(a) In general

Section 23 of the Internal Revenue Code of 1986 is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

(i) Portion of credit related to special needs children made refundable

(1) In general

So much of the credit allowed under this section for any taxable year (determined without regard to this subsection and subsection (c)) as does not exceed the special needs adoption expenses for such taxable year shall be treated as a credit allowed under subpart C (and not allowed under this section).

(2) Special needs adoption expenses

For purposes of this subsection, the term special needs adoption expenses means, with respect to any taxpayer for any taxable year, the aggregate amount of qualified adoption expenses with respect to adoptions of children with special needs which is taken into account in determining the credit allowed under this section to such taxpayer for such taxable year (determined without regard to this subsection, subsection (b)(2), and subsection (c)).

(b) Coordination with carryforward of non-Refundable portion

Section 23(c)(1) of such Code is amended by striking under subsection (a) and inserting under this section (determined after application of subsection (i)).

(c) Effective date

The amendments made by this section shall apply to taxable years beginning after the later of the date of the enactment of this Act or December 31, 2025.