I
106TH CONGRESS
2D SESSION
H. R. 4113
To amend the Internal Revenue Code of 1986 to allow a refundable tax
credit for health insurance costs, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 29, 2000
Mr. ARMEY (for himself and Mr. DOOLEY of California) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow a
refundable tax credit for health insurance costs, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Health Coverage, Ac-
cess, Relief, and Equity (C.A.R.E.) Act’’.
SEC. 2. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable personal credits) is amended
by redesignating section 35 as section 36 and inserting
after section 34 the following new section:
‘‘SEC. 35. HEALTH INSURANCE COSTS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount
equal to the amount paid during the taxable year for quali-
fied health insurance for the taxpayer and the taxpayer’s
spouse and dependents.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The amount allowed
as a credit under subsection (a) to the taxpayer
for the taxable year shall not exceed the sum of
the monthly limitations for coverage months
during such taxable year.
‘‘(B) MONTHLY LIMITATION.—The month-
ly limitation for each coverage month during
the taxable year is the amount equal to 1/12
of—
‘‘(i) in the case of self-only coverage,
$1,000, and
‘‘(ii) in the case of family coverage,
$2,000.
‘‘(2) PHASEOUT OF CREDIT.—
‘‘(A) IN
GENERAL.—The amount which
would (but for this paragraph) be taken into ac-
count under subsection (a) shall be reduced
(but not below zero) by the amount determined
under subparagraph (B).
‘‘(B) 
AMOUNT
OF
REDUCTION.—The
amount determined under this subparagraph is
the amount which bears the same ratio to the
amount which would be so taken into account
as—
‘‘(i) the excess of—
‘‘(I) the taxpayer’s modified ad-
justed gross income for such taxable
year, over
‘‘(II) $35,000 ($55,000 in the
case of family coverage), bears to
‘‘(ii) $10,000.
‘‘(C) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ 
means 
adjusted 
gross 
income
determined—
‘‘(i) without regard to this section and
sections 911, 931, and 933, and
‘‘(ii) after application of sections 86,
135, 137, 219, 221, and 469.
‘‘(3) COORDINATION
WITH
DEDUCTION
FOR
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—In the case of a taxpayer who is eligi-
ble to deduct any amount under section 162(l) for
the taxable year, this section shall apply only if the
taxpayer elects not to claim any amount as a deduc-
tion under such section for such year.
‘‘(c) COVERAGE MONTH DEFINED.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘coverage month’
means, with respect to an individual, any month if—
‘‘(A) as of the first day of such month
such individual is covered by qualified health in-
surance, and
‘‘(B) the premium for coverage under such
insurance for such month is paid by the tax-
payer.
‘‘(2) EMPLOYER-SUBSIDIZED COVERAGE.—
‘‘(A) IN GENERAL.—Such term shall not
include any month for which such individual is
eligible to participate in any subsidized health
plan (within the meaning of section 162(l)(2))
maintained by any employer of the taxpayer or
of the spouse of the taxpayer.
‘‘(B) 
PREMIUMS
TO
NONSUBSIDIZED
PLANS.—If an employer of the taxpayer or the
spouse of the taxpayer maintains a health plan
which is not a subsidized health plan (as so de-
fined) and which constitutes qualified health in-
surance, employee contributions to the plan
shall be treated as amounts paid for qualified
health insurance.
‘‘(3) CAFETERIA PLAN AND FLEXIBLE SPEND-
ING ACCOUNT BENEFICIARIES.—Such term shall not
include any month during a taxable year if any
amount is not includible in the gross income of the
taxpayer for such year under section 106 with re-
spect to—
‘‘(A) a benefit chosen under a cafeteria
plan (as defined in section 125(d)), or
‘‘(B) a benefit provided under a flexible
spending or similar arrangement.
‘‘(4) MEDICARE
AND
MEDICAID.—Such term
shall not include any month during a taxable year
with respect to an individual if, as of the first day
of such month, such individual—
‘‘(A) is eligible for any benefits under title
XVIII of the Social Security Act, or
COBRA continuation provision (as defined in section
9832(d)(1)).
