Special Needs Adoption Assistance Act of 1989

Special Needs Adoption Assistance Act of 1989 - Amends the Internal Revenue Code to authorize a deduction for the expenses of adopting a child with special needs. Limits deductible adoption expenses to $3,000. Prohibits a deduction of any such expense for which a deduction or credit is allowable under other Internal Revenue Code provisions. Provides that any reimbursement of such expenses shall be includible in the taxpayer's gross income. Allows such a deduction whether or not a taxpayer itemizes deductions.

Directs the Office of Personnel Management (OPM) to establish a demonstration program requiring executive agencies to reimburse employees for the expenses of adopting a child with special needs. Authorizes agencies to require employees applying for reimbursement of such expenses to obtain State or private adoption agency certification that the adoptive child is a child with special needs. Limits such adoption expenses to $2,000 per child and $5,000 in any calendar year. Prohibits such reimbursement in any adoption: (1) in which one of the adopting parents is a biological parent; (2) of a child 18 years of age or older; (3) of a child who, immediately prior to the adoption, was not a citizen or legal resident of the United States; (4) in which the employee separated from the service before the adoption is final; or (5) for which the employee made payment or received reimbursement under other governmental adoption programs.

Requires such reimbursement to be made from the fund available for payment of such employee's pay.

Directs OPM to: (1) prescribe regulations and provide assistance to administer the reimbursement of special needs adoption expenses; and (2) report to the President and the Congress on the operation of such demonstration program.

Repeals this Act on December 31, 1993, and prohibits further reimbursement of such expenses unless this Act is extended by the Congress.