I

106TH CONGRESS

2D SESSION H. R. 4925

To amend the Internal Revenue Code of 1986 to allow more equitable and

direct tax relief for health insurance and medical care expenses, to

give Americans more options for obtaining quality health care, and to

expand insurance coverage to the uninsured.

IN THE HOUSE OF REPRESENTATIVES

JULY 24, 2000

Mr. COOKSEY, (for himself, Mr. ARMEY, Mr. EHRLICH, Mr. BRYANT, Mr.

GOODE, Mr. CANNON, Mr. TRAFICANT, Mr. SHADEGG, Mr. ENGLISH,

Mrs. MYRICK, Mr. FLETCHER, Mrs. FOWLER, Mr. DOOLITTLE, Mr. TAUZIN, Ms. GRANGER, Mr. JENKINS, Mr. JONES of North Carolina, Mrs.

KELLY, Mr. LINDER, Mrs. CUBIN, and Mr. SESSIONS) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow more

equitable and direct tax relief for health insurance and

medical care expenses, to give Americans more options

for obtaining quality health care, and to expand insurance coverage to the uninsured.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Patient Access, Choice,

5 and Equity Act of 2000’’.
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1 SEC. 2. REFUNDABLE CREDIT FOR HEALTH INSURANCE

2 COVERAGE.

3 (a) IN GENERAL.—Subpart C of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of

5 1986 (relating to refundable credits) is amended by redes6 ignating section 35 as section 36 and by inserting after

7 section 34 the following new section:

8 ‘‘SEC. 35. HEALTH INSURANCE COSTS.

9 ‘‘(a) IN GENERAL.—In the case of a qualified indi10 vidual, there shall be allowed as a credit against the tax

11 imposed by this subtitle the fixed-amount health credit de12 termined under subsection (b) or, if the taxpayer elects

13 in lieu thereof, the percentage health credit determined

14 under subsection (c).

15 ‘‘(b) FIXED AMOUNT HEALTH CREDIT.—For pur16 poses of subsection (a)—

17 ‘‘(1) IN GENERAL.—The fixed-amount health

18 credit is an amount equal to the amount paid by the

19 taxpayer during the taxable year for qualified health

20 insurance for the taxpayer, his spouse, and depend21 ents.

22 ‘‘(2) LIMITATIONS.—

23 ‘‘(A) IN GENERAL.—The amount allowed

24 as a credit under paragraph (1) to the taxpayer

25 for the taxable year shall not exceed the lesser

26 of—
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1 ‘‘(i) the sum of the monthly limita2 tions for coverage months during such tax3 able year for each individual referred to in

4 paragraph (1), or

5 ‘‘(ii) $3,000.

6 ‘‘(B) MONTHLY LIMITATION.—

7 ‘‘(i) IN GENERAL.—The monthly limi8 tation for an individual for each coverage

9 month of such individual during the taxable year is the amount equal to 1 10 ⁄12 of—

11 ‘‘(I) $1,000 if such individual is

12 the taxpayer,

13 ‘‘(II) $1,000 if—

14 ‘‘(aa) such individual is the

15 spouse of the taxpayer,

16 ‘‘(bb) the taxpayer and such

17 spouse are married as of the first

18 day of such month, and

19 ‘‘(cc) the taxpayer files a

20 joint return for the taxable year,

21 and

22 ‘‘(III) $500 if such individual is

23 an individual for whom a deduction

24 under section 151(c) is allowable to

25 the taxpayer for such taxable year.
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1 ‘‘(ii) SPECIAL RULE FOR MARRIED IN2 DIVIDUALS.—In the case of an

3 individual—

4 ‘‘(I) who is married (within the

5 meaning of section 7703) as of the

6 close of the taxable year but does not

7 file a joint return for such year, and

8 ‘‘(II) who does not live apart

9 from such individual’s spouse at all

10 times during the taxable year,

11 the limitation imposed by clause (i)(III)

12 shall be divided equally between the indi13 vidual and the individual’s spouse unless

14 they agree on a different division.

15 ‘‘(3) DENIAL OF CREDIT IF CONTRIBUTION

16 MADE TO MEDICAL SAVINGS ACCOUNT.—No credit

17 shall be allowed under this subsection with respect

18 to any individual who makes a contribution to a

19 medical savings account (as defined in section

20 220(d)).

21 ‘‘(c) PERCENTAGE HEALTH CREDIT.—For purposes

22 of subsection (a)—

23 ‘‘(1) IN GENERAL.—The percentage health

24 credit is an amount equal to the sum of—
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1 ‘‘(A) the applicable percentage of the sum

2 of—

3 ‘‘(i) 25 percent of the qualified med4 ical expenses incurred by the taxpayer, his

5 spouse, and dependents during any cov6 erage month and paid by such taxpayer

7 during the taxable year which does not ex8 ceed 5 percent of the adjusted gross in9 come of such taxpayer for such year,

10 ‘‘(ii) 40 percent of such expenses so

11 incurred and paid which exceeds 5 percent

12 but does not exceed 15 percent of such ad13 justed gross income, plus

14 ‘‘(iii) 60 percent of such expenses so

15 incurred and paid which exceeds 15 per16 cent of such adjusted gross income, plus

17 ‘‘(B) 25 percent of the qualified medical

18 savings account contributions.

