H. R. 3590—728 
‘‘SEC. 3210. TAX TREATMENT OF PROGRAM. 
‘‘The CLASS program shall be treated for purposes of the 
Internal Revenue Code of 1986 in the same manner as a qualified 
long-term care insurance contract for qualified long-term care serv-
ices.’’. 
(2) CONFORMING
AMENDMENTS
TO
MEDICAID.—Section 
1902(a) of the Social Security Act (42 U.S.C. 1396a(a)), as 
amended by section 6505, is amended by inserting after para-
graph (80) the following: 
‘‘(81) provide that the State will comply with such regula-
tions regarding the application of primary and secondary payor 
rules with respect to individuals who are eligible for medical 
assistance under this title and are eligible beneficiaries under 
the CLASS program established under title XXXII of the Public 
Health Service Act as the Secretary shall establish; and’’. 
(b) ASSURANCE OF ADEQUATE INFRASTRUCTURE FOR THE PROVI-
SION OF PERSONAL CARE ATTENDANT WORKERS.—Section 1902(a) 
of the Social Security Act (42 U.S.C. 1396a(a)), as amended by 
subsection (a)(2), is amended by inserting after paragraph (81) 
the following: 
‘‘(82) provide that, not later than 2 years after the date 
of enactment of the Community Living Assistance Services 
and Supports Act, each State shall— 
‘‘(A) assess the extent to which entities such as pro-
viders of home care, home health services, home and 
community service providers, public authorities created to 
provide personal care services to individuals eligible for 
medical assistance under the State plan, and nonprofit 
organizations, are serving or have the capacity to serve 
as fiscal agents for, employers of, and providers of employ-
ment-related benefits for, personal care attendant workers 
who provide personal care services to individuals receiving 
benefits under the CLASS program established under title 
XXXII of the Public Health Service Act, including in rural 
and underserved areas; 
‘‘(B) designate or create such entities to serve as fiscal 
agents for, employers of, and providers of employment- 
related benefits for, such workers to ensure an adequate 
supply of the workers for individuals receiving benefits 
under the CLASS program, including in rural and under-
served areas; and 
‘‘(C) ensure that the designation or creation of such 
entities will not negatively alter or impede existing pro-
grams, models, methods, or administration of service 
delivery that provide for consumer controlled or self- 
directed home and community services and further ensure 
that such entities will not impede the ability of individuals 
to direct and control their home and community services, 
including the ability to select, manage, dismiss, co-employ, 
or employ such workers or inhibit such individuals from 
relying on family members for the provision of personal 
care services.’’. 
(c) 
PERSONAL
CARE
ATTENDANTS
WORKFORCE
ADVISORY 
PANEL.— 
(1) ESTABLISHMENT.—Not later than 90 days after the date 
of enactment of this Act, the Secretary of Health and Human 
Services shall establish a Personal Care Attendants Workforce
H. R. 3590—729 
Advisory Panel for the purpose of examining and advising 
the Secretary and Congress on workforce issues related to 
personal care attendant workers, including with respect to the 
adequacy of the number of such workers, the salaries, wages, 
and benefits of such workers, and access to the services provided 
by such workers. 
(2) MEMBERSHIP.—In appointing members to the Personal 
Care Attendants Workforce Advisory Panel, the Secretary shall 
ensure that such members include the following: 
(A) Individuals with disabilities of all ages. 
(B) Senior individuals. 
(C) Representatives of individuals with disabilities. 
(D) Representatives of senior individuals. 
(E) Representatives of workforce and labor organiza-
tions. 
(F) Representatives of home and community-based 
service providers. 
(G) Representatives of assisted living providers. 
(d) INCLUSION OF INFORMATION ON SUPPLEMENTAL COVERAGE 
IN THE NATIONAL CLEARINGHOUSE FOR LONG-TERM CARE INFORMA-
TION; EXTENSION
OF FUNDING.—Section 6021(d) of the Deficit 
Reduction Act of 2005 (42 U.S.C. 1396p note) is amended— 
(1) in paragraph (2)(A)— 
(A) in clause (ii), by striking ‘‘and’’ at the end; 
(B) in clause (iii), by striking the period at the end 
and inserting ‘‘; and’’; and 
(C) by adding at the end the following: 
‘‘(iv) include information regarding the CLASS pro-
gram established under title XXXII of the Public 
Health Service Act and coverage available for purchase 
through a Exchange established under section 1311 
of the Patient Protection and Affordable Care Act that 
is supplemental coverage to the benefits provided 
under a CLASS Independence Benefit Plan under that 
program, and information regarding how benefits pro-
vided under a CLASS Independence Benefit Plan differ 
from disability insurance benefits.’’; and 
(2) in paragraph (3), by striking ‘‘2010’’ and inserting 
‘‘2015’’. 
