Testimony of Congressman Danny K. Davis in Support of

the Davis-DelBene-Lewis-Thompson Amendment

Improving the Ability of Middle Class Families to Adopt and Care for their Children by Making the Adoption Tax Credit Refundable, Restoring the Exclusions for Employer Dependent Care and Adoption Assistance Programs, and Modernizing the Child Care Tax Credit

I am pleased to join with Representatives DelBene, Lewis, and Thompson in this amendment that improves the ability of middle class families to adopt and care for their children by making the Adoption Tax Credit refundable, permanently restoring the exclusions for employer dependent care and adoption assistance programs, and modernizing the Child and Dependent Care Tax Credit to address the rising cost of child care and benefit more working families. This amendment is fiscally responsible in that it offsets any costs associated with supporting middle class families with a minor increase in the corporate tax rate.

The Adoption Tax Credit is a bipartisan credit that helps families offset some of the costs of adoption, especially for children with special needs.  Currently, the benefit is non-refundable for up to about $13,000 of qualifying adoption expenses per adopted child, with a 5-year carry forward.   In 2014, over 73,000 households claimed the Adoption Tax Credit, with an average credit value of $4,802.  However, almost 60 percent of the credit went to families with incomes over $100,000.  Although almost half of the claimants had income under $75,000, these adoptive families received less than one-fifth of the adoptive credit in dollars. This is especially problematic given that approximately half of youth adopted from foster care live in families with incomes at or below 200 percent of the federal poverty level; thus, the credit inadvertently creates barriers to permanency for a substantial number of families.  Compared to youth who remain in foster care, adopted children experience much greater economic and social well-being.  Additionally, families who adopt from foster care save the federal government between $65,000 and $127,000 by getting children out of costly foster care and into permanent adoptive families.     

To restore the refundability of the credit, I joined Congressman Diane Black in introducing The Adoption Tax Credit Refundability Act. We heard repeatedly about how the refundability helped meet the needs of the adoptive children and the hardship caused when refundability went away.  This was the case for the Leiva family in Chicago who adopted two foster youth with special needs and the Owens family from Pennsylvania who adopted 4 medically-fragile children from foster care nursing homes. Our amendment incorporates the improvements from our bill so that more families can benefit and more waiting children can be adopted.  Restoring refundability of the Adoption Tax Credit is supported by the 150 Member organizations of the Adoption Tax Credit Working Group.

Our amendment also enhances the Child and Dependent Care Tax Credit.  Child care is the largest or second largest annual expense for families. The average cost of daycare for children up to age four has climbed to almost $10,000 a year, more than the average cost of state college tuition.  For families earning the national median income, the average cost of care for just one child under five amounts to 18% of their income; for lower-income families, child care alone can cost as much as 30% of their pay.  Indeed, the Midwest and Illinois have some of the highest child care costs in the nation.