IRS Admits It Shouldn't Have Disqualified Gay Couples From Tax Credit

Parents who adopt normally qualify for a one-time credit of more than $13,000. But the IRS sometimes refused applications from same-sex couples when one partner is adopting the other's biological child.

BY Lucas Grindley

December 14 2011 3:37 PM ET

Parents who adopt normally qualify for a one-time credit of more than $13,000. But The New York Times reports that the IRS sometimes refuses applications from same-sex couples when one partner is adopting the other's biological child.

The Government Accountability Office criticized the IRS for failing to train its staffers on how to handle the situation. And an IRS spokesman admits to the Times that the bean counters had made a few mistakes, which they've fixed when pressed by gay and lesbian parents.

“Most taxpayers, after pushing back hard, have had the credit allowed,” Patricia Cain, a law professor at Santa Clara University, said in the Times.

Cain first noted that the IRS was denying requests by lesbian couples in a blog post in August.

"The most common explanation is that the birth mother did not terminate her parental rights as part of the adoption," Cain explained. "That is true. That is the way second parent adoptions work."

Cain points out that tax law doesn't require termination of parental rights to qualify for the credit. It seems the IRS had added rules where none existed.

"Another explanation that has been given is that the adopting mother is the domestic partner of the birth mother," Cain wrote. "But there is nothing in the Internal Revenue Code that says you cannot claim the credit for the adoption of your domestic partner’s child."

 Read more about the tax credit and how it should be applied.

Tags: Business

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