2030 
•AMDT. NO. 2786 
(B) INCLUSION
OF
FOREIGN
CORPORA-
TIONS.—For purposes of subparagraph (A), in 
applying subsections (a) and (b) of section 52 
of such Code to this section, section 1563 of 
such Code shall be applied without regard to 
subsection (b)(2)(C) thereof. 
(d) UNITED STATES HEALTH RISK.—For purposes 
of this section, the term ‘‘United States health risk’’ 
means the health risk of any individual who is— 
(1) a United States citizen, 
(2) a resident of the United States (within the 
meaning of section 7701(b)(1)(A) of the Internal 
Revenue Code of 1986), or 
(3) located in the United States, with respect to 
the period such individual is so located. 
(e) THIRD PARTY ADMINISTRATION AGREEMENT 
FEES.—For purposes of this section, the term ‘‘third 
party administration agreement fees’’ means, with respect 
to any covered entity, amounts received from an employer 
which are in excess of payments made by such covered 
entity for health benefits under an arrangement under 
which such employer self-insures the United States health 
risk of its employees. 
(f) TAX TREATMENT OF FEES.—The fees imposed 
by this section— 
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•AMDT. NO. 2786 
(1) for purposes of subtitle F of the Internal 
Revenue Code of 1986, shall be treated as excise 
taxes with respect to which only civil actions for re-
fund under procedures of such subtitle shall apply, 
and 
(2) for purposes of section 275 of such Code 
shall be considered to be a tax described in section 
275(a)(6). 
(g) REPORTING REQUIREMENT.— 
(1) IN GENERAL.—Not later than the date de-
termined by the Secretary following the end of any 
calendar year, each covered entity shall report to the 
Secretary, in such manner as the Secretary pre-
scribes, the covered entity’s net premiums written 
with respect to health insurance for any United 
States health risk and third party administration 
agreement fees for such calendar year. 
(2) PENALTY FOR FAILURE TO REPORT.— 
(A) IN GENERAL.—In the case of any fail-
ure to make a report containing the information 
required by paragraph (1) on the date pre-
scribed therefor (determined with regard to any 
extension of time for filing), unless it is shown 
that such failure is due to reasonable cause, 
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•AMDT. NO. 2786 
there shall be paid by the covered entity failing 
to file such report, an amount equal to— 
(i) $10,000, plus 
(ii) the lesser of— 
(I) an amount equal to $1,000, 
multiplied by the number of days dur-
ing which such failure continues, or 
(II) the amount of the fee im-
posed by this section for which such 
report was required. 
(B) TREATMENT OF PENALTY.—The pen-
alty imposed under subparagraph (A)— 
(i) shall be treated as a penalty for 
purposes of subtitle F of the Internal Rev-
enue Code of 1986, 
(ii) shall be paid on notice and de-
mand by the Secretary and in the same 
manner as tax under such Code, and 
(iii) with respect to which only civil 
actions for refund under procedures of 
such subtitle F shall apply. 
(h) ADDITIONAL DEFINITIONS.—For purposes of 
this section— 
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•AMDT. NO. 2786 
(1) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury or the Secretary’s del-
egate. 
(2) 
UNITED
STATES.—The 
term 
‘‘United 
States’’ means the several States, the District of Co-
lumbia, the Commonwealth of Puerto Rico, and the 
possessions of the United States. 
(3) HEALTH
INSURANCE.—The term ‘‘health 
insurance’’ shall not include insurance for long-term 
care or disability. 
(i) GUIDANCE.—The Secretary shall publish guidance 
necessary to carry out the purposes of this section. 
(j) APPLICATION OF SECTION.—This section shall 
apply to any net premiums written after December 31, 
2008, with respect to health insurance for any United 
States health risk, and any third party administration 
agreement fees received after such date. 
SEC. 9011. STUDY AND REPORT OF EFFECT ON VETERANS 
HEALTH CARE. 
