II

106TH CONGRESS

2D SESSION S. 2320

To amend the Internal Revenue Code of 1986 to allow a refundable tax

credit for health insurance costs, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 29, 2000

Mr. JEFFORDS (for himself, Mr. BREAUX, Mr. FRIST, Mrs. LINCOLN, and Ms.

SNOWE) introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to allow a

refundable tax credit for health insurance costs, and

for other purposes.

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 ‘‘Health Coverage,

5 Access, Relief, and Equity (C.A.R.E.) Act’’.

6 SEC. 2. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

7 (a) IN GENERAL.—Subpart C of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of

9 1986 (relating to refundable personal credits) is amended
2

•S 2320 IS

1 by redesignating section 35 as section 36 and inserting

2 after section 34 the following new section:

3 ‘‘SEC. 35. HEALTH INSURANCE COSTS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in5 dividual, there shall be allowed as a credit against the tax

6 imposed by this subtitle for the taxable year an amount

7 equal to the amount paid during the taxable year for quali8 fied health insurance for the taxpayer and the taxpayer’s

9 spouse and dependents.

10 ‘‘(b) LIMITATIONS.—

11 ‘‘(1) MAXIMUM DOLLAR AMOUNT.—

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

13 as a credit under subsection (a) to the taxpayer

14 for the taxable year shall not exceed the sum of

15 the monthly limitations for coverage months

16 during such taxable year.

17 ‘‘(B) MONTHLY LIMITATION.—The month18 ly limitation for each coverage month during

19 the taxable year is the amount equal to 1/12

20 of—

21 ‘‘(i) in the case of self-only coverage,

22 $1,000, and

23 ‘‘(ii) in the case of family coverage,

24 $2,000.

25 ‘‘(2) PHASEOUT OF CREDIT.—
3

•S 2320 IS

1 ‘‘(A) IN GENERAL.—The amount which

2 would (but for this paragraph) be taken into ac3 count under subsection (a) shall be reduced

4 (but not below zero) by the amount determined

5 under subparagraph (B).

6 ‘‘(B) AMOUNT OF REDUCTION.—The

7 amount determined under this subparagraph is

8 the amount which bears the same ratio to the

9 amount which would be so taken into account

10 as—

11 ‘‘(i) the excess of—

12 ‘‘(I) the taxpayer’s modified ad13 justed gross income for such taxable

14 year, over

15 ‘‘(II) $35,000 ($55,000 in the

16 case of family coverage), bears to

17 ‘‘(ii) $10,000.

18 ‘‘(C) MODIFIED ADJUSTED GROSS IN19 COME.—The term ‘modified adjusted gross in20 come’ means adjusted gross income

21 determined—

22 ‘‘(i) without regard to this section and

23 sections 911, 931, and 933, and

24 ‘‘(ii) after application of sections 86,

25 135, 137, 219, 221, and 469.
4

•S 2320 IS

1 ‘‘(3) COORDINATION WITH DEDUCTION FOR

2 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN3 DIVIDUALS.—In the case of a taxpayer who is eligi4 ble to deduct any amount under section 162(l) for

5 the taxable year, this section shall apply only if the

6 taxpayer elects not to claim any amount as a deduc7 tion under such section for such year.

8 ‘‘(c) COVERAGE MONTH DEFINED.—For purposes of

9 this section—

10 ‘‘(1) IN GENERAL.—The term ‘coverage month’

11 means, with respect to an individual, any month if—

12 ‘‘(A) as of the first day of such month

13 such individual is covered by qualified health in14 surance, and

15 ‘‘(B) the premium for coverage under such

16 insurance for such month is paid by the tax17 payer.

18 ‘‘(2) EMPLOYER-SUBSIDIZED COVERAGE.—

19 ‘‘(A) IN GENERAL.—Such term shall not

20 include any month for which such individual is

21 eligible to participate in any subsidized health

22 plan (within the meaning of section 162(l)(2))

23 maintained by any employer of the taxpayer or

24 of the spouse of the taxpayer.
5

•S 2320 IS

1 ‘‘(B) PREMIUMS TO NONSUBSIDIZED

2 PLANS.—If an employer of the taxpayer or the

3 spouse of the taxpayer maintains a health plan

4 which is not a subsidized health plan (as so de5 fined) and which constitutes qualified health in6 surance, employee contributions to the plan

7 shall be treated as amounts paid for qualified

8 health insurance.