19 ‘‘(2) LIMITATIONS.—

20 ‘‘(A) IN GENERAL.—The credit allowed

21 under paragraph (1) for a taxable year shall

22 not exceed the sum of—

23 ‘‘(i) the tax imposed by this chapter

24 for the taxable year on the taxpayer, his

25 spouse, and dependents with respect to
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1 whom such credit is allowed, reduced by

2 the credits allowable against such tax

3 (other than the credits allowable under this

4 subpart), plus

5 ‘‘(ii) the tax imposed by sections

6 1401, 3101, 3111, 3201(a), 3211(a)(1),

7 3221(a) for the taxable year with respect

8 to such taxpayer, spouse, and dependents.

9 ‘‘(B) DOLLAR LIMITATION.—The amount

10 allowed as a credit under paragraph (1)(A) for

11 a taxable year shall not exceed $12,500 ($6,250

12 in the case of a married individual filing a sepa13 rate return).

14 ‘‘(C) COORDINATION WITH SPECIAL RE15 FUND OF SOCIAL SECURITY TAXES.—The taxes

16 referred to in subparagraph (A)(ii) shall not in17 clude any amount to which the taxpayer, his

18 spouse, or dependents is entitled to a special re19 fund under section 6413(c).

20 ‘‘(D) SPECIAL RULE.—Any amounts paid

21 pursuant to an agreement under section 3121(l)

22 (relating to agreements entered into by Amer23 ican employers with respect to foreign affiliates)

24 which are equivalent to the taxes imposed by

25 sections 3101, 3111, 3201(a), and 3221(a)
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1 shall be treated as taxes referred to in subpara2 graph (A)(ii).

3 ‘‘(3) QUALIFIED MEDICAL SAVINGS ACCOUNT

4 CONTRIBUTIONS.—The term ‘qualified medical sav5 ings account contributions’ means a payment to a

6 medical savings account if a deduction would (but

7 for section 220(k)) be allowed under section 220 to

8 the taxpayer for such payment for the taxable year

9 to the medical savings account of an individual.

10 ‘‘(4) SPECIAL RULE IN THE CASE OF CHILD OF

11 DIVORCED PARENTS, ETC.—For purposes of this

12 subsection, any child to whom section 152(e) applies

13 shall be treated as a dependent of both parents.

14 ‘‘(d) DEFINITIONS.—For purposes of this section—

15 ‘‘(1) QUALIFIED INDIVIDUAL.—The term ‘quali16 fied individual’ means an individual who is a citizen

17 or national of the United States or is a lawful per18 manent resident of the United States (as defined in

19 section 7701(b)(6)).

20 ‘‘(2) QUALIFIED HEALTH INSURANCE.—The

21 term ‘qualified health insurance’ means insurance—

22 ‘‘(A) which is—

23 ‘‘(i) health insurance coverage, as de24 fined by section 9832(b)(1), or
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1 ‘‘(ii) insurance which constitutes med2 ical care under a group health plan (as de3 fined by section 5000(b)(1)), other than

4 insurance a substantial portion of which

5 consists of excepted benefits (as defined by

6 section 9832(c)), and

7 ‘‘(B) under which the annual out-of-pocket

8 expenses required to be paid (other than for

9 premiums) for covered benefits does not

10 exceed—

11 ‘‘(i) $4,000 for self-only coverage, and

12 ‘‘(ii) $6,000 for family coverage.

13 ‘‘(3) QUALIFIED MEDICAL EXPENSES.—

14 ‘‘(A) IN GENERAL.—The term ‘qualified

15 medical expenses’ means, with respect to a

16 qualified individual, amounts paid by such indi17 vidual for medical care for such individual, the

18 spouse of such individual, and any dependent

19 (as defined in section 152) of such individual,

20 but only to the extent such amounts are not

21 compensated for by insurance or otherwise.

22 ‘‘(B) REDUCTION FOR AMOUNTS DISTRIB23 UTED FROM MSA’S.—Such term shall not in24 clude any distribution from a medical savings
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1 account which is not includible in gross income

2 by reason of section 220(f)(1).

3 ‘‘(C) APPLICABLE RULES.—For purposes

4 of subparagraph (A), rules similar to the rules

5 of subsections (b) and (c) of section 213 shall

6 apply.