(a) IN GENERAL.—The Secretary of Veterans Affairs 
shall conduct a study on the effect (if any) of the provi-
sions of sections 9008, 9009, and 9010 on— 
(1) the cost of medical care provided to vet-
erans, and 
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•AMDT. NO. 2786 
(2) veterans’ access to medical devices and 
branded prescription drugs. 
(b) REPORT.—The Secretary of Veterans Affairs 
shall report the results of the study under subsection (a) 
to the Committee on Ways and Means of the House of 
Representatives and to the Committee on Finance of the 
Senate not later than December 31, 2012. 
SEC. 9012. ELIMINATION OF DEDUCTION FOR EXPENSES 
ALLOCABLE TO MEDICARE PART D SUBSIDY. 
(a) IN GENERAL.—Section 139A of the Internal Rev-
enue Code of 1986 is amended by striking the second sen-
tence. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
SEC. 9013. MODIFICATION OF ITEMIZED DEDUCTION FOR 
MEDICAL EXPENSES. 
(a) IN GENERAL.—Subsection (a) of section 213 of 
the Internal Revenue Code of 1986 is amended by striking 
‘‘7.5 percent’’ and inserting ‘‘10 percent’’. 
(b) TEMPORARY WAIVER OF INCREASE FOR CERTAIN 
SENIORS.—Section 213 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection: 
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•AMDT. NO. 2786 
‘‘(f) SPECIAL RULE FOR 2013, 2014, 2015, AND 
2016.—In the case of any taxable year beginning after 
December 31, 2012, and ending before January 1, 2017, 
subsection (a) shall be applied with respect to a taxpayer 
by substituting ‘7.5 percent’ for ‘10 percent’ if such tax-
payer or such taxpayer’s spouse has attained age 65 before 
the close of such taxable year.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
56(b)(1)(B) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘by substituting ‘10 percent’ for ‘7.5 
percent’ ’’ and inserting ‘‘without regard to subsection (f) 
of such section’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
SEC. 9014. LIMITATION ON EXCESSIVE REMUNERATION 
PAID BY CERTAIN HEALTH INSURANCE PRO-
VIDERS. 
(a) IN GENERAL.—Section 162(m) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph: 
‘‘(6) SPECIAL RULE FOR APPLICATION TO CER-
TAIN HEALTH INSURANCE PROVIDERS.— 
‘‘(A) IN GENERAL.—No deduction shall be 
allowed under this chapter— 
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•AMDT. NO. 2786 
‘‘(i) in the case of applicable indi-
vidual remuneration which is for any dis-
qualified taxable year beginning after De-
cember 31, 2012, and which is attributable 
to services performed by an applicable indi-
vidual during such taxable year, to the ex-
tent that the amount of such remuneration 
exceeds $500,000, or 
‘‘(ii) in the case of deferred deduction 
remuneration for any taxable year begin-
ning after December 31, 2012, which is at-
tributable to services performed by an ap-
plicable individual during any disqualified 
taxable year beginning after December 31, 
2009, to the extent that the amount of 
such remuneration exceeds $500,000 re-
duced (but not below zero) by the sum 
of— 
‘‘(I) the applicable individual re-
muneration for such disqualified tax-
able year, plus 
‘‘(II) the portion of the deferred 
deduction remuneration for such serv-
ices which was taken into account 
under this clause in a preceding tax-
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•AMDT. NO. 2786 
able year (or which would have been 
taken into account under this clause 
in a preceding taxable year if this 
clause were applied by substituting 
‘December 31, 2009’ for ‘December 
31, 2012’ in the matter preceding 
subclause (I)). 
‘‘(B) DISQUALIFIED TAXABLE YEAR.—For 
purposes of this paragraph, the term ‘disquali-
fied taxable year’ means, with respect to any 
employer, any taxable year for which such em-
ployer is a covered health insurance provider. 
