Foster Care Tax Credit Act

To amend the Internal Revenue Code of 1986 to create a tax credit for foster families. 1. Short title This Act may be cited as the Foster Care Tax Credit Act 2. Foster care tax credit (a) Allowance of credit (1) In general Subpart A of part IV of subchapter A of chapter 1 25E. Foster care tax credit (a) Allowance of credit With respect to each qualifying foster child of an eligible taxpayer, for each calendar month occurring during the taxable year that such child resides in the home of such taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 1/12 (b) Amount determined (1) In general The amount determined under this subsection with respect to an eligible taxpayer and a taxable year is— (A) $1,000, reduced by (B) $50 for each $1,000 (or fraction thereof) by which the eligible taxpayer's modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term modified adjusted gross income (2) Threshold amount For purposes of paragraph (1), the term threshold amount (c) Qualifying foster child For purposes of this section, the term qualifying foster child (1) who has not attained age 17, (2) who is a citizen, national, or resident of the United States, (3) who resides in the home of the eligible taxpayer for not less than 1 calendar month during the taxable year, and (4) with respect to whom the credit under section 24 is not allowable to the eligible taxpayer or any other taxpayer who would be an eligible taxpayer but for paragraph (3) of subsection (d). (d) Eligible taxpayer For purposes of this section, the term eligible taxpayer (1) no single household shall include more than 1 eligible taxpayer, (2) married individuals filing a joint return shall be treated as 1 eligible taxpayer, and (3) in the case of individuals not described in paragraph (2) who are members of the same household, only the taxpayer with the highest adjusted gross income for the taxable year shall be treated as an eligible taxpayer. (e) Calendar month For purposes of this section, if a foster child resides in the home of the taxpayer for more than 15 consecutive days of a calendar month but fewer than the total number of days in such calendar month, such foster child shall be treated as residing in the home of the taxpayer for the full calendar month. (f) Portion of credit refundable (1) In general The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of— (A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a) (determined after any reduction of the credit under section 24(a) by reason of section 24(d)), or (B) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection, and after any reduction of the credit under section 24(a) by reason of section 24(d)) would increase if the limitation imposed by section 26(a) were increased by the greater of— (i) 15 percent of so much of the taxpayer's earned income (within the meaning of section 32) which is taken into account in computing taxable income for the taxable year as exceeds $3,000, or (ii) in the case of a taxpayer with 3 or more qualifying foster children residing in the home of the taxpayer for all months in the taxable year (without regard to whether the same 3 children reside in the home of the taxpayer for all such months), the excess (if any) of— (I) the taxpayer's social security taxes for the taxable year, over (II) the credit allowed under section 32 for the taxable year. The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a). For purposes of subparagraph (B), any amount excluded from gross income by reason of section 112 shall be treated as earned income which is taken into account in computing taxable income for the taxable year. (2) Social security taxes For purposes of paragraph (1), the term social security taxes (g) Identification requirements (1) Qualifying child identification requirement No credit shall be allowed under this section to an eligible taxpayer with respect to any qualifying foster child unless the taxpayer includes the name and taxpayer identification number of such qualifying foster child on the return of tax for the taxable year and such taxpayer identification number was issued on or before the due date for filing such return. (2) Taxpayer identification requirement No credit shall be allowed under this section if the identifying number of the eligible taxpayer was issued after the due date for filing the return for the taxable year. (h) Restrictions on Taxpayers Who Improperly Claimed Credit in Prior Year (1) Taxpayers making prior fraudulent or reckless claims (A) In general No credit shall be allowed under this section for any taxable year in the disallowance period. (B) Disallowance period For purposes of subparagraph (A), the disallowance period is— (i) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud, and (ii) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud). (2) Taxpayers making improper prior claims In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit. . (2) Conforming amendments (A) Section 6211(b)(4) inserting 25E(f), 32, (B) Section 1324(b)(2) of title 31, United States Code, is amended by inserting 25E, 25A, (C) The table of sections for subpart A of part IV of subchapter A of chapter 1 Sec. 25E. Foster care tax credit. . (b) Application of tax return preparer due diligence penalty Section 6695(g) 25E, 25A(a)(1), (c) Effective date The amendments made by this section shall apply to calendar months beginning after December 31, 2017, in taxable years beginning after such date. (d) Education The Secretary of Health and Human Services (or the Secretary's delegate), in coordination with the Secretary of the Treasury or such Secretary's delegate, shall identify provisions in the Internal Revenue Code of 1986 that can be used by or can benefit foster families, and shall increase outreach efforts to provide information and educational materials regarding such provisions to State and Indian tribal foster care agencies and to foster families.

Summary: Foster Care Tax Credit Act This bill amends the Internal Revenue Code to allow a partially refundable tax credit for each qualifying foster child who resides in the home of an eligible taxpayer for at least one calendar month during the taxable year. A "qualifying foster child" is a child in foster care who: (1) has not attained age 17; (2) is a citizen, national, or resident of the United States; and (3) with respect to whom the child tax credit is not allowable. In order to claim the credit, the name and taxpayer identification number of a foster child must be included on the taxpayer's tax return. No credit is allowed if the identification number of either the taxpayer or the qualifying child was issued after the due date for filing the return for the taxable year. The bill denies the tax credit to certain taxpayers who have made prior fraudulent or reckless claims for the credit within specified disallowance periods. The Department of Health and Human Services must identify provisions in the Internal Revenue Code that can benefit foster families and increase outreach efforts to inform state and Indian tribal foster care agencies and foster families about such provisions.