7 ‘‘(4) MEDICAL CARE.—The term ‘medical care’

8 has the meaning given to such term in section

9 213(d) determined without regard to—

10 ‘‘(A) paragraph (1)(C) thereof, and

11 ‘‘(B) so much of paragraph (1)(D) thereof

12 as relates to qualified long-term care insurance.

13 ‘‘(5) COVERAGE MONTH.—

14 ‘‘(A) IN GENERAL.—The term ‘coverage

15 month’ means, with respect to an individual,

16 any month if as of the first day of such month

17 such individual is covered by qualified health in18 surance.

19 ‘‘(B) MEDICARE, MEDICAID, AND STATE

20 CHILDRENS’ HEALTH INSURANCE PROGRAM.—

21 Such term shall not include any month with re22 spect to an individual if, as of the first day of

23 such month, such individual—

24 ‘‘(i) is entitled to any benefits under

25 title XVIII of the Social Security Act,
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1 ‘‘(ii) is a participant in the program

2 under title XIX of such Act, or

3 ‘‘(iii) is a participant in the program

4 under title XXI of such Act.

5 ‘‘(C) CERTAIN OTHER COVERAGE.—Such

6 term shall not include any month during a tax7 able year with respect to an individual if, at any

8 time during such month—

9 ‘‘(i) such individual is enrolled in a

10 program to receive benefits under chapter

11 55 of title 10, United States Code,

12 ‘‘(ii) any benefit is provided to such

13 individual under chapter 17 of title 38,

14 United States Code, or

15 ‘‘(iii) any benefit is provided to such

16 individual under any medical care program

17 under the Indian Health Care Improve18 ment Act.

19 ‘‘(D) PRISONERS.—Such term shall not in20 clude any month with respect to an individual

21 if, as of the first day of such month, such indi22 vidual is imprisoned under Federal, State, or

23 local authority.

24 ‘‘(e) SPECIAL RULES.—For purposes of this

25 section—
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1 ‘‘(1) NONRESIDENT ALIENS.—If the taxpayer is

2 a nonresident alien individual for any portion of the

3 taxable year, this section shall apply only if such in4 dividual is treated as a resident alien of the United

5 States for purposes of this chapter by reason of an

6 election under subsection (g) or (h) of section 6013.

7 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No

8 credit shall be allowed under this section to any indi9 vidual with respect to whom a deduction under sec10 tion 151 is allowable to another taxpayer for a tax11 able year beginning in the calendar year in which

12 such individual’s taxable year begins.

13 ‘‘(3) NO OTHER CREDIT ALLOWED WITH RE14 SPECT TO DEPENDENT IF FIXED CREDIT AL15 LOWED.—If a credit is allowed to a taxpayer for a

16 taxable year under subsection (b) with respect to a

17 dependent, no credit with respect to such dependent

18 shall be allowed under this section for such taxable

19 year to any other taxpayer.

20 ‘‘(4) IDENTIFICATION NUMBER REQUIRE21 MENT.—No credit shall be allowed under this section

22 with respect to an eligible individual who does not

23 include on the return of tax for the taxable year—

24 ‘‘(A) such individual’s taxpayer identifica25 tion number,
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1 ‘‘(B) if the individual is married (within

2 the meaning of section 7703), the taxpayer

3 identification number of such individual’s

4 spouse, and

5 ‘‘(C) the name, age, and taxpayer identi6 fication number of each dependent with respect

7 to whom a credit is claimed under this section.

8 ‘‘(5) COORDINATION WITH ADVANCE PAY9 MENT.—Rules similar to the rules of section 32(g)

10 shall apply to any credit to which this section ap11 plies.

12 ‘‘(6) TREATMENT OF AMOUNTS PAID BY EM13 PLOYER.—Amounts paid by an employer for cov14 erage under an accident or health plan which con15 stitutes medical care for a taxpayer, his spouse and

16 dependents, which would (but for section 106(d)) be

17 excludable from gross income shall be treated as

18 paid by the taxpayer.

19 ‘‘(7) COST-OF-LIVING ADJUSTMENT.—

20 ‘‘(A) IN GENERAL.—In the case of any

21 taxable year beginning in a calendar year after

22 2002, each dollar amount contained in sub23 sections (b)(2)(A)(ii), (b)(2)(B), (c)(2)(B), and

24 (d)(2)(B) shall be increased by the medical care

25 cost adjustment of such amount for such cal-
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1 endar year. If any increase determined under

2 the preceding sentence is not a multiple of $50,

3 such increase shall be rounded to the nearest

4 multiple of $50.

5 ‘‘(B) MEDICAL CARE COST ADJUST6 MENT.—For purposes of subparagraph (A), the

7 medical care cost adjustment for any calendar

8 year is the percentage (if any) by which—

9 ‘‘(i) the medical care component of

10 the Consumer Price Index (as defined in

11 section 1(f)(5)) for August of the pre12 ceding calendar year, exceeds

13 ‘‘(ii) such component for August of

14 2001.

