II 

109TH CONGRESS 

1ST SESSION S. 978 

To amend the Internal Revenue Code of 1986 to provide tax incentives 

for the purchase of qualified health insurance, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 9, 2005 

Mr. SANTORUM (for himself and Mr. DEMINT) 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 provide 

tax incentives for the purchase of qualified 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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Healthcare Tax Relief for the Uninsured Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Deduction of premiums for high deductible health plans. 

Sec. 3. Refundable credit for contributions to health savings accounts of small 

business employees. 

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Sec. 4. Refundable health insurance costs credit. 

Sec. 5. Advance payment of credit to issuers of qualified health insurance. 

1 SEC. 2. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE 

2 HEALTH PLANS. 

3 (a) IN GENERAL.—Part VII of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to 

5 additional itemized deductions for individuals) is amended 

6 by redesignating section 224 as section 225 and by insert7 ing after section 223 the following new section: 

8 ‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

9 PLANS. 

10 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi11 vidual, there shall be allowed as a deduction for the tax12 able year the aggregate amount paid by such individual 

13 as premiums under a high deductible health plan with re14 spect to months during such year for which such indi15 vidual is an eligible individual with respect to such health 

16 plan. 

17 ‘‘(b) DEFINITIONS.—For purposes of this section— 

18 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

19 individual’ has the meaning given such term by sec20 tion 223(c)(1). 

21 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The 

22 term ‘high deductible health plan’ has the meaning 

23 given such term by section 223(c)(2). 

24 ‘‘(c) SPECIAL RULES.— 

3 

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1 ‘‘(1) DEDUCTION ALLOWABLE FOR ONLY 1

2 PLAN.—For purposes of this section, in the case of 

3 an individual covered by more than 1 high deductible 

4 health plan for any month, the individual may only 

5 take into account amounts paid for 1 of such plans 

6 for such month. 

7 ‘‘(2) GROUP HEALTH PLAN COVERAGE.— 

8 ‘‘(A) IN GENERAL.—No deduction shall be 

9 allowed to an individual under subsection (a) 

10 for any amount paid for coverage under a high 

11 deductible health plan for a month if that indi12 vidual participates in any coverage under a 

13 group health plan (within the meaning of sec14 tion 5000 without regard to section 5000(d)). 

15 ‘‘(B) EXCEPTION FOR CERTAIN PER16 MITTED COVERAGE.—Subparagraph (A) shall 

17 not apply to an individual if the individual’s 

18 only coverage under a group health plan for a 

19 month is coverage described in clause (i) or (ii) 

20 of section 223(c)(1)(B). 

21 ‘‘(3) CONTRIBUTIONS TO HEALTH SAVINGS AC22 COUNT REQUIRED.—A deduction shall not be al23 lowed under subsection (a) for a taxable year with 

24 respect to such individual if a deduction is not allowVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 able under section 223 with respect to such indi2 vidual for the taxable year. 

3 ‘‘(4) MEDICAL AND HEALTH SAVINGS AC4 COUNTS.—Subsection (a) shall not apply with re5 spect to any amount which is paid or distributed out 

6 of an Archer MSA or a health savings account which 

7 is not included in gross income under section 220(f) 

8 or 223(f), as the case may be. 

9 ‘‘(5) COORDINATION WITH DEDUCTION FOR

10 HEALTH INSURANCE OF SELF-EMPLOYED INDIVID11 UALS.—The amount taken into account by the tax12 payer in computing the deduction under section 

13 162(l) shall not be taken into account under this 

14 section. 

15 ‘‘(6) COORDINATION WITH MEDICAL EXPENSE

16 DEDUCTION.—The amount taken into account by 

17 the taxpayer in computing the deduction under this 

18 section shall not be taken into account under section 

19 213.’’. 

20 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI21 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 

22 of section 62 of such Code is amended by inserting before 

23 the last sentence at the end the following new paragraph: 

5 

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1 ‘‘(21) PREMIUMS FOR HIGH DEDUCTIBLE

2 HEALTH PLANS.—The deduction allowed by section 

3 224.’’. 

4 (c) COORDINATION WITH SECTION 35 HEALTH IN5 SURANCE COSTS CREDIT.—Section 35(g)(2) of such Code 

6 is amended by striking ‘‘or 213’’ and inserting ‘‘, 213, 

7 or 224’’. 

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

9 for part VII of subchapter B of chapter 1 of such Code 

10 is amended by redesignating the item relating to section 

11 224 as an item relating to section 225 and by inserting 

12 before such item the following new item: 

‘‘Sec. 224. Premiums for high deductible health plans.’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2005. 

