HR2833-119

What This Bill Does

The Adoption Tax Credit Refundability Act turns the adoption tax credit into a refundable credit. It redesignates current section 23 as section 36C and moves it from the nonrefundable personal-credit subpart to the refundable-credit subpart near section 36B. The bill removes the existing subsection that limited refundability, updates cross-references throughout the tax code, title 31 refund appropriation language, and Social Security Act adoption-assistance plan references, and authorizes Treasury regulations and guidance. Treasury must provide a standardized third-party affidavit for verifying a legal adoption that involves qualified adoption expenses or a child with special needs. The amendments apply to taxable years beginning after December 31, 2025, and any unused excess adoption credit from the prior taxable year is added to the section 36C credit in the first refundable year.

Who Benefits and How

Adoptive families benefit because the credit can be paid even when the family has too little income-tax liability to use a nonrefundable credit. Families adopting children with special needs benefit because Treasury must provide standardized affidavit verification for those adoptions. Lower-income adoptive parents benefit most from refundability because nonrefundable credits often provide limited value to them. Adoption service providers benefit if refundable tax support makes adoption expenses easier for families to finance.

Who Bears the Burden and How

The Internal Revenue Service must administer section 36C as a refundable credit and update forms, refund processing, and deficiency rules. Treasury guidance staff must create regulations or guidance and standardized third-party affidavit procedures. Federal taxpayers bear the cost of making adoption credits refundable. State child welfare agencies must update adoption-assistance plan cross-references from section 23 to section 36C.

Key Provisions

• Creates refundable-credit treatment by moving the adoption tax credit from section 23 to section 36C.
• Establishes taxable years beginning after December 31, 2025 as the effective period for refundability.
• Requires Treasury guidance and a standardized third-party affidavit for legal adoption verification.
• Provides carryover treatment for unused excess adoption credit from the prior year into the first section 36C refundable year.