15 ‘‘(f) RESTRICTIONS ON TAXPAYERS WHO IMPROP16 ERLY CLAIMED CREDIT IN PRIOR YEAR.—

17 ‘‘(1) TAXPAYERS MAKING PRIOR FRAUDULENT

18 OR RECKLESS CLAIMS.—

19 ‘‘(A) IN GENERAL.—No credit shall be al20 lowed under this section for any taxable year in

21 the disallowance period.

22 ‘‘(B) DISALLOWANCE PERIOD.—For pur23 poses of subparagraph (A), the disallowance pe24 riod is the period of 2 taxable years after the

25 most recent taxable year for which there was a
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1 final determination that the taxpayer’s claim of

2 credit under this section was due to fraud or

3 reckless or intentional disregard of rules and

4 regulations.

5 ‘‘(2) TAXPAYERS MAKING IMPROPER PRIOR

6 CLAIMS.—In the case of a taxpayer who is denied

7 credit under this section for any taxable year as a

8 result of the deficiency procedures under subchapter

9 B of chapter 63, no credit shall be allowed under

10 this section for any subsequent taxable year unless

11 the taxpayer provides such information as the Sec12 retary may require to demonstrate eligibility for

13 such credit.

14 ‘‘(g) DENIAL OF DOUBLE BENEFIT.—No credit shall

15 be allowed under this section for any expense for which

16 a deduction or credit is allowed under any other provision

17 of this chapter.’’.

18 (b) CLERICAL AMENDMENT.—The table of sections

19 for subpart C of part IV of subchapter A of chapter 1

20 of the Internal Revenue Code of 1986 is amended by strik21 ing the item relating to section 35 and inserting the fol22 lowing new items:

‘‘Sec. 35. Health insurance costs.

‘‘Sec. 36. Overpayments of tax.’’.

23 (c) APPROPRIATIONS FOR REFUND.—Section

24 1324(b)(2) of title 31, United States Code, is amended
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1 by inserting before the period ‘‘, or of sections 35 and 36

2 of such Code’’.

3 (d) REPORT ON SUITABLE INDEX FOR INFLATION

4 ADJUSTMENT.—If the Bureau of Labor Statistics of the

5 Department of Commerce begins publishing a component

6 of the consumer price index which tracks health insurance

7 other than Medicare, the Secretary of the Treasury shall

8 submit a report to the Congress on the suitability of

9 changing the index referred to in section 35(e)(7)(B) of

10 the Internal Revenue Code of 1986 (other than for pur11 poses of subsection (c)(2)(B) of such section), as added

12 by this section, to such component.

13 (e) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 2001.

16 SEC. 3. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS

17 OF QUALIFIED HEALTH INSURANCE.

18 (a) IN GENERAL.—Chapter 77 of the Internal Rev19 enue Code of 1986 (relating to miscellaneous provisions)

20 is amended by adding at the end the following new section:

21 ‘‘SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE

22 CREDIT FOR PURCHASERS OF QUALIFIED

23 HEALTH INSURANCE.

24 ‘‘(a) GENERAL RULE.—
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1 ‘‘(1) PAYMENTS BY SECRETARY.—In the case

2 of an eligible individual, the Secretary shall make

3 payments—

4 ‘‘(A) in the case of an employee covered by

5 qualified health insurance of, or contributed to

6 by, the employer (other than insurance which

7 constitutes a self-insured group health plan), to

8 the employer if the employer elects the applica9 tion of this section,

10 ‘‘(B) in the case of an employee covered by

11 qualified health insurance of, or contributed to

12 by, the employer which constitutes a self-in13 sured group health plan, to the employer, and

14 ‘‘(C) in any other case, to the health insur15 ance issuer of qualified health insurance of such

16 individual.

17 ‘‘(2) AMOUNT OF PAYMENTS.—Payments under

18 paragraph (1) shall be made in an amount equal to

19 the qualified health insurance credit advance amount

20 of such individual.

21 ‘‘(3) PAYMENTS TO BE TREATED AS PAYMENTS

22 OF WITHHOLDING AND FICA TAXES.—

23 ‘‘(A) PAYMENTS MADE FROM CERTAIN

24 TAXES OWED.—With respect to any payment

25 under paragraph (1), rules similar to the rules
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1 of sections 3507(d) (1) and (4) shall apply. In

2 the case of payments to a health insurance

3 issuer with respect to an individual who is not

4 an employee of such issuer, rules under the pre5 ceding sentence shall be applied to any amounts

6 for which such issuer is liable under section

7 3401, 3102, and 3111.

