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Senate Approves Foster Care Tax Exemption

On February 6, the Senate approved, by unanimous consent, a House-passed bill (H.R. 586) that would expand the types of payments a foster family may exclude from taxable income for expenses incurred while caring for a foster child.

Under current law, foster care payments are excludable from taxable income only if the placements and payments are made by a state-run or non-profit agency. The legislation would lift the restrictions currently imposed on foster families who receive payments from for-profit agencies and also would lift the current age restrictions on payments limited to children and youth under the age of 19. The bill would cost $586 million over ten years.

The Senate also adopted, by unanimous consent, an amendment by Sen. Mary Landrieu (D-LA) that would accelerate the effective date, from FY2003 to FY2002, for the expansion of the adoption tax credit (H.R. 622). The adoption credit was included in the tax package (P.L. 107-16) enacted last summer.

H.R. 586, as amended, was sent back to the House for further consideration.

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