II 

109TH CONGRESS 

2D SESSION S. 3754 

To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit against income tax for the purchase of private health insurance, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 27 (legislative day, JULY 26), 2006 

Mr. MARTINEZ (for himself and Mr. COLEMAN) 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 individuals a refundable credit against income tax for the 

purchase of private health insurance, 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 ‘‘Tax Equity and Af5 fordability Act of 2006’’. 


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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 36 as section 37 and by inserting after 

7 section 35 the following new section: 

8 ‘‘SEC. 36. HEALTH INSURANCE COSTS. 

9 ‘‘(a) IN GENERAL.—In the case of an individual, 

10 there shall be allowed as a credit against the tax imposed 

11 by this subtitle an amount equal to the amount paid dur12 ing the taxable year for qualified health insurance for the 

13 taxpayer and the taxpayer’s spouse or dependent. 

14 ‘‘(b) LIMITATIONS.— 

15 ‘‘(1) IN GENERAL.—The amount allowed as a 

16 credit under subsection (a) to the taxpayer for the 

17 taxable year shall not exceed the sum of the monthly 

18 limitations for coverage months during such taxable 

19 year for the individual referred to in subsection (a) 

20 for whom the taxpayer paid during the taxable year 

21 any amount for coverage under qualified health in22 surance. 

23 ‘‘(2) PARTIAL PHASEOUT OF CREDIT

24 AMOUNT.— 

25 ‘‘(A) 37.5 PERCENT REDUCTION BASED ON

26 ADJUSTED GROSS INCOME.—37.5 percent of the 


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1 amount determined under paragraph (1) for 

2 any taxable year shall be reduced by the 

3 amount determined under subparagraph (B). 

4 ‘‘(B) AMOUNT OF REDUCTION.—The 

5 amount determined under this subparagraph 

6 shall be the amount which bears the same ratio 

7 to 37.5 percent of such amount determined 

8 under paragraph (1) as— 

9 ‘‘(i) the excess of— 

10 ‘‘(I) the taxpayer’s adjusted 

11 gross income for such taxable year, 

12 over 

13 ‘‘(II) the applicable dollar 

14 amount, bears to 

15 ‘‘(ii) $15,000 ($30,000 in the case of 

16 a joint return). 

17 The rule of section 219(g)(2)(C) shall apply to 

18 any reduction under this subparagraph. 

19 ‘‘(C) DEFINITIONS.—For purposes of this 

20 paragraph— 

21 ‘‘(i) adjusted gross income shall be de22 termined in the same manner as under sec23 tion 408A(c)(3)(C)(i), and 

24 ‘‘(ii) the applicable dollar amount is— 


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1 ‘‘(I) in the case of a taxpayer fil2 ing a joint return, $30,000, and 

3 ‘‘(II) in the case of any other 

4 taxpayer, $15,000. 

5 ‘‘(3) MONTHLY LIMITATION.— 

6 ‘‘(A) IN GENERAL.—The monthly limita7 tion for an individual for each coverage month 

8 of such individual during the taxable year is the 

amount equal to 1 9 ⁄12th of the qualified health 

10 insurance amount. 

11 ‘‘(B) QUALIFIED HEALTH INSURANCE

12 AMOUNT.—For purposes of this paragraph, the 

13 qualified health insurance amount is— 

14 ‘‘(i) $2,000 if such individual is the 

15 taxpayer, and 

16 ‘‘(ii) $2,000 if such individual is— 

17 ‘‘(I) the spouse of the taxpayer, 

18 the taxpayer and such spouse are 

19 married as of the first day of such 

20 month, and the taxpayer files a joint 

21 return for the taxable year, or 

22 ‘‘(II) an individual for whom a 

23 deduction under section 151(c) is al24 lowable to the taxpayer for such tax25 able year. 


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1 ‘‘(C) LIMITATION TO SPOUSE OR DEPEND2 ENT.—Not more than 1 individual may be 

3 taken into account by the taxpayer under sub4 paragraph (B)(ii). 

5 ‘‘(4) COVERAGE MONTH.—For purposes of this 

6 subsection— 

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

8 month’ means, with respect to an individual, 

9 any month if— 

10 ‘‘(i) as of the first day of such month 

11 such individual is covered by qualified 

12 health insurance, and 

13 ‘‘(ii) the premium for coverage under 

14 such insurance for such month is paid by 

15 the taxpayer. 