8 ‘‘(B) DIFFERENCE PAYABLE IN CASH.—In

9 the case of any employer or health insurance

10 issuer, if for any month the aggregate payment

11 to such employer or issuer by reason of the pre12 ceding sentence is less than the aggregate quali13 fied health insurance credit advance amount,

14 the Secretary shall pay the difference directly to

15 such employer or issuer (as the case may be).

16 For purposes of this subparagraph, the Sec17 retary may require the employer and the health

18 insurance issuer to provide such additional in19 formation as the Secretary determines appro20 priate.

21 ‘‘(4) TRANSFER TO TRUST FUNDS.—The Sec22 retary shall transfer from the general fund to the

23 Old-Age, Survivors, and Disability Insurance Trust

24 Fund and to the Hospital Insurance Trust Fund

25 amounts equivalent to the amount of the reduction
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1 in taxes imposed by chapter 21 by reason of para2 graph (3). Any such transfer shall be made at the

3 same time the reduced taxes would have been depos4 ited in either such Trust Fund.

5 ‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this

6 section, the term ‘eligible individual’ means any

7 individual—

8 ‘‘(1) who purchases qualified health insurance,

9 and

10 ‘‘(2) for whom a qualified health insurance

11 credit eligibility certificate is in effect.

12 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI13 BILITY CERTIFICATE.—

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, a qualified health insurance credit eligibility

16 certificate is a statement furnished by an individual

17 to the employer or the health insurance issuer

18 which—

19 ‘‘(A) certifies that the individual will be eli20 gible to receive the credit provided by section

21 35(b) for the taxable year,

22 ‘‘(B) estimates the amount of such credit

23 for such taxable year,
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1 ‘‘(C) contains the name, address, and TIN

2 of each individual who is obtaining coverage

3 under such certificate,

4 ‘‘(D) certifies that no individual described

5 in subparagraph (C) has another health insur6 ance credit eligibility certificate in effect, and

7 ‘‘(E) provides such other information as

8 the Secretary may require for purposes of this

9 section.

10 ‘‘(2) CERTIFICATE IN EFFECT.—A qualified

11 health insurance credit eligibility certificate shall

12 take effect on the first day of a coverage month (as

13 defined in section 35(d)) and shall remain in effect

14 with respect to the individual until the earlier of rev15 ocation by the individual, another such certificate

16 takes effect under this section with respect to the in17 dividual, or cancellation of the qualified health insur18 ance by the issuer or the employer.

19 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD20 VANCE AMOUNT.—For purposes of this section, the term

21 ‘qualified health insurance credit advance amount’ means,

22 with respect to any employer or issuer of qualified health

23 insurance, the Secretary’s estimate of the amount of credit

24 allowable under section 35(b) to the individual for the tax-
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1 able year which is attributable to the insurance provided

2 to the individual by such employer or issuer.

3 ‘‘(e) REQUIRED DOCUMENTATION FOR RECEIPT OF

4 PAYMENTS OF ADVANCE AMOUNT.—No payment of a

5 qualified health insurance credit advance amount with re6 spect to any eligible individual may be made under sub7 section (a) unless the employer or health insurance issuer

8 (as the case may be)—

9 ‘‘(1) provides to the Secretary the qualified

10 health insurance credit eligibility certificate of such

11 individual, and

12 ‘‘(2) agrees to provide the return relating to

13 such individual under section 6050T (or with respect

14 to such employer or issuer, an agreement relating to

15 such individual is in effect under section 6050T(e)).

16 ‘‘(f) QUALIFIED HEALTH INSURANCE.—For pur17 poses of this section, the term ‘qualified health insurance’

18 has the meaning given to such term by section 35(d).

19 ‘‘(g) REGULATIONS.—The Secretary shall prescribe

20 such regulations as may be necessary to carry out the pur21 poses of this section.’’.

22 (b) CLERICAL AMENDMENT.—The table of sections

23 for chapter 77 of such Code is amended by adding at the

24 end the following new item:

‘‘Sec. 7527. Advance payment of health insurance credit for purchasers of qualified health insurance.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on January 1, 2002.

3 SEC. 4. INFORMATION REPORTING.

4 (a) IN GENERAL.—Subpart B of part III of sub5 chapter A of chapter 61 of the Internal Revenue Code of

6 1986 (relating to information concerning transactions

7 with other persons) is amended by inserting after section

8 6050S the following new section:

9 ‘‘SEC. 6050T. RETURNS RELATING TO PAYMENTS FOR

10 QUALIFIED HEALTH INSURANCE.

11 ‘‘(a) IN GENERAL.—Any person who, in connection

12 with a trade or business conducted by such person, re13 ceives payments during any calendar year—

14 ‘‘(1) from any person for coverage of such per15 son or any other person under qualified health insur16 ance, or

17 ‘‘(2) under section 7527 with respect to a quali18 fied health insurance credit eligibility certificate,

19 shall make the return described in subsection (b) (at such

20 time as the Secretary may by regulations prescribe) with

21 respect to each person from whom any such payment is

22 received.

