I
105TH CONGRESS
1ST SESSION
H. R. 539
To amend the Internal Revenue Code of 1986 to allow certain employees
without employer-provided health coverage a refundable credit for their
health insurance costs.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 4, 1997
Mr. MCDERMOTT (for himself, Mr. RANGEL, Mr. STARK, Mr. NEAL of Massa-
chusetts, Mr. COYNE, Mr. POMEROY, Mr. DELLUMS, Mr. SERRANO, Mr.
MCGOVERN, Ms. BROWN of Florida, Ms. CHRISTIAN-GREEN, and Ms.
JACKSON-LEE of Texas) 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 cer-
tain employees without employer-provided health cov-
erage a refundable credit for their health insurance costs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. REFUNDABLE CREDIT FOR HEALTH INSUR-
ANCE COSTS OF EMPLOYEES.
(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 by inserting
after section 34 the following new section:
‘‘SEC. 35. HEALTH INSURANCE COSTS OF EMPLOYEES.
‘‘(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 30 percent of the
amount paid during the taxable year for insurance which
constitutes medical care for the taxpayer, his spouse, and
dependents.
‘‘(b) LIMITATIONS.—
‘‘(1) LIMITATION BASED ON EMPLOYEE COM-
PENSATION.—The payments taken into account
under subsection (a) for any taxable year shall not
exceed the taxpayer’s wages, salaries, tips, and other
employee compensation includible in gross income
for such taxable year.
‘‘(2) LIMITATION
BASED
ON
OTHER
COV-
ERAGE.—Subsection (a) shall not apply to—
‘‘(A) any taxpayer for any calendar month
for which the taxpayer is eligible to participate
in any subsidized health plan maintained by
any employer of the taxpayer or of the spouse
of the taxpayer, or
‘‘(B) amounts paid for coverage under—
‘‘(i) part B of title XVIII of the Social
Security Act, or
‘‘(ii) a Medicare supplemental policy
(within the meaning of section 1882(g)(1)
of the Social Security Act (42 U.S.C.
1395ss(g)(1))) or similar supplemental
coverage provided under a group health
plan.
‘‘(c) LIMITATION BASED ON ADJUSTED GROSS IN-
COME.—
‘‘(1) IN GENERAL.—No credit shall be allowed
under subsection (a) for any taxable year for which
the taxpayer’s adjusted gross income exceeds the ap-
plicable dollar amount by $10,000 or more.
‘‘(2) PHASEOUT.—If the taxpayer’s adjusted
gross income for the taxable year exceeds the appli-
cable dollar amount by less than $10,000, the credit
which would (but for this subsection and subsection
(d)) be allowed under subsection (a) shall be reduced
(but not below zero) by an amount which bears the
same ratio to such credit as such excess bears to
$10,000. Any reduction under the preceding sen-
tence which is not a multiple of $10 shall be round-
ed to the next lowest $10.
‘‘(3) APPLICABLE DOLLAR AMOUNT.—The term
‘applicable dollar amount’ means—
‘‘(A) in the case of a taxpayer filing a joint
return, $40,000,
‘‘(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—
‘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
the date of the enactment of this Act.
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