16 ‘‘(B) EMPLOYER-SUBSIDIZED COV17 ERAGE.— 

18 ‘‘(i) IN GENERAL.—Such term shall 

19 not include any month for which such indi20 vidual is eligible to participate in any sub21 sidized health plan (within the meaning of 

22 section 162(l)(2)) maintained by any em23 ployer of the taxpayer or of the spouse of 

24 the taxpayer. 


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1 ‘‘(ii) PREMIUMS TO NONSUBSIDIZED

2 PLANS.—If an employer of the taxpayer or 

3 the spouse of the taxpayer maintains a 

4 health plan which is not a subsidized 

5 health plan (as so defined) and which con6 stitutes qualified health insurance, em7 ployee contributions to the plan shall be 

8 treated as amounts paid for qualified 

9 health insurance. 

10 ‘‘(C) CAFETERIA PLAN AND FLEXIBLE

11 SPENDING ACCOUNT BENEFICIARIES.—Such 

12 term shall not include any month during a tax13 able year if any amount is not includible in the 

14 gross income of the taxpayer for such year 

15 under section 106 with respect to— 

16 ‘‘(i) a benefit chosen under a cafeteria 

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

18 ‘‘(ii) a benefit provided under a flexi19 ble spending or similar arrangement. 

20 ‘‘(D) MEDICARE AND MEDICAID.—Such 

21 term shall not include any month with respect 

22 to an individual if, as of the first day of such 

23 month, such individual— 

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

25 title XVIII of the Social Security Act, or 


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1 ‘‘(ii) is a participant in the program 

2 under title XIX or XXI of such Act. 

3 ‘‘(E) CERTAIN OTHER COVERAGE.—Such 

4 term shall not include any month during a tax5 able year with respect to an individual if, at any 

6 time during such year, any benefit is provided 

7 to such individual under— 

8 ‘‘(i) chapter 89 of title 5, United 

9 States Code, 

10 ‘‘(ii) chapter 55 of title 10, United 

11 States Code, 

12 ‘‘(iii) chapter 17 of title 38, United 

13 States Code, or 

14 ‘‘(iv) any medical care program under 

15 the Indian Health Care Improvement Act. 

16 ‘‘(F) PRISONERS.—Such term shall not in17 clude any month with respect to an individual 

18 if, as of the first day of such month, such indi19 vidual is imprisoned under Federal, State, or 

20 local authority. 

21 ‘‘(G) INSUFFICIENT PRESENCE IN UNITED

22 STATES.—Such term shall not include any 

23 month during a taxable year with respect to an 

24 individual if such individual is present in the 

25 United States on fewer than 183 days during 


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1 such year (determined in accordance with sec2 tion 7701(b)(7)). 

3 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur4 poses of this section— 

5 ‘‘(1) IN GENERAL.—The term ‘qualified health 

6 insurance’ means insurance which constitutes med7 ical care as defined in section 213(d) without regard 

8 to— 

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

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

11 as relates to qualified long-term care insurance 

12 contracts. 

13 ‘‘(2) EXCLUSION OF CERTAIN OTHER CON14 TRACTS.—Such term shall not include insurance if a 

15 substantial portion of its benefits are excepted bene16 fits (as defined in section 9832(c)). 

17 ‘‘(d) ARCHER MSA AND HEALTH SAVINGS ACCOUNT

18 CONTRIBUTIONS.— 

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

20 for paragraph (2)) be allowed under section 220 or 

21 223 to the taxpayer for a payment for the taxable 

22 year to the Archer MSA or health savings account 

23 of an individual, subsection (a) shall be applied by 

24 treating such payment as a payment for qualified 

25 health insurance for such individual. 


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1 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc2 tion shall be allowed under section 220 or 223 for 

3 that portion of the payments otherwise allowable as 

4 a deduction under section 220 or 223 for the taxable 

5 year which is equal to the amount of credit allowed 

6 for such taxable year by reason of this subsection. 

7 ‘‘(e) SPECIAL RULES.—For purposes of this sec8 tion— 

9 ‘‘(1) MARRIED COUPLES MUST FILE JOINT RE10 TURN.—If the taxpayer is married at the close of 

11 the taxable year, the credit shall be allowed under 

12 subsection (a) only if the taxpayer and the tax13 payer’s spouse file a joint return for the taxable 

14 year. 