16 SEC. 3. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO 

17 HEALTH SAVINGS ACCOUNTS OF SMALL BUSI18 NESS EMPLOYEES. 

19 (a) IN GENERAL.—Subpart C of part IV of sub20 chapter A of chapter 1 of the Internal Revenue Code of 

21 1986 is amended by redesignating section 36 as section 

22 37 and by inserting after section 35 the following new sec23 tion: 

6 

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1 ‘‘SEC. 36. SMALL EMPLOYER CONTRIBUTIONS TO HEALTH 

2 SAVINGS ACCOUNTS. 

3 ‘‘(a) GENERAL RULE.—In the case of an eligible em4 ployer, there shall be allowed as a credit against the tax 

5 imposed by this subtitle an amount equal to the lesser of— 

6 ‘‘(1) the amount contributed by the employer to 

7 any qualified health savings account of any employee 

8 who is an eligible individual (as defined in section 

9 223(c)(1)) during the taxable year and who is cov10 ered by a high deductible health plan maintained by 

11 the employer, or 

12 ‘‘(2) an amount equal to the product of— 

13 ‘‘(A) $200 ($500 if coverage for all months 

14 described in subparagraph (B)(i) is family cov15 erage), and 

16 ‘‘(B) a fraction— 

17 ‘‘(i) the numerator of which is the 

18 number of months that the employee was 

19 covered under a high deductible health 

20 plan maintained by the employer, and 

21 ‘‘(ii) the denominator of which is the 

22 number of months in the taxable year. 

23 ‘‘(b) ELIGIBLE EMPLOYER.—For purposes of this 

24 section— 

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1 ‘‘(1) IN GENERAL.—The term ‘eligible em2 ployer’ means, with respect to any taxable year, an 

3 employer which— 

4 ‘‘(A) is a small employer, and 

5 ‘‘(B) maintains a high deductible health 

6 plan under which all employees of the employer 

7 reasonably expected to receive at least $5,000 

8 of compensation during the taxable year are eli9 gible to participate. 

10 An employer may exclude from consideration under 

11 subparagraph (B) employees who are covered by an 

12 agreement described in section 410(b)(3)(A) if there 

13 is evidence that health benefits were the subject of 

14 good faith bargaining. 

15 ‘‘(2) EXCEPTION FOR GOVERNMENTAL AND

16 TAX-EXEMPT EMPLOYERS.—The term ‘eligible em17 ployer’ shall not include the Federal Government or 

18 any employer described in section 457(e)(1). 

19 ‘‘(3) SMALL EMPLOYER.— 

20 ‘‘(A) IN GENERAL.—The term ‘small em21 ployer’ means, with respect to any calendar 

22 year, any employer if such employer employed 

23 an average of 100 or fewer employees on busi24 ness days during either of the 2 preceding cal25 endar years. For purposes of the preceding senVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 tence, a preceding calendar year may be taken 

2 into account only if the employer was in exist3 ence throughout such year. 

4 ‘‘(B) EMPLOYERS NOT IN EXISTENCE IN

5 PRECEDING YEAR.—In the case of an employer 

6 which was not in existence throughout the 1st 

7 preceding calendar year, the determination 

8 under subparagraph (A) shall be based on the 

9 average number of employees that it is reason10 ably expected such employer will employ on 

11 business days in the current calendar year. 

12 ‘‘(C) SPECIAL RULE.—Any reference in 

13 this paragraph to an employer shall include a 

14 reference to any predecessor of such employer. 

15 ‘‘(c) DEFINITIONS.—For purposes of this section— 

16 ‘‘(1) HIGH DEDUCTIBLE HEALTH PLAN.—The 

17 term ‘high deductible health plan’ has the meaning 

18 given such term by section 223(c)(2). 

19 ‘‘(2) QUALIFIED HEALTH SAVINGS ACCOUNT.— 

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

21 health savings account’ means a health savings 

22 account (as defined in section 223(d))— 

23 ‘‘(i) which is designated (in such form 

24 as the Secretary may prescribe) as a qualiVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 fied account for purposes of this section or 

2 section 36A, 

3 ‘‘(ii) which may not include any 

4 amount other than contributions described 

5 in subsection (a) or section 36A(e), and 

6 earnings on such contributions, and 

7 ‘‘(iii) with respect to which section 

8 223(f)(4)(A) is applied by substituting 

9 ‘100 percent’ for ‘10 percent’. 

10 ‘‘(B) SUBACCOUNTS AND SEPARATE AC11 COUNTING.—The Secretary may prescribe rules 

12 under which a subaccount within a health sav13 ings account, or separate accounting with re14 spect to contributions and earnings described in 

15 subparagraph (A)(ii), may be treated in the 

16 same manner as a qualified health savings ac17 count for purposes of this section and section 

18 36A. 