9 ‘‘(3) CAFETERIA PLAN AND FLEXIBLE SPEND10 ING ACCOUNT BENEFICIARIES.—Such term shall not

11 include any month during a taxable year if any

12 amount is not includible in the gross income of the

13 taxpayer for such year under section 106 with re14 spect to—

15 ‘‘(A) a benefit chosen under a cafeteria

16 plan (as defined in section 125(d)), or

17 ‘‘(B) a benefit provided under a flexible

18 spending or similar arrangement.

19 ‘‘(4) MEDICARE AND MEDICAID.—Such term

20 shall not include any month during a taxable year

21 with respect to an individual if, as of the first day

22 of such month, such individual—

23 ‘‘(A) is eligible for any benefits under title

24 XVIII of the Social Security Act, or
6

•S 2320 IS

1 ‘‘(B) is eligible to participate in the pro2 gram under title XIX or XXI of such Act.

3 ‘‘(5) CERTAIN OTHER COVERAGE.—Such term

4 shall not include any month during a taxable year

5 with respect to an individual if, as of the first day

6 of such month, such individual is eligible—

7 ‘‘(A) for benefits under chapter 17 of title

8 38, United States Code,

9 ‘‘(B) for benefits under chapter 55 of title

10 10, United States Code,

11 ‘‘(C) to participate in the program under

12 chapter 89 of title 5, United States Code, or

13 ‘‘(D) for benefits under any medical care

14 program under the Indian Health Care Im15 provement Act or any other provision of law.

16 ‘‘(6) PRISONERS.—Such term shall not include

17 any month with respect to an individual if, as of the

18 first day of such month, such individual is impris19 oned under Federal, State, or local authority.

20 ‘‘(d) QUALIFIED HEALTH INSURANCE.—For pur21 poses of this section, the term ‘qualified health insurance’

22 means health insurance coverage (as defined in section

23 9832(b)(1)(A)), including coverage under a high deduct24 ible health plan (as defined in section 220(c)(2)) or a
7

•S 2320 IS

1 COBRA continuation provision (as defined in section

2 9832(d)(1)).

3 ‘‘(e) MEDICAL SAVINGS ACCOUNT CONTRIBU4 TIONS.—

5 ‘‘(1) IN GENERAL.—If a deduction would (but

6 for paragraph (2)) be allowed under section 220 to

7 the taxpayer for a payment for the taxable year to

8 the medical savings account of an individual, sub9 section (a) shall be applied by treating such payment

10 as a payment for qualified health insurance for such

11 individual.

12 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc13 tion shall be allowed under section 220 for that por14 tion of the payments otherwise allowable as a deduc15 tion under section 220 for the taxable year which is

16 equal to the amount of credit allowed for such tax17 able year by reason of this subsection.

18 ‘‘(f) SPECIAL RULES.—

19 ‘‘(1) COORDINATION WITH MEDICAL EXPENSE

20 DEDUCTION.—The amount which would (but for this

21 paragraph) be taken into account by the taxpayer

22 under section 213 for the taxable year shall be re23 duced by the credit (if any) allowed by this section

24 to the taxpayer for such year.
8

•S 2320 IS

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

2 credit shall be allowed under this section to any indi3 vidual with respect to whom a deduction under sec4 tion 151 is allowable to another taxpayer for a tax5 able year beginning in the calendar year in which

6 such individual’s taxable year begins.

7 ‘‘(3) COORDINATION WITH ADVANCE PAY8 MENT.—Rules similar to the rules of section 32(g)

9 shall apply to any credit to which this section ap10 plies.

11 ‘‘(g) EXPENSES MUST BE SUBSTANTIATED.—A pay12 ment for insurance to which subsection (a) applies may

13 be taken into account under this section only if the tax14 payer substantiates such payment in such form as the Sec15 retary may prescribe.

16 ‘‘(h) REGULATIONS.—The Secretary shall prescribe

17 such regulations as may be necessary to carry out the pur18 poses of this section, including regulations under which—

19 ‘‘(1) an awareness campaign is established to

20 educate the public, insurance issuers, and agents or

21 others who market health insurance about the re22 quirements and procedures under this section,

23 including—
9

•S 2320 IS

1 ‘‘(A) criteria for insurance products and

2 group health coverage which constitute qualified

3 health insurance under this section, and

4 ‘‘(B) guidelines for marketing schemes and

5 practices which are appropriate and acceptable

6 in connection with the credit under this section,

7 and

8 ‘‘(2) periodic reviews or audits of health insur9 ance policies and group health plans (and related

10 promotional marketing materials) which are mar11 keted to eligible taxpayers under this section are

12 conducted for the purpose of determining—

13 ‘‘(A) whether such policies and plans con14 stitute qualified health insurance under this

15 section, and

16 ‘‘(B) whether offenses described in section

17 7276 occur.’’.

