To amend the COBRA continuation Act provisions to extend COBRA continuation coverage from 18 months to 36 months, to provide a tax credit for the cost of such coverage, and to reduce the income tax rate reduction for families with incomes of more than a million dollars.

Summary: COBRA Enhancement and Health Care Relief Act of 2006 - Amends the Employee Retirement Income Security Act of 1974 (ERISA), the Public Health Service Act, the Internal Revenue Code, and related federal law provisions to extend from 18 to 36 months the period during which employees and other individuals whose group health care coverage has terminated can continue such coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (known as COBRA continuation coverage).

Amends the Internal Revenue Code to: (1) allow individual taxpayers a tax credit for the cost of COBRA continuation coverage; (2) provide for advance payments of such credit to cover current COBRA continuation coverage premiums; and (3) increase tax rates for individuals with adjusted gross incomes over $500,000 ($1 million for married taxpayers filing joint tax returns).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``COBRA Enhancement and Healthcare 
Relief Act of 2006''.

SEC. 2. EXTENSION OF COBRA CONTINUATION COVERAGE.

    (a) Under ERISA.--Section 602(2)(A) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1162(2)(A)) is amended--
            (1) by amending clause (i) to read as follows:
                            ``(i) General rule.--In the case of a 
                        qualifying event not described in section 
                        603(6), the date that is 36 months after the 
                        date of the qualifying event.'';
            (2) by striking clauses (ii), (iv), and (v) and by striking 
        the sentence beginning ``In the case of a qualified 
        beneficiary''; and
            (3) by redesignating clause (iii) as clause (ii).
    (b) Under PHSA.--Section 2202(2)(A) of the Public Health Service 
Act (42 U.S.C. 300bb-2(2)(A)) is amended to read as follows:
                    ``(A) Maximum required period.--The date that is 36 
                months after the date of the qualifying event.''.
    (c) Under IRC.--Section 4980B(f)(2)(B)(i) of the Internal Revenue 
Code of 1986 is amended--
            (1) by amending subclause (I) to read as follows:
                                    ``(I) General rule.--In the case of 
                                a qualifying event not described in 
                                paragraph (3)(F), the date that is 36 
                                months after the date of the qualifying 
                                event.'';
            (2) by striking subclauses (II), (IV), and (V) and by 
        striking the sentence beginning ``In the case of a qualified 
        beneficiary''; and
            (3) by redesignating subclause (III) as subclause (II).
    (d) Under FEHBP.--Section 8905a(e) of title 5, United States Code, 
is amended--
            (1) in paragraph (1)(A), by striking ``18 months'' and 
        inserting ``36 months'';
            (2) in paragraph (1)(C), by striking ``24 months'' and 
        inserting ``36 months''; and
            (3) in paragraph (2)(C), by striking ``18-month'' and 
        inserting ``36-month''.
    (e) Effective Date.--The amendments made by this section shall 
apply to qualifying events occurring on or after the date that is 18 
months before the date of the enactment of this Act.

SEC. 3. TAX CREDIT FOR COST OF COBRA CONTINUATION COVERAGE.

