To amend the Internal Revenue Code of 1986 to provide a refundable, advanceable tax credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment.

Summary: Health Insurance Stability Act of 2008 - Amends the Internal Revenue Code to allow individual taxpayers a refundable tax credit for amounts paid to continue health care coverage for the taxpayer, the taxpayer's spouse, and dependents under the applicable continuation provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA). Limits the amount of such credit and disqualifies taxpayers who, in any month, have employer-provided coverage, are covered under Medicare, Medicaid, or the State Children's Health Insurance Program (SCHIP) of the Social Security Act, or are imprisoned. Denies such credit to individuals who are not U.S. citizens or permanent residents or who are dependents of a taxpayer. Directs the Secretary of the Treasury to establish a program for advancing payments of credit amounts to health insurance providers of the taxpayer.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Insurance Stability Act of 
2008''.

SEC. 2. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COSTS OF INDIVIDUALS 
              WITH COBRA CONTINUATION COVERAGE BY REASON OF TERMINATION 
              OF EMPLOYMENT.

    (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 inserting after section 36 the following new section:

``SEC. 36A. HEALTH INSURANCE COSTS OF INDIVIDUALS WITH COBRA 
              CONTINUATION COVERAGE BY REASON OF TERMINATION OF 
              EMPLOYMENT.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle the 
aggregate amount paid by the taxpayer for coverage of the taxpayer and 
the taxpayer's qualifying family members under qualified COBRA 
continuation coverage for eligible coverage 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 
        that the taxpayer is an eligible individual.
            ``(2) Monthly limitation.--The monthly limitation for any 
        month is the credit percentage of \1/12\ of $1,000 ($2,000 in 
        the case of a joint return).
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2009, each dollar 
        amount contained in paragraph (2) 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 2008' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50.
    ``(c) Eligible Coverage Month.--For purposes of this section--
            ``(1) In general.--The term `eligible coverage month' 
        means, with respect to any individual, any month if, as of the 
        first day of such month, the individual--
                    ``(A) is covered by qualified health insurance,
                    ``(B) does not have disqualifying coverage, and
                    ``(C) is not imprisoned under Federal, State, or 
                local authority.
            ``(2) 12 month of coverage during any 14 month period.--A 
        month shall not be treated as an eligible coverage month with 
        respect to an individual if, during the 24-month period ending 
        with the last day of such month, the individual was an eligible 
        individual for 12 months in such period.
    ``(d) Qualifying Family Member.--For purposes of this section, the 
term `qualifying family member' means--
            ``(1) in the case of a joint return, the taxpayer's spouse, 
        and
            ``(2) any dependent of the taxpayer.
    ``(e) Qualified COBRA Continuation Coverage.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified COBRA continuation coverage' means any insurance 
        which is continuation coverage under paragraph (2) of section 
        4980B(f) by reason of the qualifying event specified in 
        paragraph (3)(B) of such section (relating to termination or 
        reduction of hours of employment).
            ``(2) Exception.--Such term does not include--
                    ``(A) a flexible spending or similar arrangement, 
                and
                    ``(B) insurance substantially all of the coverage 
                of which is of excepted benefits described in section 
                9832(c).
    ``(f) Disqualifying Coverage.--For purposes of this section, an 
individual has disqualifying coverage for any month if, as of the first 
day of such month--
            ``(1) Employer-provided coverage.--Such individual is 
        covered under any insurance which constitutes medical care 
        under any health plan maintained by any employer (or former 
        employer) of the taxpayer or the taxpayer's spouse if any 
        portion of the cost of such coverage (as so determined) is paid 
        or incurred by an employer (or former employer) of the taxpayer 
        or the taxpayer's spouse other than--
                    ``(A) coverage described in subsection (e)(1), and
                    ``(B) insurance substantially all of the coverage 
                of which is of excepted benefits described in section 
                9832(c)).
            ``(2) Certain state-based and group coverage.--Such 
        individual has coverage described in any of subparagraphs (B) 
        through (J) of section 35(e)(1).
            ``(3) Coverage under medicare, medicaid, or schip.--Such 
        individual--
                    ``(A) is entitled to benefits under part A of title 
                XVIII of the Social Security Act or is enrolled under 
                part B of such title, or
                    ``(B) is enrolled in the program under title XIX or 
                XXI of such Act (other than under section 1928 of such 
                Act).
            ``(4) Certain other coverage.--Such individual--
                    ``(A) is enrolled in a health benefits plan under 
                chapter 89 of title 5, United States Code, or
                    ``(B) is entitled to receive benefits under chapter 
                55 of title 10, United States Code.
    ``(g) Special Rules.--
            ``(1) Coordination with advance payments of credit; 
        recapture of excess advance payments.--With respect to any 
        taxable year--
                    ``(A) 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, and
                    ``(B) the tax imposed by section 1 for such taxable 
                year shall be increased by the excess (if any) of--
                            ``(i) the aggregate amount paid on behalf 
                        of such taxpayer under section 7529 for months 
                        beginning in such taxable year, over
                            ``(ii) the amount which would (but for this 
                        subsection) be allowed as a credit to the 
                        taxpayer under subsection (a).
            ``(2) Coordination with other deductions.--Amounts taken 
        into account under subsection (a) shall not be taken into 
        account in determining--
                    ``(A) any deduction allowed under section 162(l), 
                213, or 224, or
                    ``(B) any credit allowed under section 35.
            ``(3) 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).
            ``(4) Denial of credit to dependents and nonpermanent 
        resident alien individuals.--No credit shall be allowed under 
        this section to any individual who is--
                    ``(A) not a citizen or lawful permanent resident of 
                the United States for the calendar year in which the 
                taxable year begins, or
                    ``(B) a dependent with respect to another taxpayer 
                for a taxable year beginning in the calendar year in 
                which such individual's taxable year begins.
            ``(5) Married individuals.--In the case of an individual 
        who is married (within the meaning of section 7703), this 
        section shall apply only if a joint return is filed for the 
        taxable year under section 6013.
            ``(6) 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 
        qualified health insurance under which amounts are payable for 
        coverage of an individual other than the taxpayer and 
        qualifying family members.
            ``(7) 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 health 
                insurance costs of individuals with COBRA continuation 
                coverage by reason of termination of employment) 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 eligible 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.
            ``(8) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050W, and 
        section 7529.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``36A,'' after ``36,''.
            (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 inserting after the item relating to section 36 
        the following new item:

``Sec. 36A. Health insurance costs of individuals with COBRA 
                            continuation coverage by reason of 
                            termination of employment.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 3. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF 
              INDIVIDUALS WITH COBRA CONTINUATION COVERAGE BY REASON OF 
              TERMINATION OF EMPLOYMENT.

    (a) In General.--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 FOR HEALTH INSURANCE COSTS OF 
              INDIVIDUALS WITH COBRA CONTINUATION COVERAGE BY REASON OF 
              TERMINATION OF EMPLOYMENT.

    ``Not later than January 1, 2009, the Secretary shall establish a 
program for making payments to providers of qualified health insurance 
(as defined in section 36A(e)) on behalf of taxpayers eligible for the 
credit under section 36A.''.
    (b) 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 adding at the 
        end the following new section:

``SEC. 6050W. RETURNS RELATING TO CREDIT FOR HEALTH INSURANCE COSTS OF 
              INDIVIDUALS WITH COBRA CONTINUATION COVERAGE BY REASON OF 
              TERMINATION OF EMPLOYMENT.

    ``(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 for health insurance costs of 
individuals with COBRA continuation coverage by reason of termination 
of employment) 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 such person provided 
                COBRA continuation coverage by reason of termination of 
                employment,
                    ``(C) the number of months for which amounts were 
                received with respect to such individual under section 
                7529 (relating to advance payment of credit for health 
                insurance costs of individuals with COBRA continuation 
                coverage by reason of termination of employment),
                    ``(D) the amount entitled to be received for each 
                such month, and
                    ``(E) 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 striking 
                ``or'' at the end of clause (xxi), by striking ``and'' 
                at the end of clause (xxii) and inserting ``or'', and 
                by inserting after clause (xxii) the following new 
                clause:
                            ``(xxiii) section 6050W (relating to 
                        returns relating to credit for health insurance 
                        costs of individuals with COBRA continuation 
                        coverage by reason of termination of 
                        employment), and''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking the period at the end of 
                subparagraph (CC) and inserting a comma, by striking 
                the period at the end of subparagraph (DD) and 
                inserting ``, or'', and by adding after subparagraph 
                (DD) the following new subparagraph:
                    ``(EE) section 6050W (relating to returns relating 
                to credit for health insurance costs of individuals 
                with COBRA continuation coverage by reason of 
                termination of employment).''.
    (c) Clerical Amendments.--
            (1) 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 for health insurance costs of 
                            individuals with COBRA continuation 
                            coverage by reason of termination of 
                            employment.''.
            (2) 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. 6050W. Returns relating to credit for health insurance costs of 
                            individuals with COBRA continuation 
                            coverage by reason of termination of 
                            employment.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.