To amend the Internal Revenue Code of 1986 to expand the incentives for adoption and to amend part E of title IV of the Social Security Act to increase adoptive incentive payments.

Summary: Childhood Adoption Act of 2005 - Amends the Internal Revenue Code to: (1) increase the tax credit for adoption expenses from $10,000 to $15,000; (2) make such tax credit refundable; and (3) increase the exclusion from gross income for employer-paid adoption expenses from $10,000 to $15,000.

Amends title IV, part E (Federal Payments for Foster Care and Adoption Assistance) of the Social Security Act to increase: (1) levels of adoption incentive payments payable to States under the adoption assistance program; and (2) funding for adoption incentive payments for FY 2006 through 2008.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Childhood Adoption Act of 2005''.

SEC. 2. INCREASE IN ALLOWABLE EXPENSES FOR ADOPTION; ADOPTION CREDIT 
              MADE REFUNDABLE.

    (a) Increase in Dollar Limitation.--
            (1) Adoption credit.--
                    (A) In general.--Paragraph (1) of section 23(b) of 
                the Internal Revenue Code of 1986 (relating to dollar 
                limitation) is amended by striking ``$10,000'' and 
                inserting ``$15,000''.
                    (B) Child with special needs.--Paragraph (3) of 
                section 23(a) of such Code (relating to $10,000 credit 
                for adoption of child with special needs regardless of 
                expenses) is amended--
                            (i) in the text by striking ``$10,000'' and 
                        inserting ``$15,000'', and
                            (ii) in the heading by striking ``$10,000'' 
                        and inserting ``$15,000''.
                    (C) Conforming amendment to inflation adjustment.--
                Subsection (h) of section 23 of such Code (relating to 
                adjustments for inflation) is amended to read as 
                follows:
    ``(h) Adjustments for Inflation.--
            ``(1) Dollar limitations.--In the case of a taxable year 
        beginning after December 31, 2005, each of the dollar amounts 
        in subsections (a)(3) and (b)(1) shall be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2004' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.
            ``(2) Income limitation.--In the case of a taxable year 
        beginning after December 31, 2002, the dollar amount in 
        subsection (b)(2)(A)(i) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2001' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.''.
            (2) Adoption assistance programs.--
                    (A) In general.--Paragraph (1) of section 137(b) of 
                the Internal Revenue Code of 1986 (relating to dollar 
                limitation) is amended by striking ``$10,000'' and 
                inserting ``$15,000''.
                    (B) Child with special needs.--Paragraph (2) of 
                section 137(a) of such Code (relating to $10,000 
                exclusion for adoption of child with special needs 
                regardless of expenses) is amended--
                            (i) in the text by striking ``$10,000'' and 
                        inserting ``$15,000'', and
                            (ii) in the heading by striking ``$10,000'' 
                        and inserting ``$15,000''.
                    (C) Conforming amendment to inflation adjustment.--
                Subsection (f) of section 137 of such Code (relating to 
                adjustments for inflation) is amended to read as 
                follows:
    ``(f) Adjustments for Inflation.--
            ``(1) Dollar limitations.--In the case of a taxable year 
        beginning after December 31, 2005, each of the dollar amounts 
        in subsections (a)(2) and (b)(1) shall be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2004' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.
            ``(2) Income limitation.--In the case of a taxable year 
        beginning after December 31, 2002, the dollar amount in 
        subsection (b)(2)(A)(i) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2001' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.''.
    (b) Credit Made Refundable.--
            (1) Credit moved to subpart relating to refundable 
        credits.--The Internal Revenue Code of 1986 is amended--
                    (A) by redesignating section 36 as section 37,
                    (B) by redesignating section 23, as amended by 
                subsection (a), as section 36, and
                    (C) by moving section 36 (as so redesignated) from 
                subpart A of part IV of subchapter A of chapter 1 to 
                the location immediately before section 37 (as so 
                redesignated) in subpart C of part IV of subchapter A 
                of chapter 1.
            (2) Conforming amendments.--
                    (A) Section 24(b)(3)(B) of such Code is amended by 
                striking ``and sections 23'' and inserting ``section''.
                    (B) Section 25(e)(1)(C) of such Code is amended by 
                striking ``23,''.
                    (C) Section 25B(g)(2) of such Code is amended by 
                striking ``and section 23''.
                    (D) Section 137 of such Code is amended--
                            (i) in subsection (d) by striking ``section 
                        23(d)'' and inserting ``section 36(d)'', and
                            (ii) in subsection (e) by striking 
                        ``section 23'' and inserting ``section 36''.
                    (E) Section 1400C(d) of such Code is amended by 
                striking ``23, 24,'' and inserting ``24''.
                    (F) The table of sections for subpart A of part IV 
                of subchapter A of chapter 1 of such Code of 1986 is 
                amended by striking the item relating to section 23.
                    (G) Paragraph (2) of section 1324(b) of title 31, 
                United States Code, is amended by inserting ``or 36'' 
                after ``section 35''.
                    (H) The table of sections for subpart C of part IV 
                of subchapter A of chapter 1 of the Internal Revenue 
                Code of 1986 is amended by striking the last item and 
                inserting the following new items:

``Sec. 36. Adoption expenses.
``Sec. 37. Overpayments of tax.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 3. INCREASE IN ADOPTION INCENTIVE PAYMENTS.

    (a) In General.--Section 473A(d)(1) of the Social Security Act (42 
U.S.C. 673a(d)(1)) is amended--
            (1) in subparagraph (A), by striking ``$4,000'' and 
        inserting ``$8,000'';
            (2) in subparagraph (B), by striking ``$2,000'' and 
        inserting ``$8,000''; and
            (3) in subparagraph (C), by striking ``$4,000'' and 
        inserting ``$8,000''.
    (b) Increased Program Funding.--Section 473A(h)(1) of such Act (42 
U.S.C. 673a(h)(1)) is amended--
            (1) in subparagraph (C), by striking ``and'';
            (2) in subparagraph (D), by striking ``through 2008.'' and 
        inserting ``and 2005; and''; and
            (3) by adding at the end the following:
                    ``(E) $86,000,000 for each of fiscal years 2006 
                through 2008.''.