Tucked into the One Big Beautiful Bill Act (P.L. 119-21) is a provision that allows families that adopt through a Tribal court eligibility to receive the federal adoption tax credit. This federal tax credit has been available since 1997 for families that adopted a child with special needs through a state court, but the new law now extends that eligibility to adoptions performed in Tribal courts. The new law requires that a Tribe (or state) must make a determination that a child being adopted meets the Tribe’s criteria for being special needs. Tribes and states are given flexibility to define what constitutes “special needs” which can include several factors including the child’s ethnic background or race, age, medical condition, or presence of physical, mental, or emotional disabilities. The tax credit includes the option to receive tax credits (lower tax liability) for reasonable costs associated with an adoption and the ability to seek full refundability for up to $5,000 for associated costs.
The Treasury Department held a consultation for Tribal Nations and Tribal organizations on Monday, September 15 to receive comments on the development of guidance by the Internal Revenue Service to implement the Tribal tax credit provisions. Over 20 Tribal leaders, representatives and NICWA attended the consultation and provided recommendations on the development of implementing guidance. NICWA focused primarily on the importance of recognizing all forms of Tribal adoption, including adoptions that don’t require termination of parental rights, such as Tribal customary adoption. NICWA’s comments also recommended that the guidance recognize all forms of Tribal courts or processes used to finalize adoptions and be flexible in how they define child welfare agency and adoption assistance services.
The public comment period is open until October 10, 2025, so NICWA is urging Tribal Nations and Tribal organizations to file comments on the new law. You can find a copy of the Treasury letter to Tribal leaders that describes the new law and provides instructions on submitting comments here.