Missouri would end adoption tax credits' limits
By Matt Franck
Post-Dispatch Jefferson City Bureau
05/03/2004

JEFFERSON CITY - Cindy Hook's summer hotel reservations have nothing to do with leisure and everything to do with state bureaucracy.

Hook is among the hundreds of Missourians who feel they must go to desperate measures to get their share of a highly competitive tax credit for adoptive parents.

In Hook's case, the St. Charles mom and her family have delayed their Myrtle Beach vacation plans to book a night in Jefferson City. Doing so will allow her to camp out at the doors of the Missouri Department of Revenue before dawn on July 1 - the first day the tax credits are available.

Last year, Hook paid the price for not getting in line. She was among the nearly 1,000 taxpayers who qualified for the tax credit but could not receive it because state funds ran out on July 2.

"We have to just keep trying and trying to get the money," she said.

But a bill moving through the Missouri Legislature could spare Hook that hassle. The legislation would remove a cap that limits state spending on the tax credit to $2 million a year.
If the measure passes, it will make what many describe as the nation's most generous adoption subsidy even more generous, at a potential cost of more than $2.4 million in the first year alone.

But some - including state Auditor Claire McCaskill - have questioned whether the program as it's set up now should continue at all.

The 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 state taxes in a single year, recipients can receive the credit in installments over up to five years. Taxpayers can also sell their tax credit to a taxpayer or business, which in turn would likely use the entire $10,000 credit in a single year.

Those factors combine to create what many describe as a hectic scene at Department of Revenue offices on July 1 as taxpayers line up to redeem their credits.

Mixed in line with adoptive parents are those who have purchased the tax credits from adoptive parents, as well as people who have agreed to submit paperwork for others.

Jessica Robinson, a Department of Revenue spokeswoman, said the credits are redeemed on a first-come-first-served basis, with state workers using a time stamp to make sure applications are processed in the right order.

Last year, she said, the tax credit was issued to 664 families before the funds ran out on the morning of July 2. Since that time, 960 taxpayers have sought to redeem their credits, but have been turned away. The total value of the unpaid claims is $2.4 million, Robinson said.

Hook was rejected because a certified letter to the state apparently didn't arrive in time.

She said she can't take any risks this year, because she and her husband need to continue paying off a $40,000 second mortgage she took out to finance the adoption of her two daughters from China and Vietnam. At the time of the adoption, Hook believed that the $10,000 credits were a sure thing - but so far she's been able to redeem only part of the credit.

A bill by House Speaker Catherine Hanaway, R-Warson Woods, would help parents like Hook on at least two counts.

Not only would the bill eliminate the $2 million cap, but it would allow the tax credit to be redeemed in a single year - regardless of a how much tax parents paid. So even if a family paid only $1,000 in state taxes, it could qualify for the entire $10,000 credit.

Some applaud that provision in particular, saying it would eliminate the need for some families to sell the credit.

Hanaway said she's confident the state can afford lifting the cap on the tax credit. And she predicted that costs will go down after the first year, as the backlog of unredeemed credits is eliminated.

Hanaway recently adopted a child herself, but has said she does not know if she will seek the tax credit.

The adoption tax credit legislation is part of a massive 200-page foster care bill that has already passed the House. That's not to say the tax credit language has avoided controversy.

Several lawmakers, including Rep. Barbara Fraser, D-University City, have questioned whether the tax credit is fulfilling its intended purpose.

Under state statute, the tax credit is reserved for the adoption of children with special needs. Many had thought that designation would encourage the adoption of children in the Missouri foster care system that might not otherwise find a home.

But a recent audit by McCaskill revealed that 90 percent of the credits are used to pay for international adoptions. The state Department of Social Services has determined that special needs children include those from other countries, in part, due to their ethnicity.

Advocates of international adoptions say there's nothing wrong with how the tax credit is being used. They say international adoptions are more expensive than domestic ones, with the state already picking up the tab for many expenses related to adoptions out of foster care.

Cory Barron, a spokesman for the St. Louis adoption firm Children's Hope International, said tax credits spent on foreign adoptions also pay dividends to the state as those children become taxpayers. "These kids come here and they become a part of our community," he said.

Hanaway said she hopes that by lifting the cap she can help end the competition for tax credits that has often pitted parents of international children against those who adopt Missouri children.

"What it will do is make sure that everyone who adopts special needs kids will be able to redeem that credit," she said.

The bill is HB 1453. A similar bill is SB 762.

Reporter Matt Franck
E-mail: mfranck@post-dispatch.com
Phone: 573-635-6178