18 (b) INFORMATION REPORTING.—

19 (1) IN GENERAL.—Subpart B of part III of

20 subchapter A of chapter 61 of such Code (relating

21 to information concerning transactions with other

22 persons) is amended by inserting after section

23 6050S the following new section:
10

•S 2320 IS

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

2 QUALIFIED HEALTH INSURANCE.

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

4 with a trade or business conducted by such person, re5 ceives payments during any calendar year from any indi6 vidual for coverage of such individual or any other indi7 vidual under creditable health insurance, shall make the

8 return described in subsection (b) (at such time as the

9 Secretary may by regulations prescribe) with respect to

10 each individual from whom such payments were received.

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

12 is described in this subsection if such return—

13 ‘‘(1) is in such form as the Secretary may pre14 scribe, and

15 ‘‘(2) contains—

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

17 individual from whom payments described in

18 subsection (a) were received,

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

20 individual who was provided by such person

21 with coverage under creditable health insurance

22 by reason of such payments and the period of

23 such coverage,

24 ‘‘(C) the aggregate amount of payments

25 described in subsection (a),
11

•S 2320 IS

1 ‘‘(D) the qualified health insurance credit

2 advance amount (as defined in section 7527(e))

3 received by such person with respect to the indi4 vidual described in subparagraph (A), and

5 ‘‘(E) such other information as the Sec6 retary may reasonably prescribe.

7 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur8 poses of this section, the term ‘creditable health insurance’

9 means qualified health insurance (as defined in section

10 35(d)) other than—

11 ‘‘(1) insurance under a subsidized group health

12 plan maintained by an employer, or

13 ‘‘(2) to the extent provided in regulations pre14 scribed by the Secretary, any other insurance cov15 ering an individual if no credit is allowable under

16 section 35 with respect to such coverage.

17 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID18 UALS WITH RESPECT TO WHOM INFORMATION IS RE19 QUIRED.—Every person required to make a return under

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

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

22 such return a written statement showing—

23 ‘‘(1) the name and address of the person re24 quired to make such return and the phone number

25 of the information contact for such person,
12

•S 2320 IS

1 ‘‘(2) the aggregate amount of payments de2 scribed in subsection (a) received by the person re3 quired to make such return from the individual to

4 whom the statement is required to be furnished,

5 ‘‘(3) the information required under subsection

6 (b)(2)(B) with respect to such payments, and

7 ‘‘(4) the qualified health insurance credit ad8 vance amount (as defined in section 7527(e)) re9 ceived by such person with respect to the individual

10 described in paragraph (2).

11 The written statement required under the preceding sen12 tence shall be furnished on or before January 31 of the

13 year following the calendar year for which the return

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

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

16 MADE BY 2 OR MORE PERSONS.—Except to the extent

17 provided in regulations prescribed by the Secretary, in the

18 case of any amount received by any person on behalf of

19 another person, only the person first receiving such

20 amount shall be required to make the return under sub21 section (a).’’.

22 (2) ASSESSABLE PENALTIES.—

23 (A) Subparagraph (B) of section

24 6724(d)(1) of such Code (relating to defini25 tions) is amended by redesignating clauses (xi)
13

•S 2320 IS

1 through (xvii) as clauses (xii) through (xviii),

2 respectively, and by inserting after clause (x)

3 the following new clause:

4 ‘‘(xi) section 6050T (relating to re5 turns relating to payments for qualified

6 health insurance),’’.

7 (B) Paragraph (2) of section 6724(d) of

8 such Code is amended by striking ‘‘or’’ at the

9 end of the next to last subparagraph, by strik10 ing the period at the end of the last subpara11 graph and inserting ‘‘, or’’, and by adding at

12 the end the following new subparagraph:

13 ‘‘(BB) section 6050T(d) (relating to re14 turns relating to payments for qualified health

15 insurance).’’.

16 (3) CLERICAL AMENDMENT.—The table of sec17 tions for subpart B of part III of subchapter A of

18 chapter 61 of such Code is amended by inserting

19 after the item relating to section 6050S the fol20 lowing new item:

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

insurance.’’.

