The Best Tax Break You'll Ever Take. Thanks, Alabama! (2024)

My wife and I are thinking of adopting a frozen embryo.

This was unexpected news to our two existing children, particularly the younger one who recently turned 36. He and his wife are expecting their first child in June, and had been counting on us as reliable babysitters. "Are you sure?" he asked. "Mom just turned 70, and you're 74 and recovering from back surgery."

I assured him we've carefully thought this through, both the pros and cons, ever since the Alabama Supreme Court ruled in February that frozen embryos possess the same in-state rights as birthed children. And frankly, we can't come up with any cons.

It's not that we want a baby. Let's get real here.

The Best Tax Break You'll Ever Take. Thanks, Alabama! (1)

What we seek are the IRS Additional Child Tax Credit (ACTC) and related tax benefits. We've been condo shopping for a winter home on Alabama's Gulf Shore, where seasonal highs are generally in the 60s and 70s. Once we close on a property, we intend to live there long enough to claim state residency.

This year, the ACTC refund is $1,600 per dependent, aged 16 or younger, for couples filing jointly and who have a combined, adjusted annual income of less than $400,000. As it happens, my wife and I fall into the less-than-$400,000 category.

"If we adopt 10 frozen embryos from another Alabama resident and don't thaw them," I told my wife, "we could collect a total of $256,000 over the next 16 years—provided we zero out our tax liability before claiming the ACTC benefit. Our new condo will practically pay for itself."

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In fact, I added, our payout could run far higher, depending on how the IRS determines a frozen embryo's age. Would an embryo frozen for 16 years be considered to be 16? Or would the clock stay paused until the embryo is birthed, meaning that if we never thawed any of the 10, we could pocket $16,000 annually, in perpetuity?

My stepson, a more cautious sort than I, pointed out that I am not a tax attorney. He suggested that I consult with one before upending all our lives.

Over the next week, I contacted three tax-law professors who are considered among the nation's leading scholars on tax policy.

The first was Mirit Eyal-Cohen, a University of Alabama law professor who clerked for Justice Mark V. Holmes of the United States Tax Court prior to teaching. She gifted me with some unexpected, good news. "If you take the Alabama Supreme Court decision qualifying embryos as children and apply it to the state tax code," she informed me, "then according to Section 40-18-361 of the code, you can get a one-time refundable tax credit of $2,000 for each embryo privately adopted [from an Alabama resident]"—provided, she added, that we file our claim by Dec. 31, 2027.

"That's another $20,000 we hadn't counted on!" I told my wife, after hanging up the phone.

I then turned my attention to a practical matter: Would keeping our frozen embryos in a state-approved freezer in our Alabama home qualify us for a federal childcare tax credit? One we've equipped with a backup generator, for emergencies? Daniel Shaviro, a New York University law professor who served on the U.S. Congress's Joint Committee on Taxation before turning to academia, proved helpful here.

Shaviro opened his laptop to Section 152c-1 of the federal tax code. "The term, 'qualifying child,'" he said, "means A/An individual who bears a relationship to the taxpayer. Well, that's not a problem. B/Lives in the same principal abode as you for more than half the year. I guess you'd have to spend more than 183 days with the embryos in a freezer in your [Alabama] home. C/Meets the age requirement. No problem there. D/You must provide more than one half of their support. I guess that would consist of keeping the frozen embryos in your house and paying servicepeople to check on them periodically, like a repairman making a service call to check your radiator."

One sticky issue remained: To qualify for an ACTC refund—the bulk of our windfall—each embryo must possess a Social Security Number. Currently, these are issued to birthed children only.

I asked Susan Pace Hamill, who served in the IRS Office of Chief Counsel prior to teaching law at the University of Alabama, for guidance.

"The [Alabama] Supreme Court says frozen embryos are children, and the state legislature has not said they're not children. To me, as long as we don't have the U.S. Supreme Court or Congress hold otherwise—that is, if federal law doesn't preempt Alabama—there would be a reporting position for them being children," she concluded.

So there it is. Will the IRS bend its regulations to accommodate the spirit behind Alabama's pugilistic state motto, "Audemus jura nostra defendere" – Latin for, "We Dare Defend Our Rights"?

I was uncertain they would. But Hamill reassured me. "Carrying out what the Alabama Supreme Court has said takes you to ridiculous places," she reminded me. "But the court and the legislature are in the habit of doing ridiculous things."

Ron Berler is the author of "Raising the Curve: A Year Inside One of America's 45,000 Failing Public Schools."

The views expressed in this article are the writer's own.

Uncommon Knowledge

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

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The Best Tax Break You'll Ever Take. Thanks, Alabama! (2024)
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