‘‘(C) COVERED HEALTH INSURANCE PRO-
VIDER.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘covered 
health insurance provider’ means— 
‘‘(I) with respect to taxable years 
beginning after December 31, 2009, 
and before January 1, 2013, any em-
ployer which is a health insurance 
issuer 
(as 
defined 
in 
section 
9832(b)(2)) and which receives pre-
miums from providing health insur-
ance coverage (as defined in section 
9832(b)(1)), and 
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•AMDT. NO. 2786 
‘‘(II) with respect to taxable 
years beginning after December 31, 
2012, any employer which is a health 
insurance issuer (as defined in section 
9832(b)(2)) and with respect to which 
not less than 25 percent of the gross 
premiums received from providing 
health insurance coverage (as defined 
in section 9832(b)(1)) is from min-
imum essential coverage (as defined in 
section 5000A(f)). 
‘‘(ii) AGGREGATION RULES.—Two or 
more persons who are treated as a single 
employer under subsection (b), (c), (m), or 
(o) of section 414 shall be treated as a sin-
gle employer, except that in applying sec-
tion 1563(a) for purposes of any such sub-
section, paragraphs (2) and (3) thereof 
shall be disregarded. 
‘‘(D) APPLICABLE INDIVIDUAL REMUNERA-
TION.—For purposes of this paragraph, the 
term 
‘applicable 
individual 
remuneration’ 
means, with respect to any applicable individual 
for any disqualified taxable year, the aggregate 
amount allowable as a deduction under this 
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•AMDT. NO. 2786 
chapter for such taxable year (determined with-
out regard to this subsection) for remuneration 
(as defined in paragraph (4) without regard to 
subparagraphs (B), (C), and (D) thereof) for 
services performed by such individual (whether 
or not during the taxable year). Such term shall 
not include any deferred deduction remunera-
tion with respect to services performed during 
the disqualified taxable year. 
‘‘(E) DEFERRED DEDUCTION REMUNERA-
TION.—For purposes of this paragraph, the 
term ‘deferred deduction remuneration’ means 
remuneration which would be applicable indi-
vidual remuneration for services performed in a 
disqualified taxable year but for the fact that 
the deduction under this chapter (determined 
without regard to this paragraph) for such re-
muneration is allowable in a subsequent taxable 
year. 
‘‘(F) APPLICABLE INDIVIDUAL.—For pur-
poses of this paragraph, the term ‘applicable in-
dividual’ means, with respect to any covered 
health insurance provider for any disqualified 
taxable year, any individual— 
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•AMDT. NO. 2786 
‘‘(i) who is an officer, director, or em-
ployee in such taxable year, or 
‘‘(ii) who provides services for or on 
behalf of such covered health insurance 
provider during such taxable year. 
‘‘(G) COORDINATION.—Rules similar to 
the rules of subparagraphs (F) and (G) of para-
graph (4) shall apply for purposes of this para-
graph. 
‘‘(H) REGULATORY AUTHORITY.—The Sec-
retary may prescribe such guidance, rules, or 
regulations as are necessary to carry out the 
purposes of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2009, with respect to services performed 
after such date. 
SEC. 9015. ADDITIONAL HOSPITAL INSURANCE TAX ON 
HIGH-INCOME TAXPAYERS. 
(a) FICA.— 
(1) IN GENERAL.—Section 3101(b) of the In-
ternal Revenue Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—In addition’’, 
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•AMDT. NO. 2786 
ceives wages from the employer in excess of 
$200,000, and the employer may disregard the 
amount of wages received by such taxpayer’s spouse. 
‘‘(2) COLLECTION
OF
AMOUNTS
NOT
WITH-
HELD.—To the extent that the amount of any tax 
imposed by section 3101(b)(2) is not collected by the 
employer, such tax shall be paid by the employee. 