(e) EFFECTIVE DATE.—The amendments made by subsections 
(a), (b), and (d) take effect on January 1, 2011. 
(f) RULE OF CONSTRUCTION.—Nothing in this title or the amend-
ments made by this title are intended to replace or displace public 
or private disability insurance benefits, including such benefits 
that are for income replacement. 
TITLE IX—REVENUE PROVISIONS 
Subtitle A—Revenue Offset Provisions 
SEC. 9001. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH 
COVERAGE. 
(a) IN GENERAL.—Chapter 43 of the Internal Revenue Code 
of 1986, as amended by section 1513, is amended by adding at 
the end the following:
H. R. 3590—730 
‘‘SEC. 4980I. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED 
HEALTH COVERAGE. 
‘‘(a) IMPOSITION OF TAX.—If— 
‘‘(1) an employee is covered under any applicable employer- 
sponsored coverage of an employer at any time during a taxable 
period, and 
‘‘(2) there is any excess benefit with respect to the coverage, 
there is hereby imposed a tax equal to 40 percent of the excess 
benefit. 
‘‘(b) EXCESS BENEFIT.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘excess benefit’ means, with 
respect to any applicable employer-sponsored coverage made 
available by an employer to an employee during any taxable 
period, the sum of the excess amounts determined under para-
graph (2) for months during the taxable period. 
‘‘(2) MONTHLY EXCESS AMOUNT.—The excess amount deter-
mined under this paragraph for any month is the excess (if 
any) of— 
‘‘(A) the aggregate cost of the applicable employer- 
sponsored coverage of the employee for the month, over 
‘‘(B) an amount equal to 1⁄12 of the annual limitation 
under paragraph (3) for the calendar year in which the 
month occurs. 
‘‘(3) ANNUAL LIMITATION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The annual limitation under this 
paragraph for any calendar year is the dollar limit deter-
mined under subparagraph (C) for the calendar year. 
‘‘(B) APPLICABLE
ANNUAL
LIMITATION.—The annual 
limitation which applies for any month shall be determined 
on the basis of the type of coverage (as determined under 
subsection (f)(1)) provided to the employee by the employer 
as of the beginning of the month. 
‘‘(C) APPLICABLE DOLLAR LIMIT.—Except as provided 
in subparagraph (D)— 
‘‘(i) 2013.—In the case of 2013, the dollar limit 
under this subparagraph is— 
‘‘(I) in the case of an employee with self-only 
coverage, $8,500, and 
‘‘(II) in the case of an employee with coverage 
other than self-only coverage, $23,000. 
‘‘(ii) EXCEPTION FOR CERTAIN INDIVIDUALS.—In the 
case of an individual who is a qualified retiree or 
who participates in a plan sponsored by an employer 
the majority of whose employees are engaged in a 
high-risk profession or employed to repair or install 
electrical or telecommunications lines— 
‘‘(I) the dollar amount in clause (i)(I) (deter-
mined after the application of subparagraph (D)) 
shall be increased by $1,350, and 
‘‘(II) the dollar amount in clause (i)(II) (deter-
mined after the application of subparagraph (D)) 
shall be increased by $3,000. 
‘‘(iii) SUBSEQUENT YEARS.—In the case of any cal-
endar year after 2013, each of the dollar amounts 
under clauses (i) and (ii) shall be increased to the 
amount equal to such amount as in effect for the
H. R. 3590—731 
calendar year preceding such year, increased by an 
amount equal to the product of— 
‘‘(I) such amount as so in effect, multiplied 
by 
‘‘(II) the cost-of-living adjustment determined 
under section 1(f)(3) for such year (determined by 
substituting the calendar year that is 2 years 
before such year for ‘1992’ in subparagraph (B) 
thereof), increased by 1 percentage point. 
If any amount determined under this clause is not 
a multiple of $50, such amount shall be rounded to 
the nearest multiple of $50. 