23 ‘‘(b) FORM AND MANNER OF RETURNS.—A return

24 is described in this subsection if such return—
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1 ‘‘(1) is in such form as the Secretary may pre2 scribe, and

3 ‘‘(2) contains—

4 ‘‘(A) the name, address, and TIN of the

5 person from whom payments described in sub6 section (a) were received, and the aggregate

7 amounts of such payments,

8 ‘‘(B) the name, address, and TIN of each

9 individual who was provided by such person

10 with coverage under qualified health insurance

11 by reason of such payments and the period of

12 such coverage,

13 ‘‘(C) the coverage months (as defined in

14 section 35(d)) of each individual described in

15 subparagraph (A) and (B),

16 ‘‘(D) the amounts advanced to such person

17 from the Secretary under section 7527 as pre18 mium payments for such insurance, and

19 ‘‘(E) such other information as the Sec20 retary may reasonably prescribe.

21 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur22 poses of this section, the term ‘qualified health insurance’

23 means qualified health insurance (as defined in section

24 35(d)) other than, to the extent provided in regulations

25 prescribed by the Secretary, any other insurance covering
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1 an individual if no credit is allowable under section 35

2 with respect to such coverage.

3 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID4 UALS WITH RESPECT TO WHOM INFORMATION IS RE5 QUIRED.—Every person required to make a return under

6 subsection (a) shall furnish to each individual whose name

7 is required under subsection (b)(2)(A) to be set forth in

8 such return a written statement showing—

9 ‘‘(1) the name and address of the person re10 quired to make such return and the phone number

11 of the information contact for such person,

12 ‘‘(2) the aggregate amount of payments de13 scribed in subsection (a) received by the person re14 quired to make such return from the individual to

15 whom the statement is required to be furnished, and

16 ‘‘(3) the information required under subsections

17 (b)(2)(B), (C), (D), and (E) with respect to such

18 payments.

19 The written statement required under the preceding sen20 tence shall be furnished on or before January 31 of the

21 year following the calendar year for which the return

22 under subsection (a) is required to be made.

23 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

24 MADE BY 2 OR MORE PERSONS.—A person required to

25 make a return under subsection (a) (but for this sub-
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1 section) shall not be required to make such return if,

2 under such regulations as the Secretary shall prescribe,

3 such person has entered into an agreement with another

4 person to make the return required by subsection (a).’’.

5 (b) ASSESSABLE PENALTIES.—

6 (1) Subparagraph (B) of section 6724(d)(1) of

7 such Code (relating to definitions) is amended by re8 designating clauses (xi) through (xvii) as clauses

9 (xii) through (xviii), respectively, and by inserting

10 after clause (x) the following new clause:

11 ‘‘(xi) section 6050T (relating to re12 turns relating to payments for qualified

13 health insurance),’’.

14 (2) Paragraph (2) of section 6724(d) of such

15 Code is amended by striking ‘‘or’’ at the end of the

16 next to last subparagraph, by striking the period at

17 the end of the last subparagraph and inserting ‘‘,

18 or’’, and by adding at the end the following new sub19 paragraph:

20 ‘‘(BB) section 6050T(d) (relating to re21 turns relating to payments for qualified health

22 insurance).’’.

23 (c) CLERICAL AMENDMENT.—The table of sections

24 for subpart B of part III of subchapter A of chapter 61

25 of such Code is amended by inserting after the item relat-
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1 ing to section 6050S the following new item:

‘‘Sec. 6050T. Returns relating to payments for qualified health

insurance.’’.

2 (d) EFFECTIVE DATE.—The amendments made by

3 this section shall apply to taxable years beginning after

4 December 31, 2001.

5 SEC. 5. CREDIT FOR CERTAIN EMPLOYMENT TAXES WITH

6 RESPECT TO FORMERLY EXCLUDABLE

7 HEALTH INSURANCE COSTS.

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of such Code (relating to business

10 related credits) is amended by adding at the end the fol11 lowing:

12 ‘‘SEC. 45D. CREDIT FOR CERTAIN EMPLOYMENT TAXES

13 WITH RESPECT TO FORMERLY EXCLUDABLE

14 HEALTH INSURANCE COSTS.

15 ‘‘(a) GENERAL RULE.—For purposes of section 38,

16 in the case of an employer, the former health exclusion

17 credit determined under this section for the taxable year

18 is the aggregate of the creditable employee amounts.

19 ‘‘(b) CREDITABLE EMPLOYEE AMOUNT.—For pur20 poses of subsection (a)—

21 ‘‘(1) IN GENERAL.—The term ‘creditable em22 ployee amount’ means, with respect to each covered

23 employee, the employer tax on the formerly exclud-
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1 able health costs of the covered employee’s wages or

2 compensation (as the case may be).

