PURPOSE: This rule establishes the requirements and procedures for claiming the tax credit for a special needs adoption as provided in sections 135.325—135.339, RSMo.

1. (1) Special Needs Adoption Tax Credit. Any person residing in this state who, on or after January 1, 1988, legally adopts a special needs child as defined in section 135.326(3), RSMo or corresponding rules shall be eligible to receive a tax credit for nonrecurring, nonreimbursed adoption expenses. The tax credit may be applied to taxes due on the adoptive parent(s) individual income tax return for the year in which the adoption was finalized subject to the following limitations:

   1. (A) The tax credit amount shall not exceed five thousand dollars ($5,000);
   2. (B) The tax credit amount used may not exceed the tax liability for the tax year;
   3. (C) Any amount of tax credit which exceeds the tax liability shall not be refunded but may be carried forward and applied against the taxpayer’s income tax liability in any of the subsequent five (5) years from the initial year of adoption;
   4. (D) No credit shall be allowable for nonrecurring adoption expenses for which a deduction or credit is allowable under any other provision of federal, state or local law;
   5. (E) No credit shall be allowable for that portion of the nonrecurring adoption expenses paid from any funds received under any federal, state or local program;
   6. (F) No credit shall be allowable for the expenses of adoption of any child who has attained the age of eighteen (18) unless the child has a medical condition or handicap, which is verifiable by medical findings, that would limit the child’s ability to live independently of the adoptive parent(s); and

   7. (G) The credit amount shall be reduced by an amount equal to the state’s cost of providing care, treatment, maintenance and services when—

      1. 1. The special needs child is placed with

no intent to return to the adoptive home in foster care or residential treatment licensed or operated by the Division of Family Services, the Division of Youth Services or the Department of Mental Health; or

1. 2. A juvenile court temporarily or indef-

initely relieves the adoptive parent(s) of custody of the special needs child.

1. (2) Claiming the Credit. Any taxpayer claiming the Special Needs Adoption Credit must attach the following to the individual income tax return filed for the year of the adoption:

   1. (A) Completed Missouri Department of Revenue Form ATC, which indicates nonrecurring expenses subject to limitations as identified in subsections (1)(A)—(G); and
   2. (B) Statement from one (1) of the entities identified in paragraph (1)(G)1. or 2. which states that the child qualifies as a special needs child.
2. (3) In the event that paragraph (1)(G)1. or 2. occurs, the adoptive parents shall obtain a statement from the Division of Family Services, Division of Youth Services, Department of Mental Health or Juvenile Court having jurisdiction, as appropriate providing the information as required and shall supply the statement to the Department of Revenue. Any credit amount will be reduced appropriately.

AUTHORITY: section 135.339, RSMo 1994.* Original rule filed Aug. 2, 1988, effective Dec. 11, 1988. *Original authority 1987.