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

16 credit shall be allowed under this section to any indi17 vidual with respect to whom a deduction under sec18 tion 151 is allowable to another taxpayer for a tax19 able year beginning in the calendar year in which 

20 such individual’s taxable year begins. 

21 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No credit 

22 shall be allowed under subsection (a) if the credit 

23 under section 35 is allowed and no credit shall be al24 lowed under 35 if a credit is allowed under this sec25 tion. 


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1 ‘‘(4) COORDINATION WITH DEDUCTION FOR

2 HEALTH INSURANCE COSTS.—In the case of a tax3 payer who is eligible to deduct any amount under 

4 section 162(l) or 213 for the taxable year, this sec5 tion shall apply only if the taxpayer elects not to 

6 claim any amount as a deduction under such section 

7 for such year. 

8 ‘‘(5) ELECTION NOT TO CLAIM CREDIT.—This 

9 section shall not apply to a taxpayer for any taxable 

10 year if such taxpayer elects to have this section not 

11 apply for such taxable year. 

12 ‘‘(6) INFLATION ADJUSTMENT.—In the case of 

13 any taxable year beginning in a calendar year after 

14 2007, each dollar amount contained in subsection 

15 (b)(2)(B) shall be increased by an amount equal 

16 to— 

17 ‘‘(A) such dollar amount, multiplied by 

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for the calendar 

20 year in which the taxable year begins, deter21 mined by substituting ‘calendar year 2006’ for 

22 ‘calendar year 1992’ in subparagraph (B) 

23 thereof. 


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1 Any increase determined under the preceding sen2 tence shall be rounded to the nearest multiple of 

3 $50.’’. 

4 (b) INFORMATION REPORTING.— 

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

6 subchapter A of chapter 61 of such Code (relating 

7 to information concerning transactions with other 

8 persons) is amended by inserting after section 

9 6050T the following new section: 

10 ‘‘SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR 

11 QUALIFIED HEALTH INSURANCE. 

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

13 with a trade or business conducted by such person, re14 ceives payments during any calendar year from any indi15 vidual for coverage of such individual or any other indi16 vidual under creditable health insurance, shall make the 

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

18 Secretary may by regulations prescribe) with respect to 

19 each individual from whom such payments were received. 

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

21 is described in this subsection if such return— 

22 ‘‘(1) is in such form as the Secretary may pre23 scribe, and 

24 ‘‘(2) contains— 


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

2 individual from whom payments described in 

3 subsection (a) were received, 

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

5 individual who was provided by such person 

6 with coverage under creditable health insurance 

7 by reason of such payments and the period of 

8 such coverage, and 

9 ‘‘(C) such other information as the Sec10 retary may reasonably prescribe. 

11 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur12 poses of this section, the term ‘creditable health insurance’ 

13 means qualified health insurance (as defined in section 

14 36(c)) other than— 

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

16 plan maintained by an employer, or 

17 ‘‘(2) to the extent provided in regulations pre18 scribed by the Secretary, any other insurance cov19 ering an individual if no credit is allowable under 

20 section 36 with respect to such coverage. 

21 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID22 UALS WITH RESPECT TO WHOM INFORMATION IS RE23 QUIRED.—Every person required to make a return under 

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


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

2 such return a written statement showing— 

3 ‘‘(1) the name and address of the person re4 quired to make such return and the phone number 

5 of the information contact for such person, 

6 ‘‘(2) the aggregate amount of payments de7 scribed in subsection (a) received by the person re8 quired to make such return from the individual to 

9 whom the statement is required to be furnished, and 

10 ‘‘(3) the information required under subsection 

11 (b)(2)(B) with respect to such payments. 

12 The written statement required under the preceding sen13 tence shall be furnished on or before January 31 of the 

14 year following the calendar year for which the return 

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

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

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

18 provided in regulations prescribed by the Secretary, in the 

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

20 another person, only the person first receiving such 

21 amount shall be required to make the return under sub22 section (a).’’. 

23 (2) ASSESSABLE PENALTIES.— 

24 (A) Subparagraph (B) of section 

25 6724(d)(1) of such Code (relating to definiVerDate Aug 31 2005 03:05 Aug 02, 2006 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S3754.IS S3754

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1 tions) is amended by redesignating clauses (xii) 

2 through (xviii) as clauses (xiii) through (xix), 

3 respectively, and by inserting after clause (xi) 

4 the following new clause: 

5 ‘‘(xii) section 6050U (relating to re6 turns relating to payments for qualified 

7 health insurance),’’. 