‘‘(D) TRANSITION RULE FOR STATES WITH HIGHEST COV-
ERAGE COSTS.— 
‘‘(i) IN
GENERAL.—If an employee is a resident 
of a high cost State on the first day of any month 
beginning in 2013, 2014, or 2015, the annual limitation 
under this paragraph for such month with respect 
to such employee shall be an amount equal to the 
applicable percentage of the annual limitation (deter-
mined without regard to this subparagraph or subpara-
graph (C)(ii)). 
‘‘(ii) APPLICABLE
PERCENTAGE.—The applicable 
percentage is 120 percent for 2013, 110 percent for 
2014, and 105 percent for 2015. 
‘‘(iii) HIGH COST STATE.—The term ‘high cost State’ 
means each of the 17 States which the Secretary of 
Health and Human Services, in consultation with the 
Secretary, estimates had the highest average cost 
during 2012 for employer-sponsored coverage under 
health plans. The Secretary’s estimate shall be made 
on the basis of aggregate premiums paid in the State 
for such health plans, determined using the most 
recent data available as of August 31, 2012. 
‘‘(c) LIABILITY TO PAY TAX.— 
‘‘(1) IN GENERAL.—Each coverage provider shall pay the 
tax imposed by subsection (a) on its applicable share of the 
excess benefit with respect to an employee for any taxable 
period. 
‘‘(2) COVERAGE PROVIDER.—For purposes of this subsection, 
the term ‘coverage provider’ means each of the following: 
‘‘(A) HEALTH INSURANCE COVERAGE.—If the applicable 
employer-sponsored coverage consists of coverage under a 
group health plan which provides health insurance cov-
erage, the health insurance issuer. 
‘‘(B) HSA AND MSA CONTRIBUTIONS.—If the applicable 
employer-sponsored coverage consists of coverage under an 
arrangement under which the employer makes contribu-
tions described in subsection (b) or (d) of section 106, the 
employer. 
‘‘(C) OTHER
COVERAGE.—In the case of any other 
applicable employer-sponsored coverage, the person that 
administers the plan benefits. 
‘‘(3) APPLICABLE SHARE.—For purposes of this subsection, 
a coverage provider’s applicable share of an excess benefit for 
any taxable period is the amount which bears the same ratio 
to the amount of such excess benefit as—
H. R. 3590—732 
‘‘(A) the cost of the applicable employer-sponsored cov-
erage provided by the provider to the employee during 
such period, bears to 
‘‘(B) the aggregate cost of all applicable employer-spon-
sored coverage provided to the employee by all coverage 
providers during such period. 
‘‘(4) RESPONSIBILITY TO CALCULATE TAX AND APPLICABLE 
SHARES.— 
‘‘(A) IN GENERAL.—Each employer shall— 
‘‘(i) calculate for each taxable period the amount 
of the excess benefit subject to the tax imposed by 
subsection (a) and the applicable share of such excess 
benefit for each coverage provider, and 
‘‘(ii) notify, at such time and in such manner as 
the Secretary may prescribe, the Secretary and each 
coverage provider of the amount so determined for 
the provider. 
‘‘(B) SPECIAL RULE FOR MULTIEMPLOYER PLANS.—In the 
case of applicable employer-sponsored coverage made avail-
able to employees through a multiemployer plan (as defined 
in section 414(f)), the plan sponsor shall make the calcula-
tions, and provide the notice, required under subparagraph 
(A). 
‘‘(d) APPLICABLE EMPLOYER-SPONSORED COVERAGE; COST.—For 
purposes of this section— 
‘‘(1) APPLICABLE EMPLOYER-SPONSORED COVERAGE.— 
‘‘(A) IN GENERAL.—The term ‘applicable employer-spon-
sored coverage’ means, with respect to any employee, cov-
erage under any group health plan made available to the 
employee by an employer which is excludable from the 
employee’s gross income under section 106, or would be 
so excludable if it were employer-provided coverage (within 
the meaning of such section 106). 
‘‘(B) EXCEPTIONS.—The term ‘applicable employer-spon-
sored coverage’ shall not include— 
‘‘(i) any coverage (whether through insurance or 
otherwise) described in section 9832(c)(1)(A) or for long- 
term care, or 
‘‘(ii) any coverage described in section 9832(c)(3) 
the payment for which is not excludable from gross 
income and for which a deduction under section 162(l) 
is not allowable. 