‘‘(e) 
MEDICAL
SAVINGS
ACCOUNT
CONTRIBU-
TIONS.—
‘‘(1) IN GENERAL.—If a deduction would (but
for paragraph (2)) be allowed under section 220 to
the taxpayer for a payment for the taxable year to
the medical savings account of an individual, sub-
section (a) shall be applied by treating such payment
as a payment for qualified health insurance for such
individual.
‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc-
tion shall be allowed under section 220 for that por-
tion of the payments otherwise allowable as a deduc-
tion under section 220 for the taxable year which is
equal to the amount of credit allowed for such tax-
able year by reason of this subsection.
‘‘(f) SPECIAL RULES.—
‘‘(1) COORDINATION WITH MEDICAL EXPENSE
DEDUCTION.—The amount which would (but for this
paragraph) be taken into account by the taxpayer
under section 213 for the taxable year shall be re-
duced by the credit (if any) allowed by this section
to the taxpayer for such year.
‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which
such individual’s taxable year begins.
‘‘(3) COORDINATION
WITH
ADVANCE
PAY-
MENT.—Rules similar to the rules of section 32(g)
shall apply to any credit to which this section ap-
plies.
‘‘(g) 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.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section, including regulations under which—
‘‘(1) an awareness campaign is established to
educate the public, insurance issuers, and agents or
others who market health insurance about the re-
quirements and procedures under this section,
including—
‘‘(A) criteria for insurance products and
group health coverage which constitute qualified
health insurance under this section, and
‘‘(B) guidelines for marketing schemes and
practices which are appropriate and acceptable
in connection with the credit under this section,
and
‘‘(2) periodic reviews or audits of health insur-
ance policies and group health plans (and related
promotional marketing materials) which are mar-
keted to eligible taxpayers under this section are
conducted for the purpose of determining—
‘‘(A) whether such policies and plans con-
stitute qualified health insurance under this
section, and
‘‘(B) whether offenses described in section
7276 occur.’’.
(b) INFORMATION REPORTING.—
(1) IN GENERAL.—Subpart B of part III of
subchapter A of chapter 61 of such Code (relating
to information concerning transactions with other
persons) is amended by inserting after section
6050S the following new section:
‘‘SEC. 6050T. RETURNS RELATING TO PAYMENTS FOR
QUALIFIED HEALTH INSURANCE.
‘‘(a) IN GENERAL.—Any person who, in connection
with a trade or business conducted by such person, re-
ceives payments during any calendar year from any indi-
vidual for coverage of such individual or any other indi-
vidual under creditable health insurance, shall make the
return described in subsection (b) (at such time as the
Secretary may by regulations prescribe) with respect to
each individual from whom such payments were received.
‘‘(b) FORM AND MANNER OF RETURNS.—A return
is described in this subsection if such return—
‘‘(1) is in such form as the Secretary may pre-
scribe, and
‘‘(2) contains—
‘‘(A) the name, address, and TIN of the
individual from whom payments described in
subsection (a) were received,
‘‘(B) the name, address, and TIN of each
individual who was provided by such person
with coverage under creditable health insurance
by reason of such payments and the period of
such coverage,
‘‘(C) the aggregate amount of payments
described in subsection (a),
‘‘(D) the qualified health insurance credit
advance amount (as defined in section 7527(e))
received by such person with respect to the indi-
vidual described in subparagraph (A), and
‘‘(E) such other information as the Sec-
retary may reasonably prescribe.
‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur-
poses of this section, the term ‘creditable health insurance’
means qualified health insurance (as defined in section
35(d)) other than—
‘‘(1) insurance under a subsidized group health
plan maintained by an employer, or
‘‘(2) to the extent provided in regulations pre-
scribed by the Secretary, any other insurance cov-
ering an individual if no credit is allowable under
section 35 with respect to such coverage.
‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under
subsection (a) shall furnish to each individual whose name
is required under subsection (b)(2)(A) to be set forth in
such return a written statement showing—
‘‘(1) the name and address of the person re-
quired to make such return and the phone number
of the information contact for such person,
‘‘(2) the aggregate amount of payments de-
scribed in subsection (a) received by the person re-
quired to make such return from the individual to
whom the statement is required to be furnished,
‘‘(3) the information required under subsection
(b)(2)(B) with respect to such payments, and
‘‘(4) the qualified health insurance credit ad-
vance amount (as defined in section 7527(e)) re-
ceived by such person with respect to the individual
described in paragraph (2).
