A bill to amend the Internal Revenue Code of 1986 to exclude from gross income foster care payments provided by the Federal Government and to amend the Tax Reform Act of 1986 to make certain changes in the treatment of foster care payments retroactive to 1979.

Amends the Internal Revenue Code to provide an income tax exclusion for foster care payments provided by an agency of the Federal Government. (Present law excludes only such payments made by State or private placement agencies.) Specifies that such treatment shall be applied as if included in the Tax Reform Act of 1986.

Amends the Tax Reform Act of 1986 to make retroactive to taxable years beginning after December 31, 1978, certain amendments made concerning the tax treatment of foster care payments.