‘‘(C) COVERAGE INCLUDES EMPLOYEE PAID PORTION.— 
Coverage shall be treated as applicable employer-sponsored 
coverage without regard to whether the employer or 
employee pays for the coverage. 
‘‘(D) SELF-EMPLOYED INDIVIDUAL.—In the case of an 
individual who is an employee within the meaning of sec-
tion 401(c)(1), coverage under any group health plan pro-
viding health insurance coverage shall be treated as 
applicable employer-sponsored coverage if a deduction is 
allowable under section 162(l) with respect to all or any 
portion of the cost of the coverage. 
‘‘(E) GOVERNMENTAL
PLANS
INCLUDED.—Applicable 
employer-sponsored coverage shall include coverage under 
any group health plan established and maintained pri-
marily for its civilian employees by the Government of
H. R. 3590—733 
the United States, by the government of any State or 
political subdivision thereof, or by any agency or instrumen-
tality of any such government. 
‘‘(2) DETERMINATION OF COST.— 
‘‘(A) IN
GENERAL.—The cost of applicable employer- 
sponsored coverage shall be determined under rules similar 
to the rules of section 4980B(f)(4), except that in deter-
mining such cost, any portion of the cost of such coverage 
which is attributable to the tax imposed under this section 
shall not be taken into account and the amount of such 
cost shall be calculated separately for self-only coverage 
and other coverage. In the case of applicable employer- 
sponsored coverage which provides coverage to retired 
employees, the plan may elect to treat a retired employee 
who has not attained the age of 65 and a retired employee 
who has attained the age of 65 as similarly situated bene-
ficiaries. 
‘‘(B) HEALTH FSAS.—In the case of applicable employer- 
sponsored coverage consisting of coverage under a flexible 
spending arrangement (as defined in section 106(c)(2)), the 
cost of the coverage shall be equal to the sum of— 
‘‘(i) the amount of employer contributions under 
any salary reduction election under the arrangement, 
plus 
‘‘(ii) the amount determined under subparagraph 
(A) with respect to any reimbursement under the 
arrangement in excess of the contributions described 
in clause (i). 
‘‘(C) ARCHER MSAS AND HSAS.—In the case of applicable 
employer-sponsored coverage consisting of coverage under 
an arrangement under which the employer makes contribu-
tions described in subsection (b) or (d) of section 106, the 
cost of the coverage shall be equal to the amount of 
employer contributions under the arrangement. 
‘‘(D) ALLOCATION ON A MONTHLY BASIS.—If cost is deter-
mined on other than a monthly basis, the cost shall be 
allocated to months in a taxable period on such basis 
as the Secretary may prescribe. 
‘‘(e) PENALTY FOR FAILURE TO PROPERLY CALCULATE EXCESS 
BENEFIT.— 
‘‘(1) IN
GENERAL.—If, for any taxable period, the tax 
imposed by subsection (a) exceeds the tax determined under 
such subsection with respect to the total excess benefit cal-
culated by the employer or plan sponsor under subsection 
(c)(4)— 
‘‘(A) each coverage provider shall pay the tax on its 
applicable share (determined in the same manner as under 
subsection (c)(4)) of the excess, but no penalty shall be 
imposed on the provider with respect to such amount, 
and 
‘‘(B) the employer or plan sponsor shall, in addition 
to any tax imposed by subsection (a), pay a penalty in 
an amount equal to such excess, plus interest at the under-
payment rate determined under section 6621 for the period 
beginning on the due date for the payment of tax imposed 
by subsection (a) to which the excess relates and ending 
on the date of payment of the penalty.
H. R. 3590—734 
‘‘(2) LIMITATIONS ON PENALTY.— 
‘‘(A) PENALTY
NOT
TO
APPLY
WHERE
FAILURE
NOT 
DISCOVERED EXERCISING REASONABLE DILIGENCE.—No pen-
alty shall be imposed by paragraph (1)(B) on any failure 
to properly calculate the excess benefit during any period 
for which it is established to the satisfaction of the Sec-
retary that the employer or plan sponsor neither knew, 
nor exercising reasonable diligence would have known, that 
such failure existed. 
