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Internal Revenue Code, § 137. Adoption Assistance Programs

I.R.C. § 137(a) Exclusion
I.R.C. § 137(a)(1) In General
Gross income of an employee does not include amounts paid or expenses incurred by the employer for qualified adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program.
I.R.C. § 137(a)(2) $10,000 Exclusion For Adoption Of Child With Special Needs Regardless Of Expenses
In the case of an adoption of a child with special needs which becomes final during a taxable year, the qualified adoption expenses with respect to such adoption for such year shall be increased by an amount equal to the excess (if any) of $10,000 over the actual aggregate qualified adoption expenses with respect to such adoption during such taxable year and all prior taxable years.
I.R.C. § 137(b) Limitations
I.R.C. § 137(b)(1) Dollar Limitation
The aggregate of the amounts paid or expenses incurred which may be taken into account under subsection (a) for all taxable years with respect to the adoption of a child by the taxpayer shall not exceed $10,000.
I.R.C. § 137(b)(2) Income Limitation
The amount excludable from gross income under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so excludable (determined without regard to this paragraph but with regard to paragraph (1)) as—
I.R.C. § 137(b)(2)(A)
the amount (if any) by which the taxpayer's adjusted gross income exceeds $150,000, bears to
I.R.C. § 137(b)(2)(B)
$40,000.
I.R.C. § 137(b)(3) Determination Of Adjusted Gross Income
For purposes of paragraph (2), adjusted gross income shall be determined—
I.R.C. § 137(b)(3)(A)
without regard to this section and sections 221, 222, 911, 931, and 933, and
I.R.C. § 137(b)(3)(B)
after the application of sections 86, 135, 219, and 469.
I.R.C. § 137(c) Adoption Assistance Program
For purposes of this section, an adoption assistance program is a separate written plan of an employer for the exclusive benefit of such employer's employees—
I.R.C. § 137(c)(1)
under which the employer provides such employees with adoption assistance, and
I.R.C. § 137(c)(2)
which meets requirements similar to the requirements of paragraphs (2), (3), (5), and (6) of section 127(b).
An adoption reimbursement program operated under section 1052 of title 10, United States Code (relating to armed forces) or section 541 of title 14, United States Code (relating to members of the Coast Guard) shall be treated as an adoption assistance program for purposes of this section.
I.R.C. § 137(d) Qualified Adoption Expenses
For purposes of this section, the term “qualified adoption expenses” has the meaning given such term by section 23(d) (determined without regard to reimbursements under this section).
I.R.C. § 137(e) Certain Rules To Apply
Rules similar to the rules of subsections (e), (f), and (g) of section 23 shall apply for purposes of this section.
I.R.C. § 137(f) Adjustments For Inflation
In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of subsection (b) shall be increased by an amount equal to—
I.R.C. § 137(f)(1)
such dollar amount, multiplied by
I.R.C. § 137(f)(2)
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.
(Added by Pub. L. 104-188, 1807, Aug. 20, 1996, 110 Stat. 1755; amended Pub. L. 105-34, title XVI, Sec. 1601(h)(2)(C), Aug. 5, 1997, 111 Stat 788; Pub. L. 105-277, title IV, Sec. 4003(a), Oct. 21, 1998, 112 Stat 2681; Pub. L. 107-16, title II, Sec. 202, title IV, Sec. 431, June 7, 2001, 115 Stat. 38; Pub. L. 107-147, title IV, Sec. 411(c)(2), 418(a)(2), Mar. 9, 2002, 116 Stat. 21; Pub. L. 108-311, title IV, Sec. 403(e), Oct. 4, 2004; Pub. L. 108-357, title I, Sec. 102(d)(1), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 111-148, Sec. 10909(a), (b), Mar. 23, 2010, 124 Stat. 119; Pub. L. 115-97, title I, Sec. 11002(d)(1)(N), 13305(b)(1), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(40), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018 — Subsec. (c). Pub. L. 115-141, Div. U, Sec. 401(a)(40), amended subsec. (c) by substituting “section 541” for “section 514”.
