the credit from their overall tax liability. Lower income families, who generally don’t pay federal income tax, won’t get a dime from the IRS, but wealthier families will.
Even worse, Congress’s decision might have an unintended consequence: some foster children could have a harder time finding a home.
“Refundability is especially a concern for those lower to middle income families without tax liability — and those are often families who adopt from foster care,” Megan Lindsey of the National Council for Adoption (NCFA) tells Latitude News. Lindsey says the NCFA, an advocacy group that lobbied to make the credit permanent, will continue to push to make it refundable too, mainly because of the potential impact on foster children.
But according to one expert, there’s a deeper problem with this particular tax credit.
A tax in need of reform
DeLeith Gossett is an expert on adoption law at Texas Tech University. She says Congress originally intended the tax credit (which has led to over $4 billion being paid out to adoptive families) to encourage foster care adoption when it passed the bill in 1996.
Indeed the number of foster care adoptions per year jumped up from 37,000 in 1998 to 53,000 in 2002. But for the past 10 years it hasn’t moved much. Gossett believes the tax credit has encouraged international adoption at the expense of foster care children.
In an article to be published by the Lewis and Clark Law Review this spring, Gossett points to State Department data that shows parents who adopted internationally claimed 45 percent of the tax credit in 2004, and to a study by the non-profit research group Child Trends that found the tax credit “disproportionately supported higher-income families.”
Data compiled by The Columbus Dispatch support her point that lower income families tend to adopt from foster care while higher income families go abroad. As Rita Price of the Dispatch reports:
About 21 percent of those adopted from foster care live in households with incomes 400 percent or more of the poverty level, compared with 30 percent of all children and about 58 percent of children adopted internationally.
Neglected children suffer at home and abroad
Ultimately, Gossett takes a radical position on international adoption, one not supported by the NCFA and other advocacy groups. She believes Congress should no longer apply the tax credit to families who adopt from overseas.
“To be clear,” Gossett says, “I think adoption is a good thing. I do not mean to denigrate international adoption. But the main purpose of the [tax credit] statute was to help get the children of our country out of foster care. If people want to adopt overseas that’s wonderful. But it might not be the American public’s duty to subsidize that adoption.”
Megan Lindsey of the NCFA disagrees. “By including intercountry adoption in the adoption tax credit, Congress decided . . . that every child deserves a family,” she says, “including those all over the world. If a family chooses to raise a child [from] another nation in need, we believe it is appropriate and acceptable to support that family’s decision to provide a safe and stable home for a child that will become a U.S. citizen.”
Either way, there are plenty of children in foster care who are waiting to be adopted, more than 104,000 according to data compiled by the U.S. Department of Health and Human Services. That’s down from around 130,000 in 2003, but Gossett worries that number could creep back up as lower income families hesitate to cover the costs of adoption on their own. That’s a problem because caring for each child in foster care costs the government an estimated $47,000 a year, and Gossett says children who “age out” of the foster care system without being adopted are much more likely to get in trouble with the law, live on the streets and develop substance abuse issues.
Why go abroad?
Gossett doesn’t blame parents who seek to adopt internationally. Trendsetting celebrities like Angelina Jolie and Madonna do it, so why not average American families? Another significant factor, she argues, is so-called “orphan theology,” a dogma in some evangelical Christian churches that promotes the idea of converting foreign children and bringing them to the U.S.
But there are structural issues at play too. Gossett says a major problem is the slow moving and complicated bureaucracy of the foster care system, which can discourage prospective parents, especially those who want to adopt babies and infants. (The median age of foster children waiting to be adopted is seven, according to USA Today).
And several states allow birth parents to reclaim their parental rights.
“You go through this process, you get attached and then the birth mother changes her mind, and has the right to take the child,” Gossett explains. “That’s one reason parents choose international adoption.”
It’s possible that foster care adoption will increase as countries like Russia and South Korea — both major suppliers of children to the U.S. — seek to limit or completely ban intercountry adoption. Already, international adoptions have slowed, falling from a high of 22,991 in 2004 to 9,319 last year.
Senator Mary Landrieu (D-LA), an adoptive mother who helped make the tax credit permanent, says she will reintroduce legislation to make the credit refundable during the next Congress. In a statement released to Latitude News, she said: “Though making this credit a permanent part of our tax code is an important accomplishment, I will continue to work to improve the Adoption Tax Credit and to make it refundable to better assist Americans adopting out of the foster care system.”
But until Congress acts, low income families who want to adopt will have to foot the bill themselves.