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the
year following the calendar year for which the return
under subsection (a) is required to be made.
‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE
MADE BY 2 OR MORE PERSONS.—Except to the extent
provided in regulations prescribed by the Secretary, in the
case of any amount received by any person on behalf of
another person, only the person first receiving such
amount shall be required to make the return under sub-
section (a).’’.
(2) ASSESSABLE PENALTIES.—
(A) 
Subparagraph 
(B) 
of 
section
6724(d)(1) of such Code (relating to defini-
tions) is amended by redesignating clauses (xi)
through (xvii) as clauses (xii) through (xviii),
respectively, and by inserting after clause (x)
the following new clause:
‘‘(xi) section 6050T (relating to re-
turns relating to payments for qualified
health insurance),’’.
(B) Paragraph (2) of section 6724(d) of
such Code is amended by striking ‘‘or’’ at the
end of the next to last subparagraph, by strik-
ing the period at the end of the last subpara-
graph and inserting ‘‘, or’’, and by adding at
the end the following new subparagraph:
‘‘(BB) section 6050T(d) (relating to re-
turns relating to payments for qualified health
insurance).’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of
chapter 61 of such Code is amended by inserting
after the item relating to section 6050S the fol-
lowing new item:
‘‘Sec. 6050T. Returns relating to payments for qualified health
insurance.’’.
(c) CRIMINAL PENALTY FOR FRAUD.—Subchapter B
of chapter 75 of such Code (relating to other offenses)
is amended by adding at the end the following new section:
‘‘SEC. 7276. PENALTIES FOR OFFENSES RELATING TO
HEALTH INSURANCE TAX CREDIT.
‘‘Any person who knowingly misuses Department of
the Treasury names, symbols, titles, or initials to convey
the false impression of association with, or approval or en-
dorsement by, the Department of the Treasury of any in-
surance products or group health coverage in connection
with the credit for health insurance costs under section
35 shall on conviction thereof be fined not more than
$10,000, or imprisoned not more than 1 year, or both.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 162(l) of the Internal Revenue Code
of 1986 is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6) 
ELECTION
TO
HAVE
SUBSECTION
APPLY.—No deduction shall be allowed under para-
graph (1) for a taxable year unless the taxpayer
elects to have this subsection apply for such year.’’.
(2) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
(3) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the last
item and inserting the following new items:
‘‘Sec. 35. Health insurance costs.
‘‘Sec. 36. Overpayments of tax.’’.
(4) The table of sections for subchapter B of
chapter 75 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new
item:
‘‘Sec. 7276. Penalties for offenses relating to health insurance tax
credit.’’.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 2000.
(2) PENALTIES.—The amendments made by
subsections (c) and (d)(4) shall take effect on the
date of the enactment of this Act.
SEC. 3. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF
QUALIFIED HEALTH INSURANCE.
(a) IN GENERAL.—Chapter 77 of the Internal Rev-
enue Code of 1986 (relating to miscellaneous provisions)
is amended by adding at the end the following new section:
‘‘SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE
CREDIT TO ISSUERS OF QUALIFIED HEALTH
INSURANCE.
‘‘(a) GENERAL RULE.—In the case of an eligible indi-
vidual, the Secretary shall make payments to the health
insurance issuer of such individual’s qualified health in-
surance equal to such individual’s qualified health insur-
ance credit advance amount with respect to such issuer.
‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this
section, the term ‘eligible individual’ means any
individual—
‘‘(1) who purchases qualified health insurance
(as defined in section 35(c)), and
‘‘(2) for whom a qualified health insurance
credit eligibility certificate is in effect.
‘‘(c) HEALTH INSURANCE ISSUER.—For purposes of
this section, the term ‘health insurance issuer’ has the
meaning given such term by section 9832(b)(2).
‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT ELI-
GIBILITY CERTIFICATE.—For purposes of this section, a
qualified health insurance credit eligibility certificate is a
statement furnished by an individual to a qualified health
insurance issuer which—
‘‘(1) certifies that the individual will be eligible
to receive the credit provided by section 35 for the
taxable year,
‘‘(2) estimates the amount of such credit for
such taxable year, and
‘‘(3) provides such other information as the
Secretary may require for purposes of this section.