19 ‘‘(C) ROLLOVERS.—A contribution of a 

20 distribution from a qualified health savings ac21 count to another health savings account shall be 

22 treated as a rollover contribution for purposes 

23 of section 223(f)(5) only if the other account is 

24 a qualified health savings account. 

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1 ‘‘(d) SPECIAL RULES.—For purposes of this sec2 tion— 

3 ‘‘(1) AGGREGATION RULES.—All persons treat4 ed as a single employer under subsection (a) or (b) 

5 of section 52, or subsection (n) or (o) of section 414, 

6 shall be treated as one person. 

7 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de8 duction shall be allowed for that portion of contribu9 tions to any health savings accounts for the taxable 

10 year which is equal to the credit determined under 

11 subsection (a). 

12 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This 

13 section shall not apply to a taxpayer for any taxable 

14 year if such taxpayer elects to have this section not 

15 apply for such taxable year.’’. 

16 (b) CONFORMING AMENDMENTS.— 

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

18 31, United States Code, is amended by inserting be19 fore the period ‘‘, or from section 36 of such Code’’. 

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

21 IV of chapter 1 of the Internal Revenue Code of 

22 1986 is amended by redesignating the item relating 

23 to section 36 as an item relating to section 37 and 

24 by inserting before the item relating to section 37 

25 the following new item: 

‘‘Sec. 36. Small employer contributions to health savings accounts.’’. 

11 

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

2 this section shall apply to contributions made in taxable 

3 years beginning after December 31, 2005. 

4 SEC. 4. REFUNDABLE HEALTH INSURANCE COSTS CREDIT. 

5 (a) ALLOWANCE OF CREDIT.— 

6 (1) IN GENERAL.—Subpart C of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code 

8 of 1986 (relating to refundable personal credits) is 

9 amended by inserting after section 36 the following 

10 new section: 

11 ‘‘SEC. 36A. HEALTH INSURANCE COSTS FOR UNINSURED IN12 DIVIDUALS. 

13 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in14 dividual, there shall be allowed as a credit against the tax 

15 imposed by this subtitle for the taxable year an amount 

16 equal to the amount paid by the taxpayer during such tax17 able year for qualified health insurance for the taxpayer 

18 and the taxpayer’s spouse and dependents. 

19 ‘‘(b) LIMITATIONS.— 

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

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

22 taxable year shall not exceed the lesser of— 

23 ‘‘(A) 90 percent of the sum of the amounts 

24 paid by the taxpayer for qualified health insur25 ance for each individual referred to in subVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 section (a) for coverage months of such indi2 vidual during the taxable year, or 

3 ‘‘(B) $3,000. 

4 ‘‘(2) MONTHLY LIMITATION.— 

5 ‘‘(A) IN GENERAL.—For purposes of para6 graph (1), amounts paid by the taxpayer for 

7 qualified health insurance for an individual for 

8 any coverage month of such individual during 

9 the taxable year shall not be taken into account 

10 to the extent such amounts exceed the amount 

equal to 1 11 ⁄12 of— 

12 ‘‘(i) $1,111 if such individual is the 

13 taxpayer, 

14 ‘‘(ii) $1,111 if— 

15 ‘‘(I) such individual is the spouse 

16 of the taxpayer, 

17 ‘‘(II) the taxpayer and such 

18 spouse are married as of the first day 

19 of such month, and 

20 ‘‘(III) the taxpayer files a joint 

21 return for the taxable year, and 

22 ‘‘(iii) $1,111 if such individual has at23 tained the age of 24 as of the close of the 

24 taxable year and is a dependent of the tax25 payer for such taxable year, 

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1 ‘‘(iv) one-half of the amount described 

2 in clause (i) if such individual has not at3 tained the age of 24 as of the close of the 

4 taxable year and is a dependent of the tax5 payer for such taxable year. 

6 ‘‘(B) LIMITATION TO 2 YOUNG DEPEND7 ENTS.—If there are more than 2 individuals de8 scribed in subparagraph (A)(iv) with respect to 

9 the taxpayer for any coverage month, the aggre10 gate amounts paid by the taxpayer for qualified 

11 health insurance for such individuals which may 

12 be taken into account under paragraph (1) shall 

not exceed 1 13 ⁄12 of the dollar amount in effect 

14 under subparagraph (A)(i) for the coverage 

15 month. 

16 ‘‘(C) SPECIAL RULE FOR MARRIED INDI17 VIDUALS.—In the case of a taxpayer— 

18 ‘‘(i) who is married (within the mean19 ing of section 7703) as of the close of the 

20 taxable year but does not file a joint return 

21 for such year, and 

22 ‘‘(ii) who does not live apart from 

23 such taxpayer’s spouse at all times during 

24 the taxable year, 

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1 any dollar limitation imposed under this para2 graph on amounts paid for qualified health in3 surance for individuals described in subpara4 graph (A)(iv) shall be divided equally between 

5 the taxpayer and the taxpayer’s spouse unless 

6 they agree on a different division. 