2017 — Subsec. (b)(3)(A). Pub. L. 115-97, Sec. 13305(b)(1), amended subpar. (A) by striking “199”.
Subsec. (f)(2). Pub. L. 115-97, Sec. 11002(d)(1)(N), amended par. (2) by striking ‘‘for ‘calendar year 1992’ in subparagraph (B)’’ and inserting ‘‘for ‘calendar year 2016’ in subparagraph (A)(ii)’’.
2010 — Subsec. (a)(2). Pub. L. 111-148, Sec. 10909(a)(2)(B), amended par. (2) by substituting “$13,170” for “$10,000” in the heading and text.
Subsec. (b)(1). Pub. L. 111-148, Sec. 10909(a)(2)(A), amended par. (1) by substituting “$13,170” for “$10,000”.
Subsec. (d). Pub. L. 111-148, Sec. 10909(b)(2)(J)(i), amended subsec. (d) by substituting “section 36C(d)” for “section 23(d)”.
Subsec. (e). Pub. L. 111-148, Sec. 10909(b)(2)(J)(ii), amended subsec. (e) by substituting “section 36C” for “section 23”.
Subsec. (f). Pub. L. 111-148, Sec. 10909(a)(2)(C), amended subsec. (f). Before amendment, it read as follows:
“(f) Adjustments For Inflation.— In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of subsection (b) shall be increased by an amount equal to—
“(1) such dollar amount, multiplied by
“(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2001” for “calendar year 1992” in subparagraph (B) thereof.
“ If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.”
2004 — Subsec. (b)(3)(A). Pub. L. 108-357, Sec. 102(d)(1), amended subpar. (A) by inserting “199,” before “221”.
Subsec. (b). Pub. L. 108-311, Sec. 403(e), amended subsec. (b) by substituting “subsection (a)” for “subsection (a)(1)” in par. (1) and by substituting “subsection (a)(1)” for “subsection (a)” in par. (2) pursuant to an amendment to Pub. L. 107-147, Sec. 411(c)(2)(B).
2002 — Subsec. (a). Pub. L. 107-147, Sec. 411(c)(2)(A), amended subsec. (a). Prior to being amended it read as follows:
“(a) IN GENERAL.—
“Gross income of an employee does not include amounts paid or expenses incurred by the employer for adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program. The amount of the exclusion shall be—
“(1) in the case of an adoption of a child other than a child with special needs, the amount of the qualified adoption expenses paid or incurred by the taxpayer, and
“(2) in the case of an adoption of a child with special needs, $10,000.”
Subsec. (b)(2). Pub. L. 107-147, Sec. 411(c)(2)(B), amended par. (2) by substituting “subsection (a)” for “subsection (a)(1)”.
Subsec. (f). Pub. L. 107-147, Sec. 418(a)(2), amended subsec. (f) by adding the flush sentence at the end.
2001 — Subsec. (a). Pub. L. 107-16, Sec. 202(a)(2), amended subsec. (a). Before amendment it read as follows:
“(a) In General.—Gross income of an employee does not include amounts paid or expenses incurred by the employer for qualified adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program.”
Subsec. (b)(1). Pub. L. 107-16, Sec. 202(b)(1)(B), amended par. (1) by substituting “$10,000” for “$5,000”, by striking “($6,000, in the case of a child with special needs)”, and by substituting “subsection (a)(1)” for “subsection (a)”.
Subsec. (b)(2)(A). Pub. L. 107-16, Sec. 202(b)(2)(B), amended subpar. (A) by substituting “$150,000” for “$75,000”.
Subsec. (b)(3). Pub. L. 107-16, Sec. 431(c)(1), amended par. (3) by inserting “222,” after “221,”.
Subsec. (f). Pub. L. 107-16, Sec. 202(d)(2), struck subsec. (f). Prior to being struck it read as follows:
“(f) Termination.—This section shall not apply to amounts paid or expenses incurred after December 31, 2001.”
Subsec. (f). Pub. L. 107-16, Sec. 202(e)(2), added subsec. (f).
1998 — Subsec. (b)(3)(A). Pub. L. 105-277, Sec. 4003(a)(2)(C), inserted “221,” before “911,” in subpar. (A).
