Let’s Get Real: Missouri State Adoption Tax Subsidy May Be Eliminated

As you will see from the majority of comments at today’s article Missouri may do away with foreign adoption subsidy [St. Louis Post-Dispatch 9/13/11 by Virginia Young], the general public seems to recognize the adoption  in the room. They are mostly for the elimination of this credit.

This taboo subject of adoption credits is one of the biggest entitlements that adoptive parents expect and demand. Those that don’t live in Missouri may be shocked to know that they give a STATE credit of $10,000!

“The state credit gives adoptive parents up to $10,000 in tax relief to offset adoption-related expenses such as travel and legal fees. Because most families don’t pay $10,000 in taxes in a single year, recipients can receive the credit in installments over up to five years. Families also can sell the tax credits for cash.” Sell them for cash? What planet are we living on again

Adoption credits have been a lobbying point for the adoption industry for a number of years. As the credits rise, so do fees for adoption. But with the economy in the toliet, finally legislators on both sides of the aisle are having to deal with cutting entitlements.

The article states that “parents seeking the subsidy for international adoptions used to receive 90 percent of the available tax credits, which prompted questions in a 2004 audit by then-auditor and now U.S. Sen. Claire McCaskill.

The Legislature subsequently revamped the tax credit program so that $2 million was earmarked for Missouri resident adoptions and $2 million for international adoptions.”

Now, the Legislature would like to shift all the money to the foster care program. “The goal, say those pushing the change, is to shift foreign adoption tax credits — up to $2 million a year — toward abused and neglected children in Missouri.

Specifically, the money would increase the pool of tax credits available for parents who adopt children in the state’s foster care system and donors who give to certain social services agencies geared to children.”

This is sending adoption agencies into a tizzy but they can’t muster more than a very weak argument of helping people make the decision to adopt. Is that what our government is for?

“Cory Barron works for Children’s Hope International, a St. Louis adoption agency that helps families with foreign adoptions. Barron said that while fewer families use the tax credit now, more children adopted from overseas have special needs such as missing limbs or heart problems.

The credit “is huge for adopting families, especially if they need therapy, equipment, special schooling,” Barron said. He also notes that compared with the hundreds of millions of dollars being considered for development programs, the program’s $2 million outlay is “very small.

“This can really help a family make that decision, if they know they’re going to have that tax credit to pay for those extra services,” he said.”

No-Brainer

“Eliminating the credit for international adoptions was recommended by the Tax Credit Review Commission appointed last year by Gov. Jay Nixon. The commission said simply that subsidizing foreign adoption reduced funding for Missouri children in crisis.

“We didn’t hear from anybody on the issue,” said Sen. Jolie Justus, D-Kansas City and co-chair of the subcommittee that examined the social services credits. Because the group was trying to save money, dropping the international adoption subsidy ‘seemed to be a no-brainer,” she said.”

“Sen. John Lamping, R-Ladue, notes that Americans adopted only 3,400 children from China last year, down from a high of about 6,800 in 2003. Lamping himself used the credit when he adopted two daughters, now ages 8 and 11, from China and a son, 13, from Russia.

But now, with the state looking to make all its tax credits more efficient and productive, the international adoption tax credit is on the chopping block, he said.

“This is a tax credit reform bill. We are dramatically changing all of them in some way, shape or form,” Lamping said.” Oooo! Bipartisanship…of course he already took $30K from the program so it isn’t much of hardship for him.

Federal Tax Credit

We can’t discuss this subject without mentioning the Federal Tax Credits. Joe Lovrak in his June 4, 2011 blogpost NO $65,000 TAX REFUND has some interesting statistics and summary of adoptive parent entitlement.

“The adoption tax credit gives parents who adopt children as much as $13,170 per child — up from a cap of $12,150 last year. And this is the first year the credit is refundable, meaning the money goes directly into a qualifying taxpayer’s pocket, rather than being applied to future taxes owed.”

” In its latest report on the tax filing season, the Treasury Inspector for Tax Administration found that, by the end of April, the IRS had received returns from 72,656 taxpayers claiming more than $897 million in adoption credits. About 58% of those claims were sent for further review, and will be audited to verify that proper documentation was submitted and that the amount of money being claimed is correct”

“As they wait, many confused and angry adoptive parents across the country are flocking to an online forum on Adoption.com. A thread dedicated to the issue contains 85 pages filled with comments about refund delays. ”

If the nebulous international fees were removed from the equation, no one would need any adoption credit to adopt. Tax credits are one of the major marketing ploys that the industry makes to potential clients. Adoption tax credits are a sick form of public-private partnership that only benefits the adoption industry in the long-term. The adoption industry gets the money from the PAP, then the government sticks their hands in nonadopter’s pockets and gives their money to the adoptive parent as payback. But it is all for the children, right?

As an aside, I have often wondered if PAPs who fundraise for those upfront adoption fees give back the money to the people who donate to them after they get their tax refunds and credits? I don’t see people blogging about that…

REFORM Puzzle Piece