7 ‘‘(3) INCOME PHASEOUT OF CREDIT PERCENT8 AGE FOR ONE-PERSON COVERAGE.— 

9 ‘‘(A) PHASEOUT FOR UNMARRIED INDIVID10 UALS (OTHER THAN SURVIVING SPOUSES AND

11 HEADS OF HOUSEHOLDS).—In the case of an 

12 individual (other than a surviving spouse, the 

13 head of a household, or a married individual) 

14 with one-person coverage, if such individual has 

15 modified adjusted gross income— 

16 ‘‘(i) in excess of $15,000 for a taxable 

17 year but not in excess of $20,000, the 90 

18 percent under paragraph (1)(B) shall be 

19 reduced by the number of percentage 

20 points which bears the same ratio to 40 

21 percentage points as— 

22 ‘‘(I) the excess of modified ad23 justed gross income in excess of 

24 $15,000, bears to 

25 ‘‘(II) $5,000, or 

15 

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1 ‘‘(ii) in excess of $20,000 for a tax2 able year, the 90 percent under paragraph 

3 (1)(B) shall be reduced by the sum of 40 

4 percentage points plus the number of per5 centage points which bears the same ratio 

6 to 50 percentage points as— 

7 ‘‘(I) the excess of modified ad8 justed gross income in excess of 

9 $20,000, bears to 

10 ‘‘(II) $10,000. 

11 ‘‘(B) PHASEOUT FOR OTHER INDIVID12 UALS.—In the case of a taxpayer (other than 

13 an individual described in subparagraph (A) or 

14 (C)) with one-person coverage, if the taxpayer 

15 has modified adjusted gross income in excess of 

16 $25,000 for a taxable year, the 90 percent 

17 under paragraph (1)(B) shall be reduced by the 

18 number of percentage points which bears the 

19 same ratio to 90 percentage points as— 

20 ‘‘(i) the excess of modified adjusted 

21 gross income in excess of $25,000, bears to 

22 ‘‘(ii) $15,000. 

23 ‘‘(C) MARRIED FILING SEPARATE RE24 TURN.—In the case of a taxpayer who is mar25 ried filing a separate return for the taxable year 

16 

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1 and who has one-person coverage, if the tax2 payer has modified adjusted gross income in ex3 cess of $12,500 for the taxable year, the 90 

4 percent under paragraph (1)(B) shall be re5 duced by the number of percentage points 

6 which bears the same ratio to 90 percentage 

7 points as— 

8 ‘‘(i) the excess of modified adjusted 

9 gross income in excess of $12,500, bears to 

10 ‘‘(ii) $7,500. 

11 ‘‘(4) INCOME PHASEOUT OF CREDIT PERCENT12 AGE FOR COVERAGE OF MORE THAN ONE PERSON.— 

13 ‘‘(A) IN GENERAL.—Except as provided in 

14 subparagraph (B), in the case of a taxpayer 

15 with coverage of more than one person, if the 

16 taxpayer has modified adjusted gross income in 

17 excess of $25,000 for a taxable year, the 90 

18 percent under paragraph (1)(B) shall be re19 duced by the number of percentage points 

20 which bears the same ratio to 90 percentage 

21 points as— 

22 ‘‘(i) the excess of modified adjusted 

23 gross income in excess of $25,000, bears to 

24 ‘‘(ii) $35,000. 

17 

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1 ‘‘(B) MARRIED FILING SEPARATE RE2 TURN.—In the case of a taxpayer who is mar3 ried filing a separate return for the taxable year 

4 and who has coverage of more than one person, 

5 if the taxpayer has modified adjusted gross in6 come in excess of $12,500 for the taxable year, 

7 the 90 percent under paragraph (1)(B) shall be 

8 reduced by the number of percentage points 

9 which bears the same ratio to 90 percentage 

10 points as— 

11 ‘‘(i) the excess of modified adjusted 

12 gross income in excess of $12,500, bears to 

13 ‘‘(ii) $17,500. 

14 ‘‘(5) ROUNDING.—Any percentage resulting 

15 from a reduction under paragraphs (3) and (4) shall 

16 be rounded to the nearest one-tenth of a percent. 

17 ‘‘(6) MODIFIED ADJUSTED GROSS INCOME.— 

18 The term ‘modified adjusted gross income’ means 

19 adjusted gross income determined— 

20 ‘‘(A) without regard to this section and 

21 sections 911, 931, and 933, and 

22 ‘‘(B) after application of sections 86, 135, 

23 137, 219, 221, and 469. 