‘‘(3) TAX PAID BY RECIPIENT.—If an employer, 
in violation of this chapter, fails to deduct and with-
hold the tax imposed by section 3101(b)(2) and 
thereafter the tax is paid by the employee, the tax 
so required to be deducted and withheld shall not be 
collected from the employer, but this paragraph shall 
in no case relieve the employer from liability for any 
penalties or additions to tax otherwise applicable in 
respect of such failure to deduct and withhold.’’. 
(b) SECA.— 
(1) IN GENERAL.—Section 1401(b) of the In-
ternal Revenue Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—In addition’’, and 
(B) by adding at the end the following new 
paragraph: 
‘‘(2) ADDITIONAL TAX.— 
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•AMDT. NO. 2786 
‘‘(A) IN GENERAL.—In addition to the tax 
imposed by paragraph (1) and the preceding 
subsection, there is hereby imposed on every 
taxpayer (other than a corporation, estate, or 
trust) for each taxable year beginning after De-
cember 31, 2012, a tax equal to 0.5 percent of 
the self-employment income for such taxable 
year which is in excess of— 
‘‘(i) in the case of a joint return, 
$250,000, and 
‘‘(ii) in any other case, $200,000. 
‘‘(B) COORDINATION
WITH
FICA.—The 
amounts under clauses (i) and (ii) of subpara-
graph (A) shall be reduced (but not below zero) 
by the amount of wages taken into account in 
determining the tax imposed under section 
3121(b)(2) with respect to the taxpayer.’’. 
(2) NO DEDUCTION FOR ADDITIONAL TAX.— 
(A) IN GENERAL.—Section 164(f) of such 
Code is amended by inserting ‘‘(other than the 
taxes imposed by section 1401(b)(2))’’ after 
‘‘section 1401)’’. 
(B) DEDUCTION FOR NET EARNINGS FROM 
SELF-EMPLOYMENT.—Subparagraph (B) of sec-
tion 1402(a)(12) is amended by inserting ‘‘(de-
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•AMDT. NO. 2786 
termined without regard to the rate imposed 
under paragraph (2) of section 1401(b))’’ after 
‘‘for such year’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to remuneration re-
ceived, and taxable years beginning, after December 31, 
2012. 
SEC. 9016. MODIFICATION OF SECTION 833 TREATMENT OF 
CERTAIN HEALTH ORGANIZATIONS. 
(a) IN GENERAL.—Subsection (c) of section 833 of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following new paragraph: 
‘‘(5) NONAPPLICATION OF SECTION IN CASE OF 
LOW
MEDICAL
LOSS
RATIO.—Notwithstanding the 
preceding paragraphs, this section shall not apply to 
any organization unless such organization’s percent-
age of total premium revenue expended on reim-
bursement for clinical services provided to enrollees 
under its policies during such taxable year (as re-
ported under section 2718 of the Public Health 
Service Act) is not less than 85 percent.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2009. 
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•AMDT. NO. 2786 
SEC. 9017. EXCISE TAX ON ELECTIVE COSMETIC MEDICAL 
PROCEDURES. 
(a) IN GENERAL.—Subtitle D of the Internal Rev-
enue Code of 1986, as amended by this Act, is amended 
by adding at the end the following new chapter: 
‘‘CHAPTER 49—ELECTIVE COSMETIC 
MEDICAL PROCEDURES 
‘‘Sec. 5000B. Imposition of tax on elective cosmetic medical procedures. 
‘‘SEC. 5000B. IMPOSITION OF TAX ON ELECTIVE COSMETIC 
MEDICAL PROCEDURES. 
‘‘(a) IN GENERAL.—There is hereby imposed on any 
cosmetic surgery and medical procedure a tax equal to 5 
percent of the amount paid for such procedure (deter-
mined without regard to this section), whether paid by in-
surance or otherwise. 