21 (c) CRIMINAL PENALTY FOR FRAUD.—Subchapter B

22 of chapter 75 of such Code (relating to other offenses)

23 is amended by adding at the end the following new section:
14

•S 2320 IS

1 ‘‘SEC. 7276. PENALTIES FOR OFFENSES RELATING TO

2 HEALTH INSURANCE TAX CREDIT.

3 ‘‘Any person who knowingly misuses Department of

4 the Treasury names, symbols, titles, or initials to convey

5 the false impression of association with, or approval or en6 dorsement by, the Department of the Treasury of any in7 surance products or group health coverage in connection

8 with the credit for health insurance costs under section

9 35 shall on conviction thereof be fined not more than

10 $10,000, or imprisoned not more than 1 year, or both.’’.

11 (d) CONFORMING AMENDMENTS.—

12 (1) Section 162(l) of the Internal Revenue Code

13 of 1986 is amended by adding at the end the fol14 lowing new paragraph:

15 ‘‘(6) ELECTION TO HAVE SUBSECTION

16 APPLY.—No deduction shall be allowed under para17 graph (1) for a taxable year unless the taxpayer

18 elects to have this subsection apply for such year.’’.

19 (2) Paragraph (2) of section 1324(b) of title

20 31, United States Code, is amended by inserting be21 fore the period ‘‘, or from section 35 of such Code’’.

22 (3) The table of sections for subpart C of part

23 IV of subchapter A of chapter 1 of the Internal Rev24 enue Code of 1986 is amended by striking the last

25 item and inserting the following new items:
15

•S 2320 IS

‘‘Sec. 35. Health insurance costs.

‘‘Sec. 36. Overpayments of tax.’’.

1 (4) The table of sections for subchapter B of

2 chapter 75 of the Internal Revenue Code of 1986 is

3 amended by adding at the end the following new

4 item:

‘‘Sec. 7276. Penalties for offenses relating to health insurance tax

credit.’’.

5 (e) EFFECTIVE DATES.—

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section

8 shall apply to taxable years beginning after Decem9 ber 31, 2000.

10 (2) PENALTIES.—The amendments made by

11 subsections (c) and (d)(4) shall take effect on the

12 date of the enactment of this Act.

13 SEC. 3. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF

14 QUALIFIED HEALTH INSURANCE.

15 (a) IN GENERAL.—Chapter 77 of the Internal Rev16 enue Code of 1986 (relating to miscellaneous provisions)

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

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

19 CREDIT TO ISSUERS OF QUALIFIED HEALTH

20 INSURANCE.

21 ‘‘(a) GENERAL RULE.—In the case of an eligible indi22 vidual, the Secretary shall make payments to the health

23 insurance issuer of such individual’s qualified health in-
16

•S 2320 IS

1 surance equal to such individual’s qualified health insur2 ance credit advance amount with respect to such issuer.

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

4 section, the term ‘eligible individual’ means any

5 individual—

6 ‘‘(1) who purchases qualified health insurance

7 (as defined in section 35(c)), and

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

9 credit eligibility certificate is in effect.

10 ‘‘(c) HEALTH INSURANCE ISSUER.—For purposes of

11 this section, the term ‘health insurance issuer’ has the

12 meaning given such term by section 9832(b)(2).

13 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT ELI14 GIBILITY CERTIFICATE.—For purposes of this section, a

15 qualified health insurance credit eligibility certificate is a

16 statement furnished by an individual to a qualified health

17 insurance issuer which—

18 ‘‘(1) certifies that the individual will be eligible

19 to receive the credit provided by section 35 for the

20 taxable year,

21 ‘‘(2) estimates the amount of such credit for

22 such taxable year, and

23 ‘‘(3) provides such other information as the

24 Secretary may require for purposes of this section.
17

•S 2320 IS

1 ‘‘(e) QUALIFIED HEALTH INSURANCE CREDIT AD2 VANCE AMOUNT.—For purposes of this section, the term

3 ‘qualified health insurance credit advance amount’ means,

4 with respect to any qualified health insurance issuer of

5 qualified health insurance, an estimate of the amount of

6 credit allowable under section 35 to the individual for the

7 taxable year which is attributable to the insurance pro8 vided to the individual by such issuer.

9 ‘‘(f) REQUIRED DOCUMENTATION FOR RECEIPT OF

10 PAYMENTS OF ADVANCE AMOUNT.—No payment of a

11 qualified health insurance credit advance amount with re12 spect to any eligible individual may be made under sub13 section (a) unless the health insurance issuer provides to

14 the Secretary—

15 ‘‘(1) the qualified health insurance credit eligi16 bility certificate of such individual, and

17 ‘‘(2) the return relating to such individual

18 under section 6050T.

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.’’.
18

•S 2320 IS

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on January 1, 2001.

Æ