support against any sponsor of such an alien on the basis 
of provision of assistance to such category and the cost 
of such assistance shall not be considered as an unreim-
bursed cost. 
‘‘(ii) The provisions of sections 401(a), 402(b), 403, 
and 421 of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 shall not apply to a 
State that makes an election under subparagraph (A).’’. 
(b) TITLE XXI.—Section 2107(e)(1) of the Social 
Security Act (42 U.S.C. 1397gg(e)(1)) is amended by add-
ing at the end the following: 
‘‘(E) Section 1903(v)(4) (relating to op-
tional coverage of permanent resident alien chil-
dren), but only if the State has elected to apply 
such section to that category of children under 
title XIX.’’. 
SEC. 204. STATE OPTION FOR PASSIVE RENEWAL OF ELIGI-
BILITY FOR CHILDREN UNDER MEDICAID 
AND SCHIP. 
(a) IN GENERAL.—Section 1902(l) of the Social Se-
curity Act (42 U.S.C. 1396a(l)) is amended by adding at 
the end the following: 
‘‘(5) Notwithstanding any other provision of this title, 
a State may provide that an individual who has not at-
tained 21 years of age who has been determined eligible
for medical assistance under this title shall remain eligible 
for medical assistance until such time as the State has 
information demonstrating that the individual is no longer 
so eligible.’’. 
(b) APPLICATION
UNDER
TITLE
XXI.—Section 
2107(e)(1) of the Social Security Act (42 U.S.C. 
1397gg(e)) is amended—
(1) 
by 
redesignating 
subparagraphs 
(B) 
through (D) as subparagraphs (C) through (E), re-
spectively; and 
(2) by inserting after subparagraph (A), the fol-
lowing: 
‘‘(B) Section 1902(l)(5) (relating to pas-
sive renewal of eligibility for children).’’. 
TITLE III—TAX INCENTIVES FOR 
HEALTH 
INSURANCE 
COV-
ERAGE OF CHILDREN 
SEC. 301. REFUNDABLE CREDIT FOR HEALTH INSURANCE 
COVERAGE OF CHILDREN. 
(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 credits) is amended by redes-
ignating section 36 as section 37 and by inserting after 
section 35 the following new section:
‘‘SEC. 36. HEALTH INSURANCE COVERAGE OF CHILDREN. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this subtitle an amount equal to so much of the amount 
paid during the taxable year, not compensated for by in-
surance or otherwise, for qualified health insurance for 
each dependent child of the taxpayer, as exceeds 5 percent 
of the adjusted gross income of such taxpayer for such 
taxable year. 
‘‘(b) DEPENDENT CHILD.—For purposes of this sec-
tion, the term ‘dependent child’ means any child (as de-
fined in section 152(f)(1)) who has not attained the age 
of 19 as of the close of the calendar year in which the 
taxable year of the taxpayer begins and with respect to 
whom a deduction under section 151 is allowable to the 
taxpayer. 
‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified health 
insurance’ means insurance, either employer-pro-
vided or made available under title XIX or XXI of 
the Social Security Act, which constitutes medical 
care as defined in section 213(d) without regard 
to—
‘‘(A) paragraph (1)(C) thereof, and
‘‘(B) so much of paragraph (1)(D) thereof 
as relates to qualified long-term care insurance 
contracts. 
‘‘(2) EXCLUSION
OF
CERTAIN
OTHER
CON-
TRACTS.—Such term shall not include insurance if a 
substantial portion of its benefits are excepted bene-
fits (as defined in section 9832(c)). 
‘‘(d) MEDICAL SAVINGS ACCOUNT AND HEALTH SAV-
INGS ACCOUNT CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—If a deduction would (but 
for paragraph (2)) be allowed under section 220 or 
223 to the taxpayer for a payment for the taxable 
year to the medical savings account or health sav-
ings account of an individual, subsection (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 or 223 for 
that portion of the payments otherwise allowable as 
a deduction under section 220 or 223 for the taxable 
year which is equal to the amount of credit allowed 
for such taxable year by reason of this subsection. 
‘‘(e) SPECIAL RULES.—
‘‘(1) DETERMINATION OF INSURANCE COSTS.—
The Secretary shall provide rules for the allocation
of the cost of any qualified health insurance for fam-
ily coverage to the coverage of any dependent child 
under such insurance. 
‘‘(2) 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. 
‘‘(3) COORDINATION WITH MEDICAL EXPENSE 
AND
HIGH
DEDUCTIBLE
HEALTH
PLAN
DEDUC-
TIONS.—The amount which would (but for this 
paragraph) be taken into account by the taxpayer 
under section 213 or 224 for the taxable year shall 
be reduced by the credit (if any) allowed by this sec-
tion to the taxpayer for such year. 
‘‘(4) 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. 
‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 
shall be allowed under subsection (a) if the credit
under section 35 is allowed and no credit shall be al-
lowed under 35 if a credit is allowed under this sec-
tion. 
‘‘(6) ELECTION NOT TO CLAIM CREDIT.—This 
section shall not apply to a taxpayer for any taxable 
year if such taxpayer elects to have this section not 
apply for such taxable year.’’. 
(b) INFORMATION REPORTING.—
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to information concerning 
transactions with other persons) is amended by in-
serting after section 6050T the following new sec-
tion: 
‘‘SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR 
QUALIFIED HEALTH INSURANCE. 
‘‘(a) IN GENERAL.—Any governmental unit or any 
person who, in connection with a trade or business con-
ducted by such person, receives payments during any cal-
endar year from any individual for coverage of a depend-
ent child (as defined in section 36(b)) of such individual 
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 indi-
vidual from whom such payments were received.