24 ‘‘(c) COVERAGE MONTH.—For purposes of this sec25 tion— 

18 

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

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

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

4 such individual is covered by qualified health in5 surance, and 

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

7 insurance for such month is paid by the tax8 payer. 

9 ‘‘(2) GROUP HEALTH PLAN COVERAGE.— 

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

11 month’ shall not include any month for which 

12 such individual participates in any group health 

13 plan (within the meaning of section 5000 with14 out regard to section 5000(d)). 

15 ‘‘(B) EXCEPTION FOR CERTAIN PER16 MITTED COVERAGE.—Subparagraph (A) shall 

17 not apply to an individual if the individual’s 

18 only coverage under a group health plan for a 

19 month is coverage described in clause (i) or (ii) 

20 of section 223(c)(1)(B). 

21 ‘‘(3) EMPLOYER-PROVIDED COVERAGE.—The 

22 term ‘coverage month’ shall not include any month 

23 during a taxable year if any amount is not includible 

24 in the gross income of the taxpayer for such year 

19 

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1 under section 106 (other than coverage described in 

2 clause (i) or (ii) of section 223(c)(1)(B)). 

3 ‘‘(4) MEDICARE, MEDICAID, AND SCHIP.—The 

4 term ‘coverage month’ shall not include any month 

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

6 of such month, such individual— 

7 ‘‘(A) is entitled to any benefits under part 

8 A of title XVIII of the Social Security Act or 

9 is enrolled under part B of such title, or 

10 ‘‘(B) is enrolled in the program under title 

11 XIX or XXI of such Act (other than under sec12 tion 1928 of such Act). 

13 ‘‘(5) CERTAIN OTHER COVERAGE.—The term 

14 ‘coverage month’ shall not include any month with 

15 respect to an individual if, at any time during such 

16 month, any benefit is provided to such individual 

17 under— 

18 ‘‘(A) chapter 89 of title 5, United States 

19 Code, or 

20 ‘‘(B) chapter 55 of title 10, United States 

21 Code. 

22 ‘‘(6) PRISONERS.—The term ‘coverage month’ 

23 shall not include any month with respect to an indi24 vidual if, as of the first day of such month, such inVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 dividual is imprisoned under Federal, State, or local 

2 authority. 

3 ‘‘(7) INSUFFICIENT PRESENCE IN UNITED

4 STATES.—The term ‘coverage month’ shall not in5 clude any month during a taxable year with respect 

6 to an individual if such individual is present in the 

7 United States on fewer than 183 days during such 

8 year (determined in accordance with section 

9 7701(b)(7)). 

10 ‘‘(d) QUALIFIED HEALTH INSURANCE.—For pur11 poses of this section— 

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

13 insurance’ means health insurance coverage (as de14 fined in section 9832(b)(1)) which— 

15 ‘‘(A) is coverage described in paragraph 

16 (2), and 

17 ‘‘(B) meets the requirements of paragraph 

18 (3). 

19 ‘‘(2) ELIGIBLE COVERAGE.—Coverage described 

20 in this paragraph is the following: 

21 ‘‘(A) Coverage under individual health in22 surance. 

23 ‘‘(B) Coverage through a private sector 

24 health care coverage purchasing pool. 

21 

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1 ‘‘(C) Coverage through a State health care 

2 coverage purchasing pool. 

3 ‘‘(D) Coverage under a State high risk 

4 pool described in subparagraph (C) of section 

5 35(e)(1). 

6 ‘‘(E) Coverage, after December 31, 2006, 

7 under an eligible State buyin program. 

8 ‘‘(3) REQUIREMENTS.—The requirements of 

9 this paragraph are as follows: 

10 ‘‘(A) COST LIMITS.—The coverage meets 

11 the requirements of section 223(c)(2)(A)(ii). 

12 ‘‘(B) MAXIMUM BENEFITS.—Under the 

13 coverage, the annual and lifetime maximum 

14 benefits are not less than $700,000. 

15 ‘‘(C) BROAD COVERAGE.—The coverage in16 cludes inpatient and outpatient care, emergency 

17 benefits, and physician care. 

18 ‘‘(D) GUARANTEED RENEWABILITY.—Such 

19 coverage is guaranteed renewable by the pro20 vider. 

21 ‘‘(4) ELIGIBLE STATE BUYIN PROGRAM.—For 

22 purposes of paragraph (2)(E)— 

23 ‘‘(A) IN GENERAL.—The term ‘eligible 

24 State buyin program’ means a State program 

25 under which an individual who— 

22 

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1 ‘‘(i) is not eligible for assistance under 

2 the State medicaid program under title 

3 XIX of the Social Security Act, 

4 ‘‘(ii) is not eligible for assistance 

5 under the State children’s health insurance 

6 program under title XXI of such Act, or 

7 ‘‘(iii) is not a State employee, 

8 is able to buy health insurance coverage 

9 through a purchasing arrangement entered into 

10 between the State and a private sector health 

11 care purchasing group or health plan. 