‘‘(b) COSMETIC SURGERY
AND MEDICAL PROCE-
DURE.—For purposes of this section, the term ‘cosmetic 
surgery and medical procedure’ means any cosmetic sur-
gery (as defined in section 213(d)(9)(B)) or other similar 
procedure which— 
‘‘(1) is performed by a licensed medical profes-
sional, and 
‘‘(2) is not necessary to ameliorate a deformity 
arising from, or directly related to, a congenital ab-
normality, a personal injury resulting from an acci-
dent or trauma, or disfiguring disease. 
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•AMDT. NO. 2786 
‘‘(c) PAYMENT OF TAX.— 
‘‘(1) IN GENERAL.—The tax imposed by this 
section shall be paid by the individual on whom the 
procedure is performed. 
‘‘(2) COLLECTION.—Every person receiving a 
payment for procedures on which a tax is imposed 
under subsection (a) shall collect the amount of the 
tax from the individual on whom the procedure is 
performed and remit such tax quarterly to the Sec-
retary at such time and in such manner as provided 
by the Secretary. 
‘‘(3) SECONDARY
LIABILITY.—Where any tax 
imposed by subsection (a) is not paid at the time 
payments for cosmetic surgery and medical proce-
dures are made, then to the extent that such tax is 
not collected, such tax shall be paid by the person 
who performs the procedure.’’. 
(b) CLERICAL AMENDMENT.—The table of chapters 
for subtitle D of the Internal Revenue Code of 1986, as 
amended by this Act, is amended by inserting after the 
item relating to chapter 48 the following new item: 
‘‘CHAPTER 49—ELECTIVE COSMETIC MEDICAL PROCEDURES’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to procedures performed on or 
after January 1, 2010. 
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•AMDT. NO. 2786 
Subtitle B—Other Provisions 
SEC. 9021. EXCLUSION OF HEALTH BENEFITS PROVIDED BY 
INDIAN TRIBAL GOVERNMENTS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after section 139C the following new section: 
‘‘SEC. 139D. INDIAN HEALTH CARE BENEFITS. 
‘‘(a) GENERAL RULE.—Except as otherwise provided 
in this section, gross income does not include the value 
of any qualified Indian health care benefit. 
‘‘(b) QUALIFIED INDIAN HEALTH CARE BENEFIT.— 
For purposes of this section, the term ‘qualified Indian 
health care benefit’ means— 
‘‘(1) any health service or benefit provided or 
purchased, directly or indirectly, by the Indian 
Health Service through a grant to or a contract or 
compact with an Indian tribe or tribal organization, 
or through a third-party program funded by the In-
dian Health Service, 
‘‘(2) medical care provided or purchased by, or 
amounts to reimburse for such medical care provided 
by, an Indian tribe or tribal organization for, or to, 
a member of an Indian tribe, including a spouse or 
dependent of such a member, 
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•AMDT. NO. 2786 
‘‘(3) coverage under accident or health insur-
ance (or an arrangement having the effect of acci-
dent or health insurance), or an accident or health 
plan, provided by an Indian tribe or tribal organiza-
tion for medical care to a member of an Indian 
tribe, include a spouse or dependent of such a mem-
ber, and 
‘‘(4) any other medical care provided by an In-
dian tribe or tribal organization that supplements, 
replaces, or substitutes for a program or service re-
lating to medical care provided by the Federal gov-
ernment to Indian tribes or members of such a tribe. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) INDIAN TRIBE.—The term ‘Indian tribe’ 
has the meaning given such term by section 
45A(c)(6). 
‘‘(2) TRIBAL ORGANIZATION.—The term ‘tribal 
organization’ has the meaning given such term by 
section 4(l) of the Indian Self-Determination and 
Education Assistance Act. 
‘‘(3) MEDICAL CARE.—The term ‘medical care’ 
has the same meaning as when used in section 213. 
‘‘(4) ACCIDENT OR HEALTH INSURANCE; ACCI-
DENT OR HEALTH PLAN.—The terms ‘accident or 
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•AMDT. NO. 2786 
health insurance’ and ‘accident or health plan’ have 
the same meaning as when used in section 105. 
