I

104TH CONGRESS

1ST SESSION H. R. 1985

To amend the Internal Revenue Code of 1986 to exclude from gross income

employee and military adoption assistance benefits and withdrawals from

IRAs for certain adoption expenses.

IN THE HOUSE OF REPRESENTATIVES

JUNE 30, 1995

Mr. KENNEDY of Massachusetts (for himself, Mr. BURTON of Indiana, Mr.

SMITH of New Jersey, Mr. MATSUI, Mrs. MALONEY, Mr. UNDERWOOD,

Mr. EHLERS, Mr. BUNNING of Kentucky, Mr. THORNBERRY, Mr. BARTON of Texas, Mr. BRYANT of Tennessee, Mr. OBERSTAR, Mr. FROST,

Mr. DELLUMS, Mr. DORNAN, Mr. ACKERMAN, Mr. JACOBS, Mr. STUPAK,

Mr. SOLOMON, Mr. EVANS, Mr. PETE GEREN of Texas, Mr. HASTINGS

of Florida, Mr. SERRANO, Mr. PAYNE of Virginia, Mr. FATTAH, and Mr.

BARRETT of Wisconsin) introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to exclude

from gross income employee and military adoption assistance benefits and withdrawals from IRAs for certain

adoption expenses.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Adoption Incentives

5 Act of 1995’’.
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1 SEC. 2. EXCLUSION OF ADOPTION ASSISTANCE.

2 (a) IN GENERAL.—Part III of subchapter B of chap3 ter 1 of the Internal Revenue Code of 1986 is amended

4 by redesignating section 137 as section 138 and by insert5 ing after section 136 the following new section:

6 ‘‘SEC. 137. ADOPTION ASSISTANCE.

7 ‘‘(a) IN GENERAL.—Gross income of an employee

8 does not include employee adoption assistance benefits, or

9 military adoption assistance benefits, received by the em10 ployee with respect to the employee’s adoption of a child.

11 ‘‘(b) DEFINITIONS.—For purposes of this section—

12 ‘‘(1) EMPLOYEE ADOPTION ASSISTANCE BENE13 FITS.—The term ‘employee adoption assistance ben14 efits’ means payment by an employer of qualified

15 adoption expenses with respect to an employee’s

16 adoption of a child, or reimbursement by the em17 ployer of such qualified adoption expenses paid or

18 incurred by the employee in the taxable year.

19 ‘‘(2) EMPLOYER AND EMPLOYEE.—The terms

20 ‘employer’ and ‘employee’ have the respective mean21 ings given such terms by section 127(c).

22 ‘‘(3) MILITARY ADOPTION ASSISTANCE BENE23 FITS.—The term ‘military adoption assistance bene24 fits’ means benefits provided under section 1052 of

25 title 10, United States Code, or section 514 of title

26 14, United States Code.
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1 ‘‘(4) QUALIFIED ADOPTION EXPENSES.—

2 ‘‘(A) IN GENERAL.—The term ‘qualified

3 adoption expenses’ means reasonable and nec4 essary adoption fees, court costs, attorney fees,

5 and other expenses—

6 ‘‘(i) which are directly related to, and

7 the principal purpose of which is for, the

8 legal adoption of an eligible child by the

9 taxpayer, and

10 ‘‘(ii) which are not incurred in viola11 tion of State or Federal law or in carrying

12 out any surrogate parenting arrangement.

13 ‘‘(B) ELIGIBLE CHILD.—The term ‘eligible

14 child’ means any individual—

15 ‘‘(i) who has not attained age 18 as of

16 the time of the adoption, or

17 ‘‘(ii) who is physically or mentally in18 capable of caring for himself.

19 ‘‘(c) COORDINATION WITH OTHER PROVISIONS.—

20 The Secretary shall issue regulations to coordinate the ap21 plication of this section with the application of any other

22 provision of this title which allows a credit or deduction

23 with respect to qualified adoption expenses.’’

24 (b) CLERICAL AMENDMENT.—The table of sections

25 for part III of subchapter B of chapter 1 of such Code
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1 is amended by striking the item relating to section 137

2 and inserting the following new items:

‘‘Sec. 137. Adoption assistance.

‘‘Sec. 138. Cross references to other Acts.’’

3 (c) EFFECTIVE DATE.—The amendments made this

4 section shall apply to taxable years beginning after De5 cember 31, 1995.

6 SEC. 3. WITHDRAWAL FROM IRA FOR ADOPTION EXPENSES.

7 (a) IN GENERAL.—Subsection (d) of section 408 of the

8 Internal Revenue Code of 1986 is amended by adding at

9 the end the following new paragraph:

10 ‘‘(8) QUALIFIED ADOPTION EXPENSES.—

11 ‘‘(A) IN GENERAL.—Any amount which is

12 paid or distributed out of an individual retire13 ment plan of the taxpayer, and which would

14 (but for this paragraph) be includible in gross

15 income, shall be excluded from gross income to

16 the extent that—

17 ‘‘(i) such amount exceeds the sum

18 of—

19 ‘‘(I) the amount excludable under

20 section 137, and

21 ‘‘(II) any amount allowable as a

22 credit under this title with respect to

23 qualified adoption expenses; and
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1 ‘‘(ii) such amount does not exceed the

2 qualified adoption expenses paid or in3 curred by the taxpayer during the taxable

4 year.

5 ‘‘(B) QUALIFIED ADOPTION EXPENSES.—

6 For purposes of this paragraph, the term

7 ‘qualified adoption expenses’ has the meaning

8 given such term by section 137, except that

9 such term shall not include any expense in con10 nection with the adoption by an individual of a

11 child who is the child of such individual’s

12 spouse.’’

13 (b) EFFECTIVE DATE.—The amendment made by

14 this section shall apply to taxable years beginning after

15 December 31, 1995.

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