12 ‘‘(B) REQUIREMENTS.—Subparagraph (A) 

13 shall only apply to a State program if— 

14 ‘‘(i) the program uses private sector 

15 health care purchasing groups or health 

16 plans, and 

17 ‘‘(ii) the State maintains separate risk 

18 pools for participants under the State pro19 gram. 

20 ‘‘(C) SUBSIDIES.— 

21 ‘‘(i) IN GENERAL.—A State program 

22 shall not fail to be treated as an eligible 

23 State buyin program merely because the 

24 State subsidizes the costs of an individual 

23 

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1 in buying health insurance coverage under 

2 the program. 

3 ‘‘(ii) EXCEPTION.—Clause (i) shall 

4 not apply if the State subsidy under the 

5 program for any adult for any consecutive 

6 12-month period exceeds the applicable 

7 dollar amount. 

8 ‘‘(iii) APPLICABLE DOLLAR

9 AMOUNT.— 

10 ‘‘(I) IN GENERAL.—For purposes 

11 of clause (ii), the applicable dollar 

12 amount is $2,000. 

13 ‘‘(II) REDUCTION.—In the case 

14 of a family with annual income in ex15 cess of 133 percent of the applicable 

16 poverty line (as determined in accord17 ance with criteria established by the 

18 Director of the Office of Management 

19 and Budget) but not in excess of 200 

20 percent of such line, the dollar 

21 amount under clause (i) shall be rat22 ably reduced (but not below $500) for 

23 each dollar of such excess. In the case 

24 of a family with annual income in exVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
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1 cess of 200 percent of such line, the 

2 applicable dollar amount shall be zero. 

3 ‘‘(e) ARRANGEMENTS UNDER WHICH INSURERS

4 CONTRIBUTE TO HSA.— 

5 ‘‘(1) IN GENERAL.—For purposes of this sec6 tion, health insurance shall not be treated as quali7 fied health insurance if the insurer makes contribu8 tions to a health savings account of the taxpayer un9 less such insurance is provided under an arrange10 ment described in paragraph (2). 

11 ‘‘(2) ARRANGEMENTS DESCRIBED.— 

12 ‘‘(A) AMOUNTS PAID FOR COVERAGE EX13 CEED MONTHLY LIMITATION.—In the case of 

14 amounts paid under an arrangement for health 

15 insurance for a coverage month in excess of the 

16 amount in effect under subsection (b)(2)(A) for 

17 such month, an arrangement is described in 

18 this subparagraph if under the arrangement— 

19 ‘‘(i) the aggregate amount contributed 

20 by the insurer to any health savings ac21 count of the taxpayer does not exceed 90 

22 percent of the excess of— 

23 ‘‘(I) the amount paid by the tax24 payer for qualified health insurance 

25 

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1 under such arrangement for such 

2 month, over 

3 ‘‘(II) the amount in effect under 

4 subsection (b)(2)(A) for such month, 

5 and 

6 ‘‘(ii) the amount contributed by the 

7 insurer to a qualified health savings ac8 count of the taxpayer, reduced by the 

9 amount of the excess under clause (i), does 

10 not exceed 27 percent of the amount in ef11 fect under subsection (b)(2)(A) for such 

12 month. 

13 ‘‘(B) AMOUNTS PAID FOR COVERAGE LESS

14 THAN MONTHLY LIMITATION.—In the case of 

15 an arrangement under which the amount paid 

16 for qualified health insurance for a coverage 

17 month does not exceed the amount in effect 

18 under subsection (b)(2)(A) for such month, an 

19 arrangement is described in this subparagraph 

20 if— 

21 ‘‘(i) under the arrangement the value 

22 of the insured benefits (excluding over23 head) exceeds 65 percent of the amount 

24 paid for qualified health insurance for such 

25 month, and 

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1 ‘‘(ii) the amount contributed by the 

2 insurer to a qualified health savings ac3 count of the taxpayer does not exceed 27 

4 percent of the amount in effect under sub5 section (b)(2)(A) for such month. 

6 ‘‘(3) QUALIFIED HEALTH SAVINGS ACCOUNT.— 

7 The term ‘qualified health savings account’ has the 

8 meaning given such term by section 36(c)(2). 

