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House Approves Foster Care Tax Exemption

On May 15, the House overwhelmingly approved, 420-0, legislation (H.R. 586) that would allow foster families to exclude from their taxable income payments made by any agencies that are licensed or certified by states, even for-profit agencies. Under current law, payments may be excluded from taxable income only if the placement and payment is made by a state or non-profit agency. The legislation would also lift the current age restrictions on foster families whose payments are limited to children and youth under the age of 19. The bill would cost $586 million over 10 years.

“This is a straightforward bill which updates and simplifies the Tax Code as it relates to foster care families,” said Rep. Ron Lewis (R-KY), sponsor of the bill.

Rep. Michael McNulty (D-NY) pointed out, “We have over 560,000 abused, abandoned, and neglected children in our Nation’s foster care system who need caring homes as they wait to return to their birth parents or to be adopted. H.R. 586 removes one barrier to at least some families taking a foster child into their homes.”

In her floor remarks, Rep. Anne Northup (R-KY) commented, “It would be easy to look at this bill as a tax bill. But it’s really about children and families.” She added, “It is only reasonable that we make sure that our tax laws support these new evolving systems that allow children to have what is the most important thing in their life: a family.”

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