‘‘(5) DEPENDENT.—The term ‘dependent’ has 
the meaning given such term by section 152, deter-
mined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof. 
‘‘(d) DENIAL OF DOUBLE BENEFIT.—Subsection (a) 
shall not apply to the amount of any qualified Indian 
health care benefit which is not includible in gross income 
of the beneficiary of such benefit under any other provi-
sion of this chapter, or to the amount of any such benefit 
for which a deduction is allowed to such beneficiary under 
any other provision of this chapter.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 of the Internal 
Revenue Code of 1986 is amended by inserting after the 
item relating to section 139C the following new item: 
‘‘Sec. 139D. Indian health care benefits.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to benefits and coverage provided 
after the date of the enactment of this Act. 
(d) NO INFERENCE.—Nothing in the amendments 
made by this section shall be construed to create an infer-
ence with respect to the exclusion from gross income of— 
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•AMDT. NO. 2786 
(1) benefits provided by an Indian tribe or trib-
al organization that are not within the scope of this 
section, and 
(2) benefits provided prior to the date of the 
enactment of this Act. 
SEC. 9022. ESTABLISHMENT OF SIMPLE CAFETERIA PLANS 
FOR SMALL BUSINESSES. 
(a) IN GENERAL.—Section 125 of the Internal Rev-
enue Code of 1986 (relating to cafeteria plans), as amend-
ed by this Act, is amended by redesignating subsections 
(j) and (k) as subsections (k) and (l), respectively, and 
by inserting after subsection (i) the following new sub-
section: 
‘‘(j) SIMPLE CAFETERIA PLANS FOR SMALL BUSI-
NESSES.— 
‘‘(1) IN GENERAL.—An eligible employer main-
taining a simple cafeteria plan with respect to which 
the requirements of this subsection are met for any 
year shall be treated as meeting any applicable non-
discrimination requirement during such year. 
‘‘(2) SIMPLE CAFETERIA PLAN.—For purposes 
of this subsection, the term ‘simple cafeteria plan’ 
means a cafeteria plan— 
‘‘(A) which is established and maintained 
by an eligible employer, and 
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•AMDT. NO. 2786 
‘‘(B) with respect to which the contribution 
requirements of paragraph (3), and the eligi-
bility and participation requirements of para-
graph (4), are met. 
‘‘(3) CONTRIBUTION REQUIREMENTS.— 
‘‘(A) IN GENERAL.—The requirements of 
this paragraph are met if, under the plan the 
employer is required, without regard to whether 
a qualified employee makes any salary reduc-
tion contribution, to make a contribution to 
provide qualified benefits under the plan on be-
half of each qualified employee in an amount 
equal to— 
‘‘(i) a uniform percentage (not less 
than 2 percent) of the employee’s com-
pensation for the plan year, or 
‘‘(ii) an amount which is not less than 
the lesser of— 
‘‘(I) 6 percent of the employee’s 
compensation for the plan year, or 
‘‘(II) twice the amount of the sal-
ary reduction contributions of each 
qualified employee. 
‘‘(B) MATCHING CONTRIBUTIONS ON BE-
HALF OF HIGHLY COMPENSATED AND KEY EM-
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•AMDT. NO. 2786 
PLOYEES.—The requirements of subparagraph 
(A)(ii) shall not be treated as met if, under the 
plan, the rate of contributions with respect to 
any salary reduction contribution of a highly 
compensated or key employee at any rate of 
contribution is greater than that with respect to 
an employee who is not a highly compensated or 
key employee. 
‘‘(C) ADDITIONAL CONTRIBUTIONS.—Sub-
ject to subparagraph (B), nothing in this para-
graph shall be treated as prohibiting an em-
ployer from making contributions to provide 
qualified benefits under the plan in addition to 
contributions required under subparagraph (A). 