1997 — Subsec. (b)(1). Pub. L. 105-34, Sec. 1601(h)(2)(C) substituted “of the amounts paid or expenses incurred which may be taken into account” for “amount excludable from gross income”.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(40), effective March 23, 2018.
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendment by Pub. L. 115-97, Sec. 13305(b)(1), effective for taxable years beginning after December 31, 2017. Pub. L. 115-141, Div .T, Sec. 101(c), added the following transition rule:
“(2) TRANSITION RULE FOR QUALIFIED PAYMENTS OF PATRONS OF COOPERATIVES.—
‘‘(A) IN GENERAL.—The amendments made by this section shall not apply to a qualified payment received by a taxpayer from a specified agricultural or horticultural cooperative in a taxable year of the taxpayer beginning after December 31, 2017, which is attributable to qualified production activities income with respect to which a deduction is allowable to the cooperative under section 199 of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) for a taxable year of the cooperative beginning before January 1, 2018. Any term used in this subparagraph which is also used in section 199 of such Code (as so in effect) shall have the same meaning as when used in such section.
‘‘(B) COORDINATION WITH SECTION 199A.—No deduction shall be allowed under section 199A of such Code for any qualified payment to which subparagraph (A) applies.’’
Amendment by Pub. L. 115-97, Sec. 11002(d)(1)(N), effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendment by Sec. 10909 of Pub. L. 111-148 effective for taxable years beginning after December 31, 2009. Pub. L. 111-148, Sec. 10909(c), as amended by Pub. L. 111-312, Sec. 101(b), provided that:
“(c) SUNSET PROVISION.—Each provision of law amended by this section is amended to read as such provision would read if this section had never been enacted. The amendments made by the preceding sentence shall apply to taxable years beginning after December 31, 2011.
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendment by section 102(d)(1) of Pub. L. 108-357 applicable for taxable years beginning after December 31, 2004.
Amendments by section 403(e) of Pub. L. 108-311 applicable as if included in the provisions of the Job Creation and Worker Assistance Act of 2002 [Sec. 411(c)(2)(B)] to which they relate [Effective: taxable years beginning after December 31, 2001].
EFFECTIVE DATE OF 2002 AMENDMENTS
Amendment by section 411(c)(2)(A) of Pub. L. 107-147 applicable to taxable years beginning after December 31, 2002.
Amendment by section 411(c)(2)(B) of Pub. L. 107-147 applicable to taxable years beginning after December 31, 2001.
Amendment by section 418(a)(2) of Pub. L. 107-147 applicable as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107-16, Sec. 204] to which they relate.
EFFECTIVE DATE OF 2001 AMENDMENTS
Amendments by section 202(a) of Pub. L. 107-16 applicable to taxable years beginning after December 31, 2002.
Amendments by section 202(b)-(f) of Pub. L. 107-16 applicable to taxable years beginning after December 31, 2001.
Amendment by section 431(c)(1) of Pub. L. 107-16 applicable to payments made in taxable years beginning after December 31, 2001.
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, Sec. 101(a),and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.—All provisions of, and amendments made by, this Act shall not apply—
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.—The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.—Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”
NOTE: Section 10909(c) of Pub. L. 111-148, as amended by Pub. L. 111-312, Sec. 101(b), provided:
“(c) SUNSET PROVISION.—Each provision of law amended by this section is amended to read as such provision would read if this section had never been enacted. The amendments made by the preceding sentence shall apply to taxable years beginning after December 31, 2011.”
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by section 4003(a)(2)(C) of Pub. L. 105-277 shall take effect as if included in the related provisions of the Taxpayer Relief Act of 1997.
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by section 1601(h)(2)(C) of Pub. L. 105-34 shall take effect as if included in the related provision of the Small Business Job Protection Act of 1996.
EFFECTIVE DATE
Section applicable to taxable years beginning after December 31, 1996.
PRIOR PROVISIONS
A prior section 137, added in 1954, which dealt with cross references, was renumbered section 138 by Pub. L. 104-188, Sec. 1807(b), Aug. 20, 1996, 110 Stat. 1755.