9 ‘‘(f) DEPENDENTS.—For purposes of this section— 

10 ‘‘(1) DEPENDENT DEFINED.—The term ‘de11 pendent’ has the meaning given to such term by sec12 tion 152 (determined without regard to subsections 

13 (b)(1), (b)(2), and (d)(1)(B) thereof). 

14 ‘‘(2) SPECIAL RULE FOR DEPENDENT CHILD OF

15 DIVORCED PARENTS.—An individual who is a child 

16 to whom section 152(e) applies shall be treated as 

17 a dependent of the custodial parent for a coverage 

18 month unless the custodial and noncustodial parent 

19 provide otherwise. 

20 ‘‘(3) DENIAL OF CREDIT TO DEPENDENTS.—No 

21 credit shall be allowed under this section to any indi22 vidual with respect to whom a deduction under sec23 tion 151(c) is allowable to another taxpayer for a 

24 taxable year beginning in the calendar year in which 

25 such individual’s taxable year begins. 

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1 ‘‘(g) INFLATION ADJUSTMENTS.— 

2 ‘‘(1) CREDIT AND HEALTH INSURANCE

3 AMOUNTS.—In the case of any taxable year begin4 ning after 2006, each dollar amount referred to in 

5 subsections (b)(1)(B), (b)(2)(A), (d)(3)(B), and 

6 (d)(4)(C)(iii)(I) shall be increased by an amount 

7 equal to— 

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

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 213(d)(10)(B)(ii) for the 

11 calendar year in which the taxable year begins, 

12 determined by substituting ‘2005’ for ‘1996’ in 

13 subclause (II) thereof. 

14 If any amount as adjusted under the preceding sen15 tence is not a multiple of $10, such amount shall be 

16 rounded to the nearest multiple of $10. 

17 ‘‘(2) INCOME PHASEOUT AMOUNTS.—In the 

18 case of any taxable year beginning after 2006, each 

19 dollar amount referred to in paragraph (3) and (4) 

20 of subsection (b) shall be increased by an amount 

21 equal to— 

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

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar 

25 year in which the taxable year begins, deterVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
28 

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1 mined by substituting ‘calendar year 2005’ for 

2 ‘calendar year 1992’ in subparagraph (B) 

3 thereof. 

4 If any amount as adjusted under the preceding sen5 tence is not a multiple of $50, such amount shall be 

6 rounded to the next lowest multiple of $50. 

7 ‘‘(h) SPECIAL RULES.— 

8 ‘‘(1) COORDINATION WITH MEDICAL EXPENSE

9 DEDUCTION AND DEDUCTION FOR PREMIUMS FOR

10 HIGH DEDUCTIBLE HEALTH PLANS.—The amount 

11 which would (but for this paragraph) be taken into 

12 account by the taxpayer under section 213 or 224 

13 for the taxable year shall be reduced by the credit 

14 (if any) allowed by this section to the taxpayer for 

15 such year. 

16 ‘‘(2) COORDINATION WITH DEDUCTION FOR

17 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN18 DIVIDUALS.—No credit shall be allowable under this 

19 section for a taxable year if a deduction is allowed 

20 under section 162(l) for the taxable year. 

21 ‘‘(3) COORDINATION WITH ADVANCE PAY22 MENT.—Rules similar to the rules of section 

23 35(g)(1) shall apply to any credit to which this sec24 tion applies. 

29 

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1 ‘‘(4) COORDINATION WITH SECTION 35.—If a 

2 taxpayer is eligible for the credit allowed under this 

3 section and section 35 for any month, the taxpayer 

4 shall elect which credit is to be allowed with respect 

5 to such month. 

6 ‘‘(i) EXPENSES MUST BE SUBSTANTIATED.—A pay7 ment for insurance to which subsection (a) applies may 

8 be taken into account under this section only if the tax9 payer substantiates such payment in such form as the Sec10 retary may prescribe. 

11 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

12 such regulations as may be necessary to carry out the pur13 poses of this section.’’. 

14 (b) INFORMATION REPORTING.— 

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

16 subchapter A of chapter 61 of the Internal Revenue 

17 Code of 1986 (relating to information concerning 

18 transactions with other persons) is amended by in19 serting after section 6050T the following: 

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

21 QUALIFIED HEALTH INSURANCE. 

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

23 with a trade or business conducted by such person, re24 ceives payments during any calendar year from any indi25 vidual for coverage of such individual or any other indiVerDate Aug 04 2004 08:53 May 13, 2005 Jkt 039200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\PICKUP\S978.IS S978
30 

•S 978 IS

1 vidual under creditable health insurance, shall make the 

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

3 Secretary may by regulations prescribe) with respect to 

4 each individual from whom such payments were received. 

