Fiscal Note
Fiscal Services Division
HF 369 – Adoption Tax Credit (LSB1354HV)
Staff Contact: Jeff Robinson (515.281.4614) jeff.robinson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 369 increases the maximum amount of the existing Adoption Tax Credit in two
steps, to $7,500 beginning on January 1, 2022 (TY 2022), and to $10,000 for TY 2023 and after.
The existing credit maximum is $5,000 per qualified adoption. The tax credit is refundable.
Assumptions
• The Adoption Tax Credit is based on the amount of unreimbursed adoption expenses paid
by the taxpayer as part of a qualified adoption and is claimed through the filing of Iowa tax
form IA 177.
• The credit may only be claimed after a qualified adoption becomes final.
• The credit limit applies per adoption (as opposed to per taxpayer or per household).
• Expenses used to calculate the credit may not also be used in the calculation of Iowa’s
itemized deduction for adoption expenses.
• For TY 2019, 270 households claimed the credit for a total of $814,000 ($3,000 per adopting
household).
• Adoption costs as reported on the credit tax forms filed for TY 2019 are assumed to be the
adoption costs in future years.
• The number and cost of adoptions are both assumed to remain constant. This means that
for this fiscal impact calculation, the increased tax credit amount is not projected to increase
the number of qualified adoptions in a year and will also not result in an increase in adoption
expenses.
• The Department of Revenue utilized the individual income tax micromodel to calculate the
tax reduction associated with the increases in the maximum amount of the credit. The fiscal
impact was determined by comparing model results of tax liability under current law versus
tax liability under the Bill.
• The tax reduction associated with the changes to the tax credit is assumed to occur when
tax returns are filed (decreased final tax payments and increased tax refunds).
• Because the tax credit is refundable, the calculation of the income surtax for schools is not
affected by the proposed increase in the credit.
Fiscal Impact
The proposed increases in the maximum amount of the refundable Adoption Tax Credit are
projected to reduce net General Fund revenue by $310,000 in FY 2023 and $625,000 in
FY 2024 and after.
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Source
Department of Revenue
/s/ Holly M. Lyons
February 8, 2021
Doc ID 1211783
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in
developing this fiscal note is available from the Fiscal Services Division of the Legislative Services
Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 422.12A, 422.12