‘‘(B) PENALTY NOT TO APPLY TO FAILURES CORRECTED 
WITHIN 30 DAYS.—No penalty shall be imposed by paragraph 
(1)(B) on any such failure if— 
‘‘(i) such failure was due to reasonable cause and 
not to willful neglect, and 
‘‘(ii) such failure is corrected during the 30-day 
period beginning on the 1st date that the employer 
knew, or exercising reasonable diligence would have 
known, that such failure existed. 
‘‘(C) WAIVER BY SECRETARY.—In the case of any such 
failure which is due to reasonable cause and not to willful 
neglect, the Secretary may waive part or all of the penalty 
imposed by paragraph (1), to the extent that the payment 
of such penalty would be excessive or otherwise inequitable 
relative to the failure involved. 
‘‘(f) OTHER DEFINITIONS
AND SPECIAL RULES.—For purposes 
of this section— 
‘‘(1) COVERAGE DETERMINATIONS.— 
‘‘(A) IN GENERAL.—Except as provided in subparagraph 
(B), an employee shall be treated as having self-only cov-
erage with respect to any applicable employer-sponsored 
coverage of an employer. 
‘‘(B) MINIMUM
ESSENTIAL
COVERAGE.—An employee 
shall be treated as having coverage other than self-only 
coverage only if the employee is enrolled in coverage other 
than self-only coverage in a group health plan which pro-
vides minimum essential coverage (as defined in section 
5000A(f)) to the employee and at least one other beneficiary, 
and the benefits provided under such minimum essential 
coverage do not vary based on whether any individual 
covered under such coverage is the employee or another 
beneficiary. 
‘‘(2) QUALIFIED
RETIREE.—The term ‘qualified retiree’ 
means any individual who— 
‘‘(A) is receiving coverage by reason of being a retiree, 
‘‘(B) has attained age 55, and 
‘‘(C) is not entitled to benefits or eligible for enrollment 
under the Medicare program under title XVIII of the Social 
Security Act. 
‘‘(3) EMPLOYEES ENGAGED IN HIGH-RISK PROFESSION.—The 
term ‘employees engaged in a high-risk profession’ means law 
enforcement officers (as such term is defined in section 1204 
of the Omnibus Crime Control and Safe Streets Act of 1968), 
employees in fire protection activities (as such term is defined 
in section 3(y) of the Fair Labor Standards Act of 1938), individ-
uals who provide out-of-hospital emergency medical care 
(including emergency medical technicians, paramedics, and 
first-responders), and individuals engaged in the construction,
H. R. 3590—735 
mining, agriculture (not including food processing), forestry, 
and fishing industries. Such term includes an employee who 
is retired from a high-risk profession described in the preceding 
sentence, if such employee satisfied the requirements of such 
sentence for a period of not less than 20 years during the 
employee’s employment. 
‘‘(4) GROUP HEALTH PLAN.—The term ‘group health plan’ 
has the meaning given such term by section 5000(b)(1). 
‘‘(5) HEALTH
INSURANCE
COVERAGE; HEALTH
INSURANCE 
ISSUER.— 
‘‘(A) HEALTH INSURANCE COVERAGE.—The term ‘health 
insurance coverage’ has the meaning given such term by 
section 9832(b)(1) (applied without regard to subparagraph 
(B) thereof, except as provided by the Secretary in regula-
tions). 
‘‘(B) HEALTH
INSURANCE
ISSUER.—The term ‘health 
insurance issuer’ has the meaning given such term by 
section 9832(b)(2). 
‘‘(6) PERSON THAT ADMINISTERS THE PLAN BENEFITS.—The 
term ‘person that administers the plan benefits’ shall include 
the plan sponsor if the plan sponsor administers benefits under 
the plan. 
‘‘(7) PLAN
SPONSOR.—The term ‘plan sponsor’ has the 
meaning given such term in section 3(16)(B) of the Employee 
Retirement Income Security Act of 1974. 
‘‘(8) TAXABLE
PERIOD.—The term ‘taxable period’ means 
the calendar year or such shorter period as the Secretary may 
prescribe. The Secretary may have different taxable periods 
for employers of varying sizes. 
‘‘(9) AGGREGATION
RULES.—All employers treated as a 
single employer under subsection (b), (c), (m), or (o) of section 
414 shall be treated as a single employer. 
‘‘(10) DENIAL OF DEDUCTION.—For denial of a deduction 
for the tax imposed by this section, see section 275(a)(6). 
