To amend the Internal Revenue Code of 1986 to allow previously uninsured individuals a refundable credit for health insurance costs and to provide tax incentives to encourage small business health plans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Care Relief Act of 2007''.

SEC. 2. REFUNDABLE CREDIT FOR HEALTH INSURANCE COSTS OF PREVIOUSLY 
              UNINSURED INDIVIDUALS.

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

``SEC. 36. HEALTH INSURANCE COSTS OF PREVIOUSLY UNINSURED INDIVIDUALS.

    ``(a) Allowance of Credit.--In the case of a previously uninsured 
individual, there shall be allowed as a credit against the tax imposed 
by this subtitle for the taxable year an amount equal to the amount 
paid by the taxpayer during such taxable year for health insurance 
coverage for the taxpayer and the taxpayer's spouse and dependents.
    ``(b) Limitation.--The amount allowed as a credit under subsection 
(a) for the taxable year shall not exceed $1,000 ($2,000 in the case of 
a joint return filed by 2 previously uninsured individuals).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Previously uninsured individual.--The term 
        `previously uninsured individual' means any individual who had 
        no health insurance coverage at any time during the 6-month 
        period before the earliest date that such individual has health 
        insurance coverage by reason of the payments taken into account 
        under subsection (a).
            ``(2) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning given to such term by 
        section 9832(b)(1).
    ``(d) Special Rules.--
            ``(1) Coordination with other benefits.--The amount which 
        would (but for this paragraph) be taken into account by the 
        taxpayer under sections 35, 162(l), 213, 220, or 223 for the 
        taxable year shall be reduced by the credit allowed by this 
        section to the taxpayer for such year.
            ``(2) 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.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``, 36,'' after ``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 striking the last item and inserting the 
        following:

``Sec. 36. Health insurance costs of previously uninsured individuals.
``Sec. 37. Overpayments of tax.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 3. CREDIT FOR HEALTH INSURANCE EXPENSES OF SMALL BUSINESSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following:

``SEC. 45O. SMALL BUSINESS HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small employer, the health insurance credit determined under this 
section for the taxable year is an amount equal to 35 percent of the 
expenses paid by the taxpayer during the taxable year for health 
insurance coverage for such year provided under a new health plan for 
employees of such employer.
    ``(b) Limitations.--
            ``(1) Per employee dollar limitation.--The amount of 
        expenses taken into account under subsection (a) with respect 
        to any employee for any taxable year shall not exceed--
                    ``(A) $800 in the case of self-only coverage, and
                    ``(B) $2,000 in the case of family coverage.
        In the case of an employee who is covered by a new health plan 
        of the employer for only a portion of such taxable year, the 
        limitation under the preceding sentence shall be an amount 
        which bears the same ratio to such limitation (determined 
        without regard to this sentence) as such portion bears to the 
        entire taxable year.
            ``(2) Period of coverage.--Expenses may be taken into 
        account under subsection (a) only with respect to coverage for 
        the 4-year period beginning on the date the employer 
        establishes a new health plan.
            ``(3) Employer must bear 65 percent of cost.--Expenses may 
        be taken into account under subsection (a) only if at least 65 
        percent of the cost of the coverage (without regard to this 
        section) is borne by the employer.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning given such term by section 
        9832(b)(1).
            ``(2) New health plan.--
                    ``(A) In general.--The term `new health plan' means 
                any arrangement of the employer which provides health 
                insurance coverage to employees if--
                            ``(i) such employer (and any predecessor 
                        employer) did not establish or maintain such 
                        arrangement (or any similar arrangement) at any 
                        time during the 2 taxable years ending prior to 
                        the taxable year in which the credit under this 
                        section is first allowed, and
                            ``(ii) such arrangement provides health 
                        insurance coverage to at least 70 percent of 
                        the qualified employees of such employer.
                    ``(B) Qualified employee.--The term `qualified 
                employee' means any employee of an employer and shall 
                include a leased employee within the meaning of section 
                414(n).
            ``(3) Small employer.--The term `small employer' has the 
        meaning given to such term by section 4980D(d)(2); except 
        that--
                    ``(A) only qualified employees shall be taken into 
                account, and
                    ``(B) such section shall be applied by substituting 
                `100 employees' for `50 employees'.
    ``(d) Special Rules.--
            ``(1) Certain rules made applicable.--For purposes of this 
        section, rules similar to the rules of section 52 shall apply.
            ``(2) Amounts paid under salary reduction arrangements.--No 
        amount paid or incurred pursuant to a salary reduction 
        arrangement shall be taken into account under subsection (a).
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2008, each dollar 
        amount contained in subsection (b) 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 2006' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50.
    ``(e) Termination.--This section shall not apply to expenses paid 
or incurred by an employer with respect to any arrangement established 
on or after January 1, 2014.''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
such Code (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (30), by striking the period 
at the end of paragraph (31) and inserting ``, plus'', and by adding at 
the end the following:
            ``(32) in the case of a small employer (as defined in 
        section 45O(c)(3)), the health insurance credit determined 
        under section 45O(a).''.
    (c) Denial of Double Benefit.--Section 280C of such Code is amended 
by adding at the end the following new subsection:
    ``(e) Credit for Small Business Health Insurance Expenses.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the expenses (otherwise allowable as a deduction) 
        taken into account in determining the credit under section 45O 
        for the taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 45O(a).
            ``(2) Controlled groups.--Persons treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as 1 person for purposes of this section.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following:

``Sec. 45O. Small business health insurance expenses.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2007, for arrangements established after the date of the 
enactment of this Act.

Summary: Health Care Relief Act of 2007 - Amends the Internal Revenue Code to allow: (1) a refundable tax credit up to $1,000 for the health insurance coverage costs of a previously uninsured taxpayer, the taxpayer's spouse, and dependents. And (2) certain small business employers a business tax credit for amounts paid under a new health plan for employee health insurance coverage.