Income tax, state; creates nonfamily adoption tax credit.
Summary
HB1962 creates a new nonrefundable Virginia income tax credit for taxpayers who finalize a legal nonfamily adoption. For taxable years beginning on or after January 1, 2025, and before January 1, 2030, an individual or married couple may claim a $4,000 credit for the year in which the adoption is finalized. The bill defines a nonfamily adoption as one in which the adopting taxpayer is not the child’s father, mother, or stepparent, and limits the credit to one claim per adopted child.
The credit may only offset a taxpayer’s Virginia income tax liability, but any unused amount can be carried forward for up to three additional taxable years or until fully used. The Department of Taxation would administer the credit, and total statewide credits are capped at $5 million per year, allocated on a first-come, first-served basis. The Tax Commissioner would also be required to issue guidelines, which would be exempt from the Administrative Process Act.
Impact
The bill would add a new section to Virginia’s income tax code, Title 58.1, creating a targeted tax incentive for nonfamily adoptions. It would affect individual taxpayers and married couples who complete qualifying adoptions during the specified five-year window, while also imposing an annual statewide cap on the total amount of credits available. The measure would require the Department of Taxation to establish administrative guidance for claiming the credit and would give the agency discretion to allocate credits until the annual cap is reached.
Sentiment
The available voting history suggests the bill had mixed support in subcommittee, with a 5-2 vote to lay the bill on the table. That outcome indicates some interest in the policy but not enough consensus to advance it at that stage. Because there are no committee transcripts provided, the record does not show detailed arguments for or against the proposal, but the vote suggests the bill was not broadly embraced in its initial review.
Contention
The main points of contention likely center on whether Virginia should create a new tax expenditure for a narrow category of adoptions, the size of the $4,000 credit, and the $5 million annual cap. Supporters would likely view the credit as a way to encourage and offset the costs of nonfamily adoptions, while skeptics may question the fiscal impact, the fairness of limiting the benefit to certain adoptive families, and the administrative complexity of allocating credits on a first-come, first-served basis. The subcommittee’s decision to lay the bill on the table reflects that these issues were not resolved in favor of moving the bill forward.