‘‘(D) DEFINITIONS.—For purposes of this 
paragraph— 
‘‘(i) SALARY
REDUCTION
CONTRIBU-
TION.—The term ‘salary reduction con-
tribution’ means, with respect to a cafe-
teria plan, any amount which is contrib-
uted to the plan at the election of the em-
ployee and which is not includible in gross 
income by reason of this section. 
‘‘(ii) 
QUALIFIED
EMPLOYEE.—The 
term ‘qualified employee’ means, with re-
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•AMDT. NO. 2786 
spect to a cafeteria plan, any employee who 
is not a highly compensated or key em-
ployee and who is eligible to participate in 
the plan. 
‘‘(iii) HIGHLY
COMPENSATED
EM-
PLOYEE.—The term ‘highly compensated 
employee’ has the meaning given such term 
by section 414(q). 
‘‘(iv) KEY EMPLOYEE.—The term ‘key 
employee’ has the meaning given such term 
by section 416(i). 
‘‘(4) MINIMUM
ELIGIBILITY
AND
PARTICIPA-
TION REQUIREMENTS.— 
‘‘(A) IN GENERAL.—The requirements of 
this paragraph shall be treated as met with re-
spect to any year if, under the plan— 
‘‘(i) all employees who had at least 
1,000 hours of service for the preceding 
plan year are eligible to participate, and 
‘‘(ii) each employee eligible to partici-
pate in the plan may, subject to terms and 
conditions applicable to all participants, 
elect any benefit available under the plan. 
‘‘(B) CERTAIN
EMPLOYEES
MAY
BE
EX-
CLUDED.—For 
purposes 
of 
subparagraph 
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•AMDT. NO. 2786 
(A)(i), an employer may elect to exclude under 
the plan employees— 
‘‘(i) who have not attained the age of 
21 before the close of a plan year, 
‘‘(ii) who have less than 1 year of 
service with the employer as of any day 
during the plan year, 
‘‘(iii) who are covered under an agree-
ment which the Secretary of Labor finds to 
be a collective bargaining agreement if 
there is evidence that the benefits covered 
under the cafeteria plan were the subject 
of good faith bargaining between employee 
representatives and the employer, or 
‘‘(iv) who are described in section 
410(b)(3)(C) 
(relating 
to 
nonresident 
aliens working outside the United States). 
A plan may provide a shorter period of service 
or younger age for purposes of clause (i) or (ii). 
‘‘(5) ELIGIBLE
EMPLOYER.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘eligible em-
ployer’ means, with respect to any year, any 
employer if such employer employed an average 
of 100 or fewer employees on business days 
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•AMDT. NO. 2786 
during either of the 2 preceding years. For pur-
poses of this subparagraph, a year may only be 
taken into account if the employer was in exist-
ence throughout the year. 
‘‘(B) EMPLOYERS NOT IN EXISTENCE DUR-
ING PRECEDING YEAR.—If an employer was not 
in existence throughout the preceding year, the 
determination under subparagraph (A) shall be 
based on the average number of employees that 
it is reasonably expected such employer will em-
ploy on business days in the current year. 
‘‘(C) 
GROWING
EMPLOYERS
RETAIN 
TREATMENT AS SMALL EMPLOYER.— 
‘‘(i) IN GENERAL.—If— 
‘‘(I) an employer was an eligible 
employer for any year (a ‘qualified 
year’), and 
‘‘(II) such employer establishes a 
simple cafeteria plan for its employees 
for such year, 
then, notwithstanding the fact the em-
ployer fails to meet the requirements of 
subparagraph (A) for any subsequent year, 
such employer shall be treated as an eligi-
ble employer for such subsequent year with 
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•AMDT. NO. 2786 
respect to employees (whether or not em-
ployees during a qualified year) of any 
trade or business which was covered by the 
plan during any qualified year. 