    (a) In General.--Subpart C of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to refundable credits) is 
amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. COBRA CONTINUATION COVERAGE.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by subtitle A an amount 
equal to the amount paid by the taxpayer for coverage of the taxpayer 
and qualifying family members under COBRA continuation coverage for 
months beginning in the taxable year.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowable as a credit under 
        subsection (a) for the taxable year shall not exceed the sum of 
        the monthly limitations for months during such taxable year.
            ``(2) Monthly limitation.--The monthly limitation for any 
        month is the product of the credit percentage for such month 
        multiplied by the amounts paid by the taxpayer for such month 
        which may be taken into account under subsection (a).
            ``(3) Credit percentage.--The credit percentage for any 
        month in any period of COBRA continuation coverage is--
                    ``(A) 100 percent, in the case of the first 12 
                months of such period,
                    ``(B) 50 percent, in the case of the first 12 
                months after the months to which subparagraph (A) 
                applies, and
                    ``(C) zero, in the case of any month thereafter.
    ``(c) Qualifying Family Member.--For purposes of this section, the 
term `qualifying family member' means the taxpayer's spouse and any 
dependent of the taxpayer.
    ``(d) COBRA Continuation Coverage.--For purposes of this section, 
the term `COBRA continuation coverage' means coverage under a COBRA 
continuation provision (as defined in section 9832(d)(1)).
    ``(e) Other Specified Coverage.--Amounts paid for COBRA 
continuation coverage of any individual for any month shall not be 
taken into account under subsection (a) if such individual has other 
specified coverage for such month (within the meaning of section 
35(f)).
    ``(f) Special Rules.--
            ``(1) Coordination with advance payments of credit.--With 
        respect to any taxable year, the amount which would (but for 
        this subsection) be allowed as a credit to the taxpayer under 
        subsection (a) shall be reduced (but not below zero) by the 
        aggregate amount paid on behalf of such taxpayer under section 
        7529 for months beginning in such taxable year.
            ``(2) Coordination with other deductions.--Amounts taken 
        into account under subsection (a) shall not be taken into 
        account in determining any deduction allowed under section 
        162(l) or 213.
            ``(3) Coordination with other health insurance costs 
        credit.--Amounts taken into account under subsection (a) with 
        respect to coverage for any month shall not be taken into 
        account in determining the credit allowed under section 35. Any 
        taxpayer who would (but for the preceding sentence) be allowed 
        a credit under section 35 may elect not to have this section 
        apply with respect to amounts paid for coverage for any month 
        during the taxable year.
            ``(4) Medical and health savings accounts.--Amounts 
        distributed from an Archer MSA (as defined in section 220(d)) 
        or from a health savings account (as defined in section 223(d)) 
        shall not be taken into account under subsection (a).
            ``(5) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(6) Separate returns.--The spouse of the taxpayer shall 
        not be treated as a qualifying family member for purposes of 
        this section if the taxpayer files a separate return for the 
        taxable year.
            ``(7) Insurance which covers other individuals .--For 
        purposes of this section, rules similar to the rules of section 
        213(d)(6) shall apply with respect to any contract for COBRA 
        continuation coverage under which amounts are payable for 
        coverage of an individual other than the taxpayer and 
        qualifying family members.
            ``(8) Treatment of payments.--For purposes of this 
        section--
                    ``(A) Payments by secretary.--Payments made by the 
                Secretary on behalf of any individual under section 
                7529 (relating to advance payment of credit for cost of 
                COBRA continuation coverage) shall be treated as having 
                been made by the taxpayer on the first day of the month 
                for which such payment was made.
                    ``(B) Payments by taxpayer.--Payments made by the 
                taxpayer for coverage months shall be treated as having 
                been made by the taxpayer on the first day of the month 
                for which such payment was made.
            ``(9) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050U, and 
        section 7529.''.
    (b) Advance Payment of Credit as Premium Payment for COBRA 
Continuation Coverage.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following:

``SEC. 7529. ADVANCE PAYMENT OF CREDIT AS PREMIUM PAYMENT FOR COBRA 
              CONTINUATION COVERAGE.

    ``(a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary shall establish a program for 
making payments to providers of COBRA continuation coverage (as defined 
in section 36(d)) on behalf of taxpayers eligible for the credit under 
section 36.
    ``(b) Limitations.--
            ``(1) Termination after first 12 months of coverage.--The 
        Secretary shall not make any payment under subsection (a) with 
        respect to any individual for COBRA continuation coverage of 
        such individual for any month after the first 12 months of any 
        period of COBRA continuation coverage.
            ``(2) Dollar limitation.--The Secretary may make payments 
        under subsection (a) only to the extent that the such payment 
        does not exceed 100 percent of the amount paid by the taxpayer 
        for coverage of the taxpayer and qualifying family members 
        under COBRA continuation coverage for the months to which such 
        payment relates.''.
    (c) Disclosure of Return Information for Purposes of Carrying Out 
Advance Payment Program.--
            (1) In general.--Subsection (l) of section 6103 of such 
        Code is amended by adding at the end the following new 
        paragraph:
            ``(21) Disclosure of return information for purposes of 
        advance payment of credit as premium payment for cobra 
        continuation coverage.--The Secretary may, on behalf of 
        taxpayers eligible for the credit under section 36, disclose to 
        a provider of COBRA continuation coverage (as defined in 
        section 36(d)), and persons acting on behalf of such provider, 
        return information with respect to any such taxpayer only to 
        the extent necessary (as prescribed by regulations issued by 
        the Secretary) to carry out the program established by section 
        7529 (relating to advance payment of credit as premium payment 
        for COBRA continuation coverage).''.
            (2) Confidentiality of information.--Paragraph (3) of 
        section 6103(a) of such Code is amended by striking ``or (20)'' 
        and inserting ``(20), or (21)''.
            (3) Unauthorized disclosure.--Paragraph (2) of section 
        7213(a) of such Code is amended by striking ``or (20)'' and 
        inserting ``(20), or (21)''.
    (d) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of such Code (relating to information concerning 
        transactions with other persons) is amended by inserting after 
        section 6050T the following new section:

``SEC. 6050U. RETURNS RELATING TO CREDIT FOR COBRA CONTINUATION 
              COVERAGE.