‘‘(g) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary to carry out this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for chapter 
43 of such Code, as amended by section 1513, is amended by 
adding at the end the following new item: 
‘‘Sec. 4980I. Excise tax on high cost employer-sponsored health coverage.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2012. 
SEC. 9002. INCLUSION OF COST OF EMPLOYER-SPONSORED HEALTH 
COVERAGE ON W–2. 
(a) IN GENERAL.—Section 6051(a) of the Internal Revenue Code 
of 1986 (relating to receipts for employees) is amended by striking 
‘‘and’’ at the end of paragraph (12), by striking the period at the 
end of paragraph (13) and inserting ‘‘, and’’, and by adding after 
paragraph (13) the following new paragraph: 
‘‘(14) the aggregate cost (determined under rules similar 
to the rules of section 4980B(f)(4)) of applicable employer-spon-
sored coverage (as defined in section 4980I(d)(1)), except that 
this paragraph shall not apply to— 
‘‘(A) coverage to which paragraphs (11) and (12) apply, 
or
H. R. 3590—736 
‘‘(B) the amount of any salary reduction contributions 
to a flexible spending arrangement (within the meaning 
of section 125).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2010. 
SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR 
PRESCRIBED DRUG OR INSULIN. 
(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal 
Revenue Code of 1986 is amended by adding at the end the fol-
lowing: ‘‘Such term shall include an amount paid for medicine 
or a drug only if such medicine or drug is a prescribed drug 
(determined without regard to whether such drug is available with-
out a prescription) or is insulin.’’. 
(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of 
the Internal Revenue Code of 1986 is amended by adding at the 
end the following: ‘‘Such term shall include an amount paid for 
medicine or a drug only if such medicine or drug is a prescribed 
drug (determined without regard to whether such drug is available 
without a prescription) or is insulin.’’. 
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH 
REIMBURSEMENT ARRANGEMENTS.—Section 106 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the following 
new subsection: 
‘‘(f) REIMBURSEMENTS
FOR
MEDICINE
RESTRICTED
TO
PRE-
SCRIBED DRUGS AND INSULIN.—For purposes of this section and 
section 105, reimbursement for expenses incurred for a medicine 
or a drug shall be treated as a reimbursement for medical expenses 
only if such medicine or drug is a prescribed drug (determined 
without regard to whether such drug is available without a prescrip-
tion) or is insulin.’’. 
(d) EFFECTIVE DATES.— 
(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.—The amend-
ments made by subsections (a) and (b) shall apply to amounts 
paid with respect to taxable years beginning after December 
31, 2010. 
(2) REIMBURSEMENTS.—The amendment made by sub-
section (c) shall apply to expenses incurred with respect to 
taxable years beginning after December 31, 2010. 
SEC. 9004. INCREASE IN ADDITIONAL TAX ON DISTRIBUTIONS FROM 
HSAS AND ARCHER MSAS NOT USED FOR QUALIFIED 
MEDICAL EXPENSES. 
(a) HSAS.—Section 223(f)(4)(A) of the Internal Revenue Code 
of 1986 is amended by striking ‘‘10 percent’’ and inserting ‘‘20 
percent’’. 
(b) ARCHER MSAS.—Section 220(f)(4)(A) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘15 percent’’ and inserting 
‘‘20 percent’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to distributions made after December 31, 2010. 
SEC. 9005. LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGE-
MENTS UNDER CAFETERIA PLANS. 
(a) IN GENERAL.—Section 125 of the Internal Revenue Code 
of 1986 is amended— 
(1) by redesignating subsections (i) and (j) as subsections 
(j) and (k), respectively, and
H. R. 3590—737 
(2) by inserting after subsection (h) the following new sub-
section: 
‘‘(i) LIMITATION
ON HEALTH FLEXIBLE SPENDING ARRANGE-
MENTS.—For purposes of this section, if a benefit is provided under 
a cafeteria plan through employer contributions to a health flexible 
spending arrangement, such benefit shall not be treated as a quali-
fied benefit unless the cafeteria plan provides that an employee 
may not elect for any taxable year to have salary reduction contribu-
tions in excess of $2,500 made to such arrangement.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2010. 
SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS. 