‘‘(ii) 
EXCEPTION.—This 
subpara-
graph shall cease to apply if the employer 
employs an average of 200 or more em-
ployees on business days during any year 
preceding any such subsequent year. 
‘‘(D) SPECIAL RULES.— 
‘‘(i) PREDECESSORS.—Any reference 
in this paragraph to an employer shall in-
clude a reference to any predecessor of 
such employer. 
‘‘(ii) AGGREGATION RULES.—All per-
sons treated as a single employer under 
subsection (a) or (b) of section 52, or sub-
section (n) or (o) of section 414, shall be 
treated as one person. 
‘‘(6) APPLICABLE
NONDISCRIMINATION
RE-
QUIREMENT.—For purposes of this subsection, the 
term ‘applicable 
nondiscrimination 
requirement’ 
means any requirement under subsection (b) of this 
section, section 79(d), section 105(h), or paragraph 
(2), (3), (4), or (8) of section 129(d). 
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•AMDT. NO. 2786 
‘‘(7) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section 
414(s).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2010. 
SEC. 
9023. 
QUALIFYING 
THERAPEUTIC 
DISCOVERY 
PROJECT CREDIT. 
(a) IN GENERAL.—Subpart E of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 48C the fol-
lowing new section: 
‘‘SEC. 
48D. 
QUALIFYING 
THERAPEUTIC 
DISCOVERY 
PROJECT CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 46, the 
qualifying therapeutic discovery project credit for any tax-
able year is an amount equal to 50 percent of the qualified 
investment for such taxable year with respect to any quali-
fying therapeutic discovery project of an eligible taxpayer. 
‘‘(b) QUALIFIED INVESTMENT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the qualified investment for any taxable year is 
the aggregate amount of the costs paid or incurred 
in such taxable year for expenses necessary for and 
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•AMDT. NO. 2786 
directly related to the conduct of a qualifying thera-
peutic discovery project. 
‘‘(2) LIMITATION.—The amount which is treat-
ed as qualified investment for all taxable years with 
respect to any qualifying therapeutic discovery 
project shall not exceed the amount certified by the 
Secretary as eligible for the credit under this sec-
tion. 
‘‘(3) EXCLUSIONS.—The qualified investment 
for any taxable year with respect to any qualifying 
therapeutic discovery project shall not take into ac-
count any cost— 
‘‘(A) for remuneration for an employee de-
scribed in section 162(m)(3), 
‘‘(B) for interest expenses, 
‘‘(C) for facility maintenance expenses, 
‘‘(D) which is identified as a service cost 
under section 1.263A-1(e)(4) of title 26, Code 
of Federal Regulations, or 
‘‘(E) for any other expense as determined 
by the Secretary as appropriate to carry out the 
purposes of this section. 
‘‘(4) CERTAIN PROGRESS EXPENDITURE RULES 
MADE APPLICABLE.—In the case of costs described 
in paragraph (1) that are paid for property of a 
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•AMDT. NO. 2786 
(A) IN GENERAL.—At the stated election 
of the applicant, an application for certification 
under section 48D(d)(2) of the Internal Rev-
enue Code of 1986 for a credit under such sec-
tion for the taxable year of the applicant which 
begins in 2009 shall be considered to be an ap-
plication for a grant under paragraph (1) for 
such taxable year. 
(B) 
TAXABLE
YEARS
BEGINNING
IN 
2010.—An application for a grant under para-
graph (1) for a taxable year beginning in 2010 
shall be submitted— 
(i) not earlier than the day after the 
last day of such taxable year, and 
(ii) not later than the due date (in-
cluding extensions) for filing the return of 
tax for such taxable year. 
(C) INFORMATION TO BE SUBMITTED.—An 
application for a grant under paragraph (1) 
shall include such information and be in such 
form as the Secretary may require to state the 
amount of the credit allowable (but for the re-
ceipt of a grant under this subsection) under 
section 48D for the taxable year for the quali-
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