    ``(a) Requirement of Reporting.--Every person who is entitled to 
receive payments for any month of any calendar year under section 7529 
(relating to advance payment of credit as premium payment for COBRA 
continuation coverage) with respect to any individual shall, at such 
time as the Secretary may prescribe, make the return described in 
subsection (b) with respect to each such individual.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of each individual 
                referred to in subsection (a),
                    ``(B) the number of months for which amounts were 
                entitled to be received with respect to such individual 
                under section 7529 (relating to advance payment of 
                credit as premium payment for COBRA continuation 
                coverage),
                    ``(C) the amount entitled to be received for each 
                such month, and
                    ``(D) such other information as the Secretary may 
                prescribe.
    ``(c) Statements to Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return a written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person, and
            ``(2) the information required to be shown on the return 
        with respect to such individual.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be 
made.''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xiii) through (xviii) as clauses 
                (xiv) through (xix), respectively, and by inserting 
                after clause (xii) the following new clause:
                            ``(xiii) section 6050U (relating to returns 
                        relating to credit for COBRA continuation 
                        coverage),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking ``or'' at the end of 
                subparagraph (AA), by striking the period at the end of 
                subparagraph (BB) and inserting ``, or'', and by adding 
                after subparagraph (BB) the following new subparagraph:
                    ``(CC) section 6050U (relating to returns relating 
                to credit for COBRA continuation coverage).''.
    (e) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or section 36'' after 
        ``section 35''.
            (2) 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 redesignating the item relating to section 36 as 
        an item relating to section 37 and by inserting after the item 
        relating to section 35 the following new item:

``Sec. 36. COBRA continuation coverage.''.
            (3) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 of such Code is amended by adding at 
        the end the following new item:

``Sec. 6050U. Returns relating to credit for COBRA continuation 
                            coverage.''.
            (4) The table of sections for chapter 77 of such Code is 
        amended by adding at the end the following new item:

``Sec. 7529. Advance payment of credit as premium payment for COBRA 
                            continuation coverage.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to amounts paid for coverage months beginning after the date of 
the enactment of this Act, in taxable years ending after such date.

SEC. 4. REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH 
              INCOMES OVER $1,000,000.

    (a) General Rule.--Section 1 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(j) Reduction in Benefit of Rate Reduction for Families With 
Incomes Over $1,000,000.--
            ``(1) In general.--If the adjusted gross income of a 
        taxpayer exceeds the threshold amount, the tax imposed by this 
        section (determined without regard to this subsection) shall be 
        increased by an amount equal to the applicable percentage of so 
        much of the adjusted gross income as exceeds the threshold 
        amount.
            ``(2) Threshold amounts.--For purposes of this subsection, 
        the term `threshold amount' means--
                    ``(A) $1,000,000 in the case of a joint return, and
                    ``(B) $500,000 in the case of any other return.
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, with 
        respect to any taxable year, such percentage as is estimated by 
        the Secretary to result in an increase in the revenues to the 
        Treasury for such taxable year which is equal to the decrease 
        (if any) in the revenues to the Treasury that the Secretary 
        estimates results from the application of sections 36 and 7529 
        for such taxable year.
            ``(4) Tax not to apply to estates and trusts.--This 
        subsection shall not apply to an estate or trust.
            ``(5) Special rule.--For purposes of section 55, the amount 
        of the regular tax shall be determined without regard to this 
        subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.
    (c) Application of EGTRRA Sunset.--The amendment made by this 
section shall be subject to title IX of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 to the same extent and in the same 
manner as section 101 of such Act.
    (d) Section 15 Not to Apply.--The amendment made by subsection (a) 
shall not be treated as a change in a rate of tax for purposes of 
section 15 of the Internal Revenue Code of 1986.