H.R. 2438 — Foster Care Tax Credit Act

This section establishes a new refundable tax credit of $850 under new section 36C for eligible taxpayers who have a qualifying foster child (i.e., an eligible foster child under section 152(f)(1)(C), who has not attained age 17 and is a U.S. citizen, national, or resident) placed with them for at least one month (with more than 15 consecutive days in a month treated as a full month), provided no child tax credit is allowed under section 24 for that child. The credit phases out for taxpayers with modified adjusted gross income above a threshold of $250,000 (joint return), $150,000 (single), or $125,000 (married filing separately), fully phasing out over a $17,000 income range; it is denied for 10 years after a fraudulent prior claim or two years after a reckless claim, and requires documentation after any prior deficiency denial. This section makes conforming amendments to the definition of deficiency, Treasury payment rules, and the table of sections. This section also requires authorized placement agencies and courts to report foster child placements (including names, TINs, addresses, and dates) to the IRS under new section 6039K and to furnish statements to foster parents by January 31 of the following year.

This section directs the Secretary of Health and Human Services, in coordination with the Secretary of the Treasury, to conduct a study on (1) the costs and financial burdens on foster families experiencing multiple emergency and short-term foster placements annually and (2) challenges to verifying and documenting such placements, defining short-term placements as those lasting less than one week. The section further requires the Secretary of Health and Human Services to submit a report on the study to Congress not later than one year after enactment.