3 ‘‘(2) EMPLOYER TAX ON THE FORMERLY EX4 CLUDABLE HEALTH COSTS.—The term ‘employer tax

5 on the formerly excludable health costs’ means the

6 amount equal to the excess of—

7 ‘‘(A) the tax imposed under section 3111

8 or 3221(a) on wages or compensation (as the

9 case may be) of the employee for the calendar

10 year ending in or with the end of the taxable

11 year of the employer, over

12 ‘‘(B) such tax for such calendar year which

13 would be imposed on—

14 ‘‘(i) wages or compensation (as the

15 case may be) of such employee, if such

16 wages or compensation were reduced by

17 ‘‘(ii) the total amount of the em18 ployer-provided coverage under an accident

19 or health plan which would have been ex20 cludable from the gross income of such em21 ployee under section 106 but for section

22 106(d).

23 ‘‘(3) COVERED EMPLOYEE.—The term ‘covered

24 employee’ means an individual who—
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1 ‘‘(A) was employed by the employer on

2 January 1, 2001,

3 ‘‘(B) was covered at all times during cal4 endar year 2001 by such employer’s employer5 provided coverage under an accident or health

6 plan which is excludable from the gross income

7 of such individual under section 106, and

8 ‘‘(C) for the period—

9 ‘‘(i) beginning on January 1, 2002,

10 and

11 ‘‘(ii) ending on the day before the

12 first day such person is not covered by

13 such employer’s employer-provided cov14 erage for an accident or health plan which

15 would have been excludable from the gross

16 income of such individual under section

17 106 but for section 106(d).

18 ‘‘(4) WAGES AND COMPENSATION.—The terms

19 ‘wages’ and ‘compensation’ shall have the meaning

20 given to such terms by sections 3121(a) and

21 3231(e), respectively.

22 ‘‘(c) SPECIAL RULES.—

23 ‘‘(1) SPECIAL RULE CONCERNING SELF-EM24 PLOYED.—The term ‘employer’ shall not include an
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1 individual who is an employee within the meaning of

2 section 401(c)(1).

3 ‘‘(2) CERTAIN RULES MADE APPLICABLE.—For

4 purposes of this section, rules similar to the rules of

5 paragraphs (1) and (2) of section 41(f) shall apply.

6 ‘‘(d) NOTICE OF VALUE OF HEALTH INSURANCE

7 COVERAGE.—No credit shall be allowed under subsection

8 (a) to an employer unless such employer notifies (in the

9 manner the Secretary shall provide) each individual who

10 is an employee of the employer during calendar year 2001

11 of the aggregate value of the applicable premiums (as de12 fined by section 4980B(f)(4)) provided to the employee

13 during such calendar year.

14 ‘‘(e) TERMINATION.—This section shall not apply to

15 taxable years beginning after December 31, 2003.’’.

16 (b) CURRENT YEAR BUSINESS CREDIT CALCULA17 TION.—Section 38(b) of such Code (relating to current

18 year business credit) is amended by striking ‘‘plus’’ at the

19 end of paragraph (11), by striking the period at the end

20 of paragraph (12) and inserting ‘‘, plus’’, and by adding

21 at the end the following:

22 ‘‘(13) the former health exclusion credit deter23 mined under section 45D(a).’’.

24 (c) LIMITATION ON CARRYBACK.—Subsection (d) of

25 section 39 of such Code (relating to carryback and
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1 carryforward of unused credits) is amended by adding at

2 the end the following:

3 ‘‘(9) NO CARRYBACK OF FORMER HEALTH EX4 CLUSION CREDIT BEFORE EFFECTIVE DATE.—No

5 amount of unused business credit available under

6 section 45D may be carried back to a taxable year

7 beginning on or before the date of the enactment of

8 this paragraph.’’.

9 (d) CLERICAL AMENDMENT.—The table of sections

10 for subpart D of part IV of subchapter A of chapter 1

11 of such Code is amended by inserting after the item relat12 ing to section 45C the following:

‘‘Sec. 45D. Credit for certain employment taxes with respect to

formerly excludable health insurance costs.’’.

13 (e) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 2001.

16 SEC. 6. ADDITIONAL PROVISIONS.

17 (a) TERMINATION OF EXCLUSION FROM GROSS IN18 COME FOR EMPLOYER-PROVIDED HEALTH CARE COV19 ERAGE.—Section 106 of the Internal Revenue Code of

20 1986 (relating to contributions by employer to accident

21 and health plans) is amended by adding at the end the

22 following new subsection:
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1 ‘‘(d) INCLUSION OF INSURANCE CONSTITUTING

2 MEDICAL CARE (OTHER THAN LONG-TERM CARE INSUR3 ANCE).—

4 ‘‘(1) IN GENERAL.—Subsection (a) shall not

5 apply to—

6 ‘‘(A) any employer-provided coverage

7 under an accident or health plan which con8 stitutes medical care, and

9 ‘‘(B) any employer contribution to a med10 ical savings account which is treated by sub11 section (b) as employer-provided coverage for

12 medical expenses under an accident or health

13 plan.