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

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

10 end of the next to last subparagraph, by strik11 ing the period at the end of the last subpara12 graph and inserting ‘‘, or’’, and by adding at 

13 the end the following new subparagraph: 

14 ‘‘(CC) section 6050U(d) (relating to re15 turns relating to payments for qualified health 

16 insurance).’’. 

17 (3) CLERICAL AMENDMENT.—The table of sec18 tions for subpart B of part III of subchapter A of 

19 chapter 61 of such Code is amended by inserting 

20 after the item relating to section 6050T the fol21 lowing new item: 

‘‘Sec. 6050U. Returns relating to payments for qualified health insurance.’’. 

22 (c) CONFORMING AMENDMENTS.— 

23 (1) Paragraph (2) of section 1324(b) of title 

24 31, United States Code, is amended by inserting be25 fore the period ‘‘, or from section 36 of such Code’’. 


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1 (2) The table of sections for subpart C of part 

2 IV of subchapter A of chapter 1 of the Internal Rev3 enue Code of 1986 is amended by striking the last 

4 item and inserting the following new items: 

‘‘Sec. 36. Health insurance costs. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2006. 

8 SEC. 3. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS 

9 OF QUALIFIED HEALTH INSURANCE. 

10 (a) IN GENERAL.—Chapter 77 of the Internal Rev11 enue Code of 1986 (relating to miscellaneous provisions) 

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

13 ‘‘SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE 

14 CREDIT FOR PURCHASERS OF QUALIFIED 

15 HEALTH INSURANCE. 

16 ‘‘(a) GENERAL RULE.—In the case of an eligible indi17 vidual, the Secretary shall make payments to the provider 

18 of such individual’s qualified health insurance equal to 

19 such individual’s qualified health insurance credit advance 

20 amount with respect to such provider. 

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

22 section, the term ‘eligible individual’ means any indi23 vidual— 


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1 ‘‘(1) who purchases qualified health insurance 

2 (as defined in section 36(c)), and 

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

4 credit eligibility certificate is in effect. 

5 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI6 BILITY CERTIFICATE.—For purposes of this section, a 

7 qualified health insurance credit eligibility certificate is a 

8 statement furnished by an individual to the Secretary 

9 which— 

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

11 to receive the credit provided by section 36 for the 

12 taxable year, 

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

14 such taxable year, and 

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

16 Secretary may require for purposes of this section. 

17 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD18 VANCE AMOUNT.—For purposes of this section, the term 

19 ‘qualified health insurance credit advance amount’ means, 

20 with respect to any provider of qualified health insurance, 

21 the Secretary’s estimate of the amount of credit allowable 

22 under section 36 to the individual for the taxable year 

23 which is attributable to the insurance provided to the indi24 vidual by such provider. 


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1 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

2 such regulations as may be necessary to carry out the pur3 poses of this section.’’. 

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

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

6 end the following new item: 

‘‘Sec. 7529. Advance payment of health insurance credit for purchasers of 

qualified health insurance.’’. 

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

8 this section shall apply to taxable year beginning after the 

9 date of the enactment of this Act. 

10 SEC. 4. LIMITATION ON EMPLOYER-PROVIDED HEALTH 

11 CARE COVERAGE. 

12 (a) IN GENERAL.—Section 106 of the Internal Rev13 enue Code of 1986 (relating to contributions by employer 

14 to accident and health plans) is amended by adding at the 

15 end the following new subsection: 

16 ‘‘(e) LIMITATION ON EMPLOYER-PROVIDED HEALTH

17 CARE COVERAGE.— 

18 ‘‘(1) IN GENERAL.—The amount of any exclu19 sion under subsection (a) for any taxable year with 

20 respect to— 

21 ‘‘(A) any employer-provided coverage 

22 under an accident or health plan which con23 stitutes medical care, and 


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1 ‘‘(B) any employer contribution to an Ar2 cher MSA or a health savings account which is 

3 treated by subsection (b) or (d) as employer4 provided coverage for medical expenses under 

5 an accident or health plan, 

6 shall not exceed $5,000 per employee for self-only 

7 coverage and $11,500 for family coverage. 

8 ‘‘(2) MEDICAL CARE DEFINED.—For purposes 

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

10 meaning given to such term in section 213(d) deter11 mined without regard to— 

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

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

14 as relates to qualified long-term care insur15 ance.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2006. 

Æ 


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