[Congressional Record Volume 147, Number 72 (Wednesday, May 23, 2001)]
[Senate]
[Page S5548]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS (for himself, Mr. Dodd, Mr. Fitzgerald, and Mr. 
        Brownback):
  S. 938. A bill to amend the Internal Revenue Code of 1986 to provide 
that the exclusion from gross income for foster care payments shall 
also apply to payments by qualifying placement agencies, and for other 
purposes; to the Committee on Finance.
  Mr. JEFFORDS. Mr. President, I am introducing today a bill that will 
simplify and make more fair the tax treatment of foster care payments. 
The bill will eliminate unnecessary distinctions drawn by the Internal 
Revenue Code in the treatment of payments received by people who open 
their homes to foster children and adults. I introduced this same bill 
in the 106th Congress, and it was passed by both Houses as part of a 
larger tax bill that was subsequently vetoed by the President. I am re-
introducing the bill now, as I believe that this issue should not be 
overlooked as we debate tax reform this year. This bill not only 
simplifies the tax treatment of foster care payments, it will also 
remove inequities and uncertainties inherent in current law.
  In my home State of Vermont, we are proud that we have been able to 
reduce our reliance on the institutional care of children and adults. 
We have accomplished this by developing an array of services that can 
be provided in typical family homes, in a cost-effective and fiscally 
responsible manner. I believe that this is not only good public policy, 
but that whenever possible we should encourage these alternatives. 
Equal tax treatment for all tax families that provide foster care 
services should provide some encouragement.
  Under current law, foster care families are required to include 
foster care payments in income. They can offset this income with 
deductions for the expenditures they incur. Families must maintain 
detailed records to substantiate these deductions. In lieu of detailed 
record keeping, Section 131 of the Internal Revenue Code allows certain 
foster care families to exclude from income the payments they receive 
for providing foster care. Eligibility for this exclusion depends upon 
a complicated analysis of three factors: the age of the person in 
foster care; the type of foster care placement agency; and the source 
of the foster care payments. For children under age 19 in foster care, 
Section 131 permits families to exclude payments when a State, or one 
of its political subdivisions, or a tax-exempt charitable placement 
agency places the individual in foster care and makes the foster care 
payments. For persons age 19 and older, Section 131 permits families to 
exclude foster care payments from income only when a State, or one of 
its political subdivisions, places the individual and makes the 
payments.
  This bill is designed to provide tax fairness; it will simplify the 
anachronistic tax rules by amending the tax code's current exclusion to 
include foster care payments for all persons in foster care, regardless 
of age. The exclusion will also be available when the foster care 
placement is made by a private foster care placement agency and even 
when the foster care payments are received through a private foster 
care placement agency, rather than directly from a State. To ensure 
appropriate oversight, the bill requires that the placement agency be 
either licensed or certified by a State.
  A qualified foster care payment under this bill must be made pursuant 
to a foster care program run by a State or county. My intention is for 
this bill to cover the wide variety of foster care programs developed 
by States. Recognizing foster care as an effective approach to provide 
support within the community to people with mental retardation and 
other disabilities, these programs place children, and in some cases 
adults, in homes of unrelated families who provide foster care on a 
full-time basis. Families providing foster care give those in their 
care the daily support and supervision typically given to a family 
member. Like traditional families, foster care families ensure that 
foster children and adults have a healthy physical environment, get 
routine and emergency medical care, are adequately clothed and fed, and 
have satisfying leisure activities. Foster families provide those in 
their care with stimulation and emotional support all too often lacking 
in large congregate and institutional settings.

  In some State, the State itself administers both child and adult 
foster care programs. Many States, however, are increasingly entrusting 
administration of these programs to private placement agencies, 
approved through licensing or certification procedures, or to 
government-designated intermediary tax-exempt organizations. Through 
the approval process, private placement agencies are accountable for 
their use of funds and for the quality of services they provide. This 
bill is intended to cover governmental foster care programs funded 
solely by State or political subdivision monies, and, especially in the 
case of adult foster care, programs funded by the federal government, 
typical through a State's Medicaid Home and Community-Based Waiver 
program.
  While foster care for children has been in existence for decades, 
foster care for adults is a more recent phenomenon. Sometimes referred 
to as ``host homes'' or ``developmental homes,'' adult foster care 
facilities have proven to be an effective alternative to institutional 
care for adults with disabilities. In 1993, Vermont closed the State 
institution for people with developmental disabilities, choosing 
instead to rely on foster families. Under this approach, Vermonters 
with developmental disabilities can live in homes and participate in 
the routines of daily life that most of us take for granted. Vermont's 
approach has provided people with disabilities a cost-effective 
opportunity for successful lives in communities, with valued 
relationships with their foster families.
  Vermont authorizes local developmental disability service 
organizations to act as placement agencies and contract with families 
willing to provide foster care in their homes. The current tax law's 
disparate tax treatment of foster care payments impedes these types of 
arrangements. Persons providing foster care for individuals placed in 
their homes by the government can exclude foster care payments from 
income, while foster care families receiving the same payments through 
private agencies under contract with State or local governments are not 
eligible for this exclusion, unless the individual in foster care is 
under age 19 and the placement agency is a nonprofit organization. 
Because of the complexity of current law, families often receive 
conflicting advice from tax professionals regarding the proper tax 
treatment of foster care payments. In addition, the law's complex rules 
discourage willing families from providing foster care in their homes 
to persons placed by private agencies, reducing the availability of 
care alternatives.
  This bill will advance the development of family-based foster care 
services, a highly valued alternative to institutionalization. My home 
State of Vermont is proud of having closed its institutions and leading 
the nation in developing other support systems. The use of foster care 
services has facilitated this effort. I believe this represents good 
policy and is something to be encouraged. We should be removing 
disincentives and barriers to quality support for people with 
disabilities in our communities. I urge my colleagues to support this 
bill.
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