SEC. 2. REFUNDABLE TAX CREDIT FOR HEALTH INSUR-
ANCE COSTS OF INDIVIDUALS WITH COBRA 
CONTINUATION COVERAGE BY REASON OF 
TERMINATION OF EMPLOYMENT. 
(a) IN GENERAL.—Subpart C of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating 
to refundable credits) is amended by inserting after sec-
tion 36 the following new section: 
‘‘SEC. 36A. HEALTH INSURANCE COSTS OF INDIVIDUALS 
WITH COBRA CONTINUATION COVERAGE BY 
REASON OF TERMINATION OF EMPLOYMENT. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this subtitle the aggregate amount paid by the taxpayer 
for coverage of the taxpayer and the taxpayer’s qualifying 
family members under qualified COBRA continuation cov-
erage for eligible coverage months beginning in the taxable 
year. 
‘‘(b) LIMITATIONS.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
credit under subsection (a) for the taxable year shall 
not exceed the sum of the monthly limitations for 
months during such taxable year that the taxpayer 
is an eligible individual. 
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‘‘(2) MONTHLY LIMITATION.—The monthly lim-
itation for any month is the credit percentage of 1⁄12 
of $1,000 ($2,000 in the case of a joint return). 
‘‘(3) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2009, each dollar amount contained in paragraph 
(2) shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2008’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$50. 
‘‘(c) ELIGIBLE COVERAGE MONTH.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘eligible coverage 
month’ means, with respect to any individual, any 
month if, as of the first day of such month, the indi-
vidual— 
‘‘(A) is covered by qualified health insur-
ance, 
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‘‘(B) does not have disqualifying coverage, 
and 
‘‘(C) is not imprisoned under Federal, 
State, or local authority. 
‘‘(2) 12 MONTH OF COVERAGE DURING ANY 14 
MONTH PERIOD.—A month shall not be treated as 
an eligible coverage month with respect to an indi-
vidual if, during the 24-month period ending with 
the last day of such month, the individual was an el-
igible individual for 12 months in such period. 
‘‘(d) QUALIFYING FAMILY MEMBER.—For purposes 
of this section, the term ‘qualifying family member’ 
means— 
‘‘(1) in the case of a joint return, the taxpayer’s 
spouse, and 
‘‘(2) any dependent of the taxpayer. 
‘‘(e) QUALIFIED
COBRA CONTINUATION
COV-
ERAGE.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified COBRA continuation cov-
erage’ means any insurance which is continuation 
coverage under paragraph (2) of section 4980B(f) 
by reason of the qualifying event specified in para-
graph (3)(B) of such section (relating to termination 
or reduction of hours of employment). 
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‘‘(2) EXCEPTION.—Such term does not in-
clude— 
‘‘(A) a flexible spending or similar ar-
rangement, and 
‘‘(B) insurance substantially all of the cov-
erage of which is of excepted benefits described 
in section 9832(c). 
‘‘(f) DISQUALIFYING COVERAGE.—For purposes of 
this section, an individual has disqualifying coverage for 
any month if, as of the first day of such month— 
‘‘(1) EMPLOYER-PROVIDED
COVERAGE.—Such 
individual is covered under any insurance which con-
stitutes medical care under any health plan main-
tained by any employer (or former employer) of the 
taxpayer or the taxpayer’s spouse if any portion of 
the cost of such coverage (as so determined) is paid 
or incurred by an employer (or former employer) of 
the taxpayer or the taxpayer’s spouse other than— 
‘‘(A) coverage described in subsection 
(e)(1), and 
‘‘(B) insurance substantially all of the cov-
erage of which is of excepted benefits described 
in section 9832(c)). 
‘‘(2) CERTAIN STATE-BASED AND GROUP COV-
ERAGE.—Such individual has coverage described in 
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any of subparagraphs (B) through (J) of section 
35(e)(1). 
