‘‘(B) in the case of any other taxpayer
(other than a married individual filing a sepa-
rate return), $25,000, and
‘‘(C) in the case of a married individual fil-
ing a separate return, zero.
‘‘(4) SPECIAL RULE FOR MARRIED INDIVIDUALS
FILING SEPARATELY AND LIVING APART.—A hus-
band and wife who—
‘‘(A) file separate returns for any taxable
year, and
‘‘(B) live apart at all times during such
taxable year,
shall not be treated as married individuals for pur-
poses of this paragraph.
‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The credit allowed by sub-
section (a) for the taxable year (determined after the
application of subsections (b) and (c)) shall not ex-
ceed the sum of—
‘‘(A) the tax imposed by this chapter for
the taxable year (reduced by the credits allow-
able against such tax other than the credits al-
lowable under this subpart), and
‘‘(B) the taxpayer’s social security taxes
for such taxable year.
‘‘(2) SOCIAL SECURITY TAXES.—For purposes
of paragraph (1)—
‘‘(A) IN GENERAL.—The term ‘social secu-
rity taxes’ means, with respect to any taxpayer
for any taxable year—
‘‘(i) the amount of the taxes imposed
by sections 3101, 3111, 3201(a), and
3221(a) on amounts received by the tax-
payer during the calendar year in which
the taxable year begins,
‘‘(ii) the taxes imposed by section
1401 on the self-employment income of the
taxpayer for the taxable year, and
‘‘(iii) the taxes imposed by section
3211(a)(1) on amounts received by the
taxpayer during the calendar year in which
the taxable year begins.
‘‘(B) COORDINATION
WITH
SPECIAL
RE-
FUND OF SOCIAL SECURITY TAXES.—The term
‘social security taxes’ shall not include any
taxes to the extent the taxpayer is entitled to
a special refund of such taxes under section
6413(c).
‘‘(C) SPECIAL RULE.—Any amounts paid
pursuant to an agreement under section 3121(l)
(relating to agreements entered into by Amer-
ican employers with respect to foreign affiliates)
which are equivalent to the taxes referred to in
subparagraph (A)(i) shall be treated as taxes
referred to in such subparagraph.
‘‘(e) COORDINATION WITH OTHER PROVISIONS.—
‘‘(1) DEDUCTION FOR MEDICAL EXPENSES.—
The amount taken into account in computing the
credit under subsection (a) shall not be taken into
account in computing the amount allowable to the
taxpayer as a deduction under section 213(a).
‘‘(2) DEDUCTION
FOR
HEALTH
INSURANCE
COSTS
OF
SELF-EMPLOYED
INDIVIDUALS.—No
amount taken into account under section 162(l) may
be taken into account under this section.
‘‘(f) EXPENSES MUST BE SUBSTANTIATED.—A pay-
ment for insurance to which subsection (a) applies may
be taken into account under this section only if the tax-
payer substantiates such payment in such form as the Sec-
retary may prescribe.
‘‘(g) SECTION NOT TO APPLY TO LONG-TERM CARE
INSURANCE.—This section shall not apply to insurance
which constitutes medical care by reason of section
213(d)(1)(C).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart C of part IV of subchapter A of chapter 1
of such Code is amended by striking the last item and
inserting the following new items:
‘‘Sec. 35. Health insurance costs of employees.
‘‘Sec. 36. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
Æ