14 ‘‘(2) EXCEPTION FOR INDIVIDUALS ENTITLED

15 TO MEDICARE.—Paragraph (1) shall not apply to

16 any employee who, as of the time such employer-pro17 vided coverage was provided, is entitled to any bene18 fits under title XVIII of the Social Security Act.

19 ‘‘(3) MEDICAL CARE DEFINED.—For purposes

20 of paragraph (1), the term ‘medical care’ has the

21 meaning given to such term in section 213(d) deter22 mined without regard to—

23 ‘‘(A) paragraph (1)(C) thereof, and

24 ‘‘(B) so much of paragraph (1)(D) thereof

25 as relates to qualified long-term care insurance.
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1 ‘‘(4) SPECIAL RULE FOR VALUATION OF INCLU2 SION OF EMPLOYER-PROVIDED HEALTH COV3 ERAGE.—The amount included in gross income by

4 reason of paragraph (1) shall be the cost to the em5 ployer of the employer-provided coverage under an

6 accident or health plan with respect to the employee

7 for the calendar year. Such cost shall be the applica8 ble premium (as defined by section 4980B(f)(4)).’’.

9 (b) DISALLOWANCE OF DEDUCTION FOR HEALTH

10 INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—

11 Section 162(l) of such Code is amended by adding at the

12 end the following new paragraph:

13 ‘‘(6) TERMINATION OF DEDUCTION FOR

14 HEALTH INSURANCE.—In the case of taxable years

15 beginning after December 31, 2001, this subsection

16 shall only apply to amounts paid for qualified long17 term care insurance contracts.’’.

18 (c) MEDICAL CARE DEDUCTION LIMITED TO QUALI19 FIED LONG-TERM CARE AND INDIVIDUALS ENTITLED TO

20 MEDICARE.—Section 213 of such Code (relating to med21 ical, dental, etc., expenses) is amended by adding at the

22 end the following new subsection:

23 ‘‘(f) TERMINATION.—

24 ‘‘(1) IN GENERAL.—Except as provided in para25 graphs (2) and (3), subsection (a) shall not apply to
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1 any taxable year beginning after December 31,

2 2001.

3 ‘‘(2) EXCEPTION FOR INDIVIDUALS ENTITLED

4 TO MEDICARE.—Paragraph (1) shall not apply to ex5 penses paid for medical care provided for any indi6 vidual who, as of the time such medical care was

7 provided, is entitled to any benefits under title

8 XVIII of the Social Security Act.

9 ‘‘(3) EXCEPTION FOR QUALIFIED LONG-TERM

10 CARE.—Paragraph (1) shall not apply to expenses

11 paid for medical care described in paragraph (1)(C)

12 of subsection (d) and so much of paragraph (1)(D)

13 of such subsection as relates to qualified long-term

14 care insurance contracts.’’.

15 (d) MEDICAL SAVINGS ACCOUNTS.—

16 (1) TERMINATION OF DEDUCTION.—Section

17 220 of such Code (relating to medical savings ac18 counts) is amended by adding at the end the fol19 lowing:

20 ‘‘(k) TERMINATION.—No deduction shall be allowed

21 for a contribution to a medical savings account made after

22 December 31, 2001.’’.

23 (2) BOTH EMPLOYERS AND EMPLOYEES MAY

24 CONTRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—
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1 Paragraph (5) of section 220(b) of such Code is

2 amended to read as follows:

3 ‘‘(5) COORDINATION WITH EXCLUSION FOR EM4 PLOYER CONTRIBUTIONS.—The limitation which

5 would (but for this paragraph) apply under this sub6 section to the taxpayer for any taxable year shall be

7 reduced (but not below zero) by the amount which

8 would (but for section 106(b), without regard to

9 subsection (d) thereof) be includible in the tax10 payer’s gross income for such taxable year.’’.

11 (3) PENALTY FOR EXCESS CONTRIBUTIONS.—

12 (A) Paragraph (1) of section 4973(d) of

13 such Code is amended to read as follows:

14 ‘‘(1) the aggregate amount contributed for the

15 taxable year to the accounts (other than rollover

16 contributions described in section 220(f)(5)) for

17 which a credit is not allowed under section

18 35(c)(1)(B), and’’.

19 (B) Clause (i) of section 4973(d)(2)(B) of

20 such Code is amended to read as follows:

21 ‘‘(i) the maximum amount allowable

22 as a deduction under section 220(b)(1)

23 (determined without regard to section

24 220(k)) for the taxable year, over’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2001.

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