Connections Vol. 2, 2.28.10
A focus on adoptions and TA
Each month, Connections will feature different resources available on the Resource Center website related to implementation of the Fostering Connections to Success and Increasing Adoptions Act of 2008. Read below for information about the adoption tax credit, incentives, and changes in eligibility which make more children eligible for adoption assistance.
Our national partner for adoption, the North American Council on Adoptable Children, is available to provide limited technical assistance to states and experts working to implement the adoption-related provisions. For example, NACAC created a fiscal analysis tool to help states project how many more children will be eligible for federal adoption assistance.
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It's tax time: Adoptive families should know about federal tax credit
Families who adopt a child with special needs from foster care can claim a federal adoption tax credit without needing to incur or document expenses. The per-child tax credit is $12,150 for adoptions finalized in 2009, and families have six years to use the entire credit.
As described in a recent Child Trends analysis, in 2004, taxpayers claimed the tax credit for less than 1 in 4 foster children adopted. To address the underuse of this benefit for children adopted from foster care, the Fostering Connections act requires states, as of October 1, 2008, to inform prospective adopters about the credit (see P.L. 110-351, Sec. 403). States must also document assurance of informing families about the tax credit in their Title IV-E plans.
The North American Council on Adoptable Children (NACAC) created a helpful resource for child welfare staff and adoptive (or prospective adoptive) families that outlines eligibility criteria for the credit, provides instructions on how to claim the credit, and reviews special circumstances and questions families may have. The IRS summary and instructions provide more detail on the federal adoption tax credit and specific guidelines.
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How are states spending adoption incentive awards?
The U.S Department of Health and Human Services (HHS) awarded $35 million to 38 states and Puerto Rico in September 2009 through the Adoption Incentives program. A history of Adoption Incentive awards from FY1998 to FY2008 can be found here.
The Fostering Connections Act enhanced the Adoption Incentives program (see P.L. 110-351, Sec. 401). This provision creates opportunities for states to receive financial rewards from the federal government for moving more foster youth not eligible for reunification to adoption. States have great flexibility in how they spend their Incentive dollars, with HHS requiring only that award expenditures be allowable under Title IV-B and Title IV-E (see the HHS Information Referendum issued 9/1/2009). A report by Cornerstone Consulting describes how states used their incentive dollars in the early years of the program.The Fostering Connections Resource Center would like to hear how your state has used or plans to use its adoption incentive dollars this year so we can share with other states. Please email us at firstname.lastname@example.org. Thank you!
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More youth now eligible for adoption assistance
The Fostering Connections law, over time, removes the IV-E Adoption Assistance eligibility link to the requirements of the Aid to Families with Dependent Children program (AFDC) (see P.L. 110-351, Sec. 402). NACAC's summary of this de-link provision and implementation guide provide a helpful foundation for states as this process gets underway.
As of October 1, 2009, newly adopted children who: will turn 16 on or before September 30, 2010; or have been in foster care for at least 60 consecutive months; or are a sibling of a child who falls into one of these two groups are now eligible for IV-E adoption assistance as long as they meet the state's definition of special needs and other IV-E requirements (see the HHS Program Instruction issued 8/26/2009). The Act includes a requirement that states reinvest any savings from the IV-E delink into Title IV-B or Title IV-E services. Savings have begun to accrue for states. To facilitate implementation, states can project the number of children who are or will be newly eligible for IV-E Adoption Assistance, estimate the state savings that will results, and plan for reinvesting these savings. A fiscal analysis tool created by NACAC, with built-in formulas, will help state administrators, policymakers, and advocates perform these important projections.
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