17052.3.

 For each taxable year beginning on or after January 1, 1999, and before January 1, 2005, for expenses of an adoption not eligible for the credit under Section 17052.25, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, in an amount equal to 50 percent of the amount determined in accordance with Section 23 of the Internal Revenue Code, modified as follows:

(a) Section 23(b)(1) of the Internal Revenue Code, relating to dollar limitation on the aggregate amount of qualified adoption expenses to which the credit applies, is modified to include only those qualified adoption expenses that exceed five thousand dollars ($5,000), (six thousand dollars ($6,000) in the case of a child with special needs) but do not exceed ten thousand dollars ($10,000) (eleven thousand dollars ($11,000) in the case of a child with special needs).

(b) Section 23(d) of the Internal Revenue Code, relating to carryforwards of unused credit, does not apply. If the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit is exhausted.

(c) Section 23(d)(2) of the Internal Revenue Code, relating to the definition of an eligible child, is modified to read as follows: The term “eligible child” means any individual who meets at least one of the following requirements:

(1) Has not attained age 18, or 18.

(2) Is physically or mentally incapable of caring for himself or herself.

(3) Is a child with special needs.