To amend the Internal Revenue Code of 1986 to expand incentives for saving.

Summary: Lifetime Prosperity Act of 2005 - Amends the Internal Revenue Code to: (1) make permanent the tax credit for retirement savings contributions; (2) revise the applicable percentage and dollar limitations for such credit; (3) provide for an inflation adjustment to adjusted gross income limitations applicable to such credit; and (4) allow a tax credit for contributions to Roth IRAs for children (under age 25).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Lifetime Prosperity Act of 2005''.

SEC. 2. EXPANSION OF SAVERS CREDIT.

    (a) Credit Extended and Made Permanent.--
            (1) Permanent extension of credit.--Section 25B of the 
        Internal Revenue Code of 1986 (relating to elective deferrals 
        and IRA contributions by certain individuals) is amended by 
        striking subsection (h).
            (2) Sunset made inapplicable.--Title IX of the Economic 
        Growth and Tax Relief Reconciliation Act of 2001 shall not 
        apply to the amendments made by section 618 of such Act 
        (relating to nonrefundable credit to certain individuals for 
        elective deferrals and IRA contributions).
    (b) Expansion of Credit.--Subsections (a) and (b) of section 25B of 
such Code are amended to read as follows:
    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to 50 percent of the 
qualified retirement savings contributions of the eligible individual 
for the taxable year.
    ``(b) Limitation.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) for a taxable year shall not exceed the 
        applicable dollar limit.
            ``(2) Applicable dollar limit.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the applicable dollar limit is--
                            ``(i) in the case of a joint return, 
                        $3,000, and
                            ``(ii) in the case of any other return, 50 
                        percent of the dollar amount applicable for the 
                        taxable year under clause (i).
                    ``(B) Limitation based on adjusted gross income.--
                The applicable dollar limit shall be zero in the case 
                of a taxpayer whose adjusted gross income for the 
                taxable year exceeds--
                            ``(i) $150,000 in the case of a joint 
                        return, and
                            ``(ii) $95,000 in any other case.
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning after 2006, the amounts contained in 
        subparagraph (A)(i) and clauses (i) and (ii) of subparagraph 
        (B) of paragraph (2) shall each 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 such calendar year by 
                substituting `calendar year 2005' for `calendar year 
                1992' in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $100, such amount shall be rounded to the nearest multiple 
of $100.''.
    (c) Credit Allowed for Contributions to Roth IRAs for Children.--
            (1) In general.--Paragraph (1) of section 25B(d) of such 
        Code (defining qualified retirement savings contributions) is 
        amended by striking ``and'' at the end of subparagraph (B), by 
        striking the period at the end of subparagraph (C) and 
        inserting ``, and'', and by inserting after subparagraph (C) 
        the following new subparagraph:
                    ``(D) the amount of contributions made by the 
                eligible individual to all Roth IRAs for children under 
                section 408A(g).''.
            (2) Limitation.--Paragraph (1) of section 25B(d) of such 
        Code (defining qualified retirement savings contributions) is 
        amended by adding at the end the following flush sentence: 
        ``The amount taken into account under subparagraph (D) shall 
        not exceed the aggregate amount of contributions allowed to all 
        Roth IRAs of such eligible individual under section 408A(g).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 3. ROTH IRAS FOR CHILDREN.

    (a) In General.--Section 408A of the Internal Revenue Code of 1986 
(relating to Roth IRAs) is amended by adding at the end the following 
new subsection:
    ``(g) Special Rules for Roth IRAs for Children.--
            ``(1) General rule.--A Roth IRA maintained for the benefit 
        of an individual who has not attained age 25 before the close 
        of the taxable year shall be maintained under this section, as 
        modified by this subsection.
            ``(2) Contribution limits.--
                    ``(A) In general.--For so long as a Roth IRA is 
                subject to this subsection, contributions to such Roth 
                IRA shall be subject to this paragraph and not to 
                subsection (c)(2), and subsection (c)(3) shall not 
                apply.
                    ``(B) Limit.--The aggregate amount of contributions 
                for any taxable year to all child Roth IRAs maintained 
                for the benefit of an individual under this subsection 
                shall not exceed the maximum amount allowable as a 
                deduction under subsection (b)(1) of section 219 for 
                such taxable year (computed without regard to 
                subsections (b)(1)(B), (d)(1), and (g) of such 
                section).''.
    (b) Enforcement of Contribution Limits.--Paragraphs (1)(B) and 
(2)(B) of section 4973(f) of such Code are each amended by striking 
``and (c)(3)'' and inserting ``, (c)(3), and (f)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.