‘‘(3) COVERAGE UNDER MEDICARE, MEDICAID, 
OR SCHIP.—Such individual— 
‘‘(A) is entitled to benefits under part A of 
title XVIII of the Social Security Act or is en-
rolled under part B of such title, or 
‘‘(B) is enrolled in the program under title 
XIX or XXI of such Act (other than under sec-
tion 1928 of such Act). 
‘‘(4) CERTAIN OTHER COVERAGE.—Such indi-
vidual— 
‘‘(A) is enrolled in a health benefits plan 
under chapter 89 of title 5, United States Code, 
or 
‘‘(B) is entitled to receive benefits under 
chapter 55 of title 10, United States Code. 
‘‘(g) SPECIAL RULES.— 
‘‘(1) COORDINATION WITH ADVANCE PAYMENTS 
OF CREDIT; RECAPTURE OF EXCESS ADVANCE PAY-
MENTS.—With respect to any taxable year— 
‘‘(A) the amount which would (but for this 
subsection) be allowed as a credit to the tax-
payer under subsection (a) shall be reduced 
(but not below zero) by the aggregate amount 
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paid on behalf of such taxpayer under section 
7529 for months beginning in such taxable 
year, and 
‘‘(B) the tax imposed by section 1 for such 
taxable year shall be increased by the excess (if 
any) of— 
‘‘(i) the aggregate amount paid on be-
half of such taxpayer under section 7529 
for months beginning in such taxable year, 
over 
‘‘(ii) the amount which would (but for 
this subsection) be allowed as a credit to 
the taxpayer under subsection (a). 
‘‘(2) COORDINATION
WITH
OTHER
DEDUC-
TIONS.—Amounts taken into account under sub-
section (a) shall not be taken into account in deter-
mining— 
‘‘(A) any deduction allowed under section 
162(l), 213, or 224, or 
‘‘(B) any credit allowed under section 35. 
‘‘(3) MEDICAL
AND
HEALTH
SAVINGS
AC-
COUNTS.—Amounts distributed from an Archer 
MSA (as defined in section 220(d)) or from a health 
savings account (as defined in section 223(d)) shall 
not be taken into account under subsection (a). 
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‘‘(4) DENIAL OF CREDIT TO DEPENDENTS AND 
NONPERMANENT RESIDENT ALIEN INDIVIDUALS.— 
No credit shall be allowed under this section to any 
individual who is— 
‘‘(A) not a citizen or lawful permanent 
resident of the United States for the calendar 
year in which the taxable year begins, or 
‘‘(B) a dependent with respect to another 
taxpayer for a taxable year beginning in the 
calendar year in which such individual’s taxable 
year begins. 
‘‘(5) MARRIED INDIVIDUALS.—In the case of an 
individual who is married (within the meaning of 
section 7703), this section shall apply only if a joint 
return is filed for the taxable year under section 
6013. 
‘‘(6) INSURANCE WHICH COVERS OTHER INDI-
VIDUALS.—For purposes of this section, rules simi-
lar to the rules of section 213(d)(6) shall apply with 
respect to any contract for qualified health insurance 
under which amounts are payable for coverage of an 
individual other than the taxpayer and qualifying 
family members. 
‘‘(7) TREATMENT
OF
PAYMENTS.—For pur-
poses of this section— 
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‘‘(A) PAYMENTS
BY
SECRETARY.—Pay-
ments made by the Secretary on behalf of any 
individual under section 7529 (relating to ad-
vance payment of credit for health insurance 
costs of individuals with COBRA continuation 
coverage by reason of termination of employ-
ment) shall be treated as having been made by 
the taxpayer on the first day of the month for 
which such payment was made. 
‘‘(B) PAYMENTS
BY
TAXPAYER.—Pay-
ments made by the taxpayer for eligible cov-
erage months shall be treated as having been 
made by the taxpayer on the first day of the 
month for which such payment was made. 
