What kinds of adoptions qualify under an adoption assistance plan?
Three kinds of adoptions are eligible for tax-favored reimbursement or payments through an employer-provided plan: domestic adoptions, foreign adoptions and adoptions of “special needs” children. All three are described below. (1) Domestic adoptions. In a domestic adoption, an eligible child is any individual who, at the time the expenses are paid or incurred, is under the age of 18 or is physically or mentally incapable of caring for himself or herself. The Section 137 rules do not distinguish between state-licensed agency adoptions and private legal adoptions. Amounts are excludable for the year in which the employer pays the adoption expenses. A domestic adoption does not have to be finalized in order to qualify for adoption assistance reimbursements. (2) Foreign adoptions. Employer-provided assistance for an international adoption (referred to as a “foreign” adoption by the IRS) is excludable from income only if the adoption is considered “final.” Under a February 2003 IRS notice,
