Did Kansas bring back the adoption income tax credit, and how much is it?

Plain-English summary

Kansas Notice 14-05 (July 1, 2014) announces that the Kansas adoption credit is back after being repealed in 2012.

The change. 2014 Senate Bill 265 (New Section 4) reenacts the adoption credit formerly found in K.S.A. 79-32,202, effective for tax year 2014 and later.

How much. A resident individual may claim a credit equal to:

• 25% of the federal adoption credit allowed under IRC Section 23 (determined without regard to its subsection (c)); plus
• an additional 25% if the adopted child was a Kansas resident before the lawful adoption; plus
• a further 25% if the child is a special-needs child (as defined in IRC Section 23) who was a Kansas resident before the adoption.

Flat $1,500 credit. In addition, a $1,500 credit is allowed for the year of a lawful adoption of a child in the custody of the Secretary for Children and Families or a child with special needs -- whether or not the taxpayer was reimbursed or received a grant for adoption expenses.

Cap and carryover. The combined credit cannot exceed the tax imposed by K.S.A. 79-32,110 (reduced by other allowable credits), but any excess carries over to the next succeeding year or years until fully used. Specific claiming instructions appear in the income-tax instruction booklet.

What this means for you

Families who adopted in 2014 or later

• You may claim a Kansas credit tied to your federal adoption credit, with extra amounts for adopting a Kansas-resident child and a special-needs child, plus a possible $1,500 credit for a foster-custody or special-needs adoption.

Tax preparers

• Layer the three 25% components correctly, confirm Kansas residency of the child before adoption for the enhanced amounts, and carry any unused credit forward.

Common questions

When does the credit apply? Tax year 2014 and all later years.

What is the base amount? 25% of the federal adoption credit under IRC Section 23.

How can it increase? An extra 25% for a Kansas-resident child, and another 25% for a special-needs Kansas-resident child.

What about the $1,500 credit? It applies to adopting a child in the custody of the Secretary for Children and Families or a special-needs child, regardless of reimbursement.

Is it refundable? No, but unused amounts carry forward until used.

Citations and references

• K.S.A. 79-32,202 -- the adoption credit statute, reenacted by New Section 4 of 2014 Senate Bill 265.
• IRC Section 23 -- the federal adoption credit that the Kansas credit is measured against.
• K.S.A. 79-32,110 -- the individual income tax whose liability caps the credit.
• 2014 Senate Bill 265, New Section 4 -- the reenacting legislation.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 14-05

Original ruling text

Policy & Research Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Nick Jordan, Secretary Department of Revenue Sam Brownback, Governor
Richard Cram, Director

                                      Notice 14-05

                              Adoption Credit Reenacted
                                    (July 1, 2014)

  During the 2014 Legislative Session Senate Bill 265 was passed and signed into law. New

Section 4 of the Bill reenacts the adoption credit that was found in K.S.A. 79-32,202 prior to its
repeal during the 2012 Legislative Session. The reenacted provisions are effective for tax year
2014 and later years. Specifically, New Section 4 provides:

        New Sec. 4. Commencing in tax year 2014, and all tax years thereafter, and in
 addition to the credit provided in subsection (b), there shall be allowed as a credit
 against the tax liability of a resident individual imposed under the Kansas income tax
 act an amount equal to: (1) 25% of the amount of the credit allowed against such
 taxpayer's federal income tax liability pursuant to section 23 of the federal internal
 revenue code determined without regard to subsection (c) of such section; (2) in
 addition to subsection (a)(1), 25% of the amount of such federal income tax credit, if
 the child adopted by the taxpayer was a resident of Kansas prior to such lawful
 adoption; and (3) in addition to subsections (a)(1) and (a)(2), 25% of the amount of
 such federal income tax credit, if the child adopted by the taxpayer is a child with
 special needs, as defined in section 23 of the federal internal revenue code, and the
 child was a resident of Kansas prior to such lawful adoption, for the taxable year in
 which such credit was claimed against the taxpayer's federal income tax liability.
        (b) Commencing in tax year 2014, and all tax years thereafter, there shall be
 allowed as a credit against the tax liability of a resident individual imposed under the
 Kansas income tax act an amount equal to $1,500 for the taxable year in which occurs
 the lawful adoption of a child in the custody of the secretary for children and families
 or a child with special needs, whether or not such individual is reimbursed for all or
 part of qualified adoption expenses or has received a public or private grant therefor.
 As used in this subsection, terms and phrases shall have the meanings ascribed thereto
 by the provisions of section 23 of the federal internal revenue code.
       (c) The credit allowed by subsections (a) and (b) shall not exceed the amount of
 the tax imposed by K.S.A. 79-32,110, and amendments thereto, reduced by the sum
 of any other credits allowable pursuant to law. If the amount of such tax credit
 exceeds the taxpayer's income tax liability for such taxable year, the amount thereof
 which exceeds such tax liability may be carried over for deduction from the
 taxpayer's income tax liability in the next succeeding taxable year or years until the
 total amount of the tax credits has been deducted from tax liability.

 Please note that specific information about how to claim the credit on the individual

income tax return will be included in the instruction booklet.

                               Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                           Taxpayer Assistance Center
                          Kansas Department of Revenue
                          915 SW Harrison St., 1st Floor
                            Topeka, KS 66612-1588
                              Phone: 785-368-8222
                               Fax: 785-291-3614