‘‘(8) REGULATIONS.—The Secretary may pre-
scribe such regulations and other guidance as may 
be necessary or appropriate to carry out this section, 
section 6050W, and section 7529.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting 
‘‘36A,’’ after ‘‘36,’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
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enue Code of 1986 is amended by inserting after the 
item relating to section 36 the following new item: 
‘‘Sec. 36A. Health insurance costs of individuals with COBRA continuation 
coverage by reason of termination of employment.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 3. ADVANCE PAYMENT OF CREDIT FOR HEALTH IN-
SURANCE 
COSTS 
OF 
INDIVIDUALS 
WITH 
COBRA CONTINUATION COVERAGE BY REA-
SON OF TERMINATION OF EMPLOYMENT. 
(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: 
‘‘SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH 
INSURANCE COSTS OF INDIVIDUALS WITH 
COBRA CONTINUATION COVERAGE BY REA-
SON OF TERMINATION OF EMPLOYMENT. 
‘‘Not later than January 1, 2009, the Secretary shall 
establish a program for making payments to providers of 
qualified health insurance (as defined in section 36A(e)) 
on behalf of taxpayers eligible for the credit under section 
36A.’’. 
(b) INFORMATION REPORTING.— 
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 of such Code (relating 
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to information concerning transactions with other 
persons) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 6050W. RETURNS RELATING TO CREDIT FOR HEALTH 
INSURANCE COSTS OF INDIVIDUALS WITH 
COBRA CONTINUATION COVERAGE BY REA-
SON OF TERMINATION OF EMPLOYMENT. 
‘‘(a) REQUIREMENT OF REPORTING.—Every person 
who is entitled to receive payments for any month of any 
calendar year under section 7529 (relating to advance pay-
ment of credit for health insurance costs of individuals 
with COBRA continuation coverage by reason of termi-
nation of employment) with respect to any individual shall, 
at such time as the Secretary may prescribe, make the 
return described in subsection (b) with respect to each 
such individual. 
‘‘(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 each 
individual referred to in subsection (a), 
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‘‘(B) the number of months such person 
provided COBRA continuation coverage by rea-
son of termination of employment, 
‘‘(C) the number of months for which 
amounts were received with respect to such in-
dividual under section 7529 (relating to ad-
vance payment of credit for health insurance 
costs of individuals with COBRA continuation 
coverage by reason of termination of employ-
ment), 
‘‘(D) the amount entitled to be received for 
each such month, and 
‘‘(E) such other information as the Sec-
retary may prescribe. 
‘‘(c) 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 to be set forth in such return a written state-
ment 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, and 
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
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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.’’. 
(2) ASSESSABLE PENALTIES.— 
(A) 
Subparagraph 
(B) 
of 
section 
6724(d)(1) of such Code (relating to defini-
tions) is amended by striking ‘‘or’’ at the end 
of clause (xxi), by striking ‘‘and’’ at the end of 
clause (xxii) and inserting ‘‘or’’, and by insert-
ing after clause (xxii) the following new clause: 
‘‘(xxiii) section 6050W (relating to re-
turns relating to credit for health insur-
ance costs of individuals with COBRA con-
tinuation coverage by reason of termi-
nation of employment), and’’. 
(B) Paragraph (2) of section 6724(d) of 
such Code is amended by striking the period at 
the end of subparagraph (CC) and inserting a 
comma, by striking the period at the end of 
subparagraph (DD) and inserting ‘‘, or’’, and 
by adding after subparagraph (DD) the fol-
lowing new subparagraph: 
‘‘(EE) section 6050W (relating to returns 
relating to credit for health insurance costs of 
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individuals with COBRA continuation coverage 
by reason of termination of employment).’’. 
(c) CLERICAL AMENDMENTS.— 
(1) The table of sections for chapter 77 of such 
Code is amended by adding at the end the following 
new item: 
‘‘Sec. 7529. Advance payment of credit for health insurance costs of individuals 
with COBRA continuation coverage by reason of termination of 
employment.’’. 
(2) The table of sections for subpart B of part 
III of subchapter A of chapter 61 of such Code is 
amended by adding at the end the following new 
item: 
‘‘Sec. 6050W. Returns relating to credit for health insurance costs of individ-
uals with COBRA continuation coverage by reason of termi-
nation of employment.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
Æ 
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