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

6 is described in this subsection if such return— 

7 ‘‘(1) is in such form as the Secretary may pre8 scribe, and 

9 ‘‘(2) contains— 

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

11 individual from whom payments described in 

12 subsection (a) were received, 

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

14 individual who was provided by such person 

15 with coverage under creditable health insurance 

16 by reason of such payments and the period of 

17 such coverage, 

18 ‘‘(C) the aggregate amount of payments 

19 described in subsection (a), and 

20 ‘‘(D) such other information as the Sec21 retary may reasonably prescribe. 

22 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur23 poses of this section, the term ‘creditable health insurance’ 

24 means qualified health insurance (as defined in section 

25 36A(d)). 

31 

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1 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID2 UALS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return under 

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

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

6 such return a written statement showing— 

7 ‘‘(1) the name and address of the person re8 quired to make such return and the phone number 

9 of the information contact for such person, 

10 ‘‘(2) the aggregate amount of payments de11 scribed in subsection (a) received by the person re12 quired to make such return from the individual to 

13 whom the statement is required to be furnished, and 

14 ‘‘(3) the information required under subsection 

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

16 The written statement required under the preceding sen17 tence shall be furnished on or before January 31 of the 

18 year following the calendar year for which the return 

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

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

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

22 provided in regulations prescribed by the Secretary, in the 

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

24 another person, only the person first receiving such 

32 

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1 amount shall be required to make the return under sub2 section (a).’’. 

3 (2) ASSESSABLE PENALTIES.— 

4 (A) Subparagraph (B) of section 

5 6724(d)(1) of such Code (relating to defini6 tions) is amended by redesignating clauses (xiii) 

7 through (xviii) as clauses (xiv) through (xix), 

8 respectively, and by inserting after clause (xii) 

9 the following: 

10 ‘‘(xiii) section 6050U (relating to re11 turns relating to payments for qualified 

12 health insurance),’’. 

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

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

15 end of subparagraph (AA), by striking the pe16 riod at the end of the subparagraph (BB) and 

17 inserting ‘‘, or’’, and by adding at the end the 

18 following: 

19 ‘‘(CC) section 6050U(d) (relating to re20 turns relating to payments for qualified health 

21 insurance).’’. 

22 (3) CLERICAL AMENDMENT.—The table of sec23 tions for subpart B of part III of subchapter A of 

24 chapter 61 of such Code is amended by inserting 

33 

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1 after the item relating to section 6050T the fol2 lowing: 

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

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

4 of chapter 75 of the Internal Revenue Code of 1986 (relat5 ing to other offenses) is amended by adding at the end 

6 the following: 

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

8 HEALTH INSURANCE TAX CREDIT. 

9 ‘‘Any person who knowingly misuses Department of 

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

11 the false impression of association with, or approval or en12 dorsement by, the Department of the Treasury of any in13 surance products or health coverage in connection with the 

14 credit for health insurance costs under section 36A shall 

15 on conviction thereof be fined not more than $10,000, or 

16 imprisoned not more than 1 year, or both.’’. 

17 (d) CONFORMING AMENDMENTS.— 

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

19 31, United States Code, is amended by inserting be20 fore the period ‘‘, or from section 36A of such 

21 Code’’. 

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

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34 

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1 enue Code of 1986 is amended by inserting after the 

2 item relating to section 36 the following new item: 

‘‘Sec. 36A. Health insurance costs for uninsured individuals.’’. 

3 (3) The table of sections for subchapter B of 

4 chapter 75 of such Code is amended by adding at 

5 the end the following: 

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

6 (e) EFFECTIVE DATES.— 

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section 

9 shall apply to taxable years beginning after Decem10 ber 31, 2005. 

11 (2) PENALTIES.—The amendments made by 

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

13 date of the enactment of this Act. 

14 SEC. 5. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF 

15 QUALIFIED HEALTH INSURANCE. 

16 (a) IN GENERAL.—Chapter 77 of the Internal Rev17 enue Code of 1986 (relating to miscellaneous provisions) 

18 is amended by adding at the end the following: 

19 ‘‘SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH 

20 INSURANCE COSTS OF ELIGIBLE INDIVID21 UALS. 

22 ‘‘Not later than July 1, 2007, the Secretary shall es23 tablish a program for making payments to providers of 

24 qualified health insurance (as defined in section 36A(d)) 

35 

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1 on behalf of individuals eligible for the credit under section 

2 36A. Such payments shall be made on the basis of modi3 fied adjusted gross income of eligible individuals for the 

4 preceding taxable year.’’. 

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

6 for chapter 77 of the Internal Revenue Code of 1986 is 

7 amended by adding at the end the following: 

‘‘Sec. 7529. Advance payment of credit for health insurance costs of eligible individuals.’’. 

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

9 this section shall take effect on July 1, 2007. 

Æ