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new sub-
sections: 
‘‘(h) APPLICATION
TO
CORPORATIONS.—Notwithstanding any 
regulation prescribed by the Secretary before the date of the enact-
ment of this subsection, for purposes of this section the term ‘person’ 
includes any corporation that is not an organization exempt from 
tax under section 501(a). 
‘‘(i) REGULATIONS.—The Secretary may prescribe such regula-
tions and other guidance as may be appropriate or necessary to 
carry out the purposes of this section, including rules to prevent 
duplicative reporting of transactions.’’. 
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.— 
Subsection (a) of section 6041 of the Internal Revenue Code of 
1986 is amended— 
(1) by inserting ‘‘amounts in consideration for property,’’ 
after ‘‘wages,’’, 
(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or 
other’’, and 
(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the 
amount of such’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to payments made after December 31, 2011. 
SEC. 9007. ADDITIONAL REQUIREMENTS FOR CHARITABLE HOSPITALS. 
(a) REQUIREMENTS TO QUALIFY AS SECTION 501(C)(3) CHARI-
TABLE HOSPITAL ORGANIZATION.—Section 501 of the Internal Rev-
enue Code of 1986 (relating to exemption from tax on corporations, 
certain trusts, etc.) is amended by redesignating subsection (r) 
as subsection (s) and by inserting after subsection (q) the following 
new subsection: 
‘‘(r) ADDITIONAL REQUIREMENTS FOR CERTAIN HOSPITALS.— 
‘‘(1) IN GENERAL.—A hospital organization to which this 
subsection applies shall not be treated as described in sub-
section (c)(3) unless the organization— 
‘‘(A) meets the community health needs assessment 
requirements described in paragraph (3), 
‘‘(B) meets the financial assistance policy requirements 
described in paragraph (4), 
‘‘(C) meets the requirements on charges described in 
paragraph (5), and 
‘‘(D) meets the billing and collection requirement 
described in paragraph (6). 
‘‘(2) HOSPITAL
ORGANIZATIONS
TO
WHICH
SUBSECTION 
APPLIES.—
H. R. 3590—739 
‘‘(v) measures to widely publicize the policy within 
the community to be served by the organization. 
‘‘(B) POLICY RELATING TO EMERGENCY MEDICAL CARE.— 
A written policy requiring the organization to provide, with-
out discrimination, care for emergency medical conditions 
(within the meaning of section 1867 of the Social Security 
Act (42 U.S.C. 1395dd)) to individuals regardless of their 
eligibility under the financial assistance policy described 
in subparagraph (A). 
‘‘(5) LIMITATION ON CHARGES.—An organization meets the 
requirements of this paragraph if the organization— 
‘‘(A) limits amounts charged for emergency or other 
medically necessary care provided to individuals eligible 
for assistance under the financial assistance policy 
described in paragraph (4)(A) to not more than the lowest 
amounts charged to individuals who have insurance cov-
ering such care, and 
‘‘(B) prohibits the use of gross charges. 
‘‘(6) 
BILLING
AND
COLLECTION
REQUIREMENTS.—An 
organization meets the requirement of this paragraph only 
if the organization does not engage in extraordinary collection 
actions before the organization has made reasonable efforts 
to determine whether the individual is eligible for assistance 
under the financial assistance policy described in paragraph 
(4)(A). 
‘‘(7) REGULATORY AUTHORITY.—The Secretary shall issue 
such regulations and guidance as may be necessary to carry 
out the provisions of this subsection, including guidance relating 
to what constitutes reasonable efforts to determine the eligi-
bility of a patient under a financial assistance policy for pur-
poses of paragraph (6).’’. 
(b) EXCISE TAX FOR FAILURES TO MEET HOSPITAL EXEMPTION 
REQUIREMENTS.— 
(1) IN
GENERAL.—Subchapter D of chapter 42 of the 
Internal Revenue Code of 1986 (relating to failure by certain 
charitable organizations to meet certain qualification require-
ments) is amended by adding at the end the following new 
section: 
‘‘SEC. 4959. TAXES ON FAILURES BY HOSPITAL ORGANIZATIONS. 
‘‘If a hospital organization to which section 501(r) applies fails 
to meet the requirement of section 501(r)(3) for any taxable year, 
there is imposed on the organization a tax equal to $50,000.’’. 
(2) CONFORMING AMENDMENT.—The table of sections for 
subchapter D of chapter 42 of such Code is amended by adding 
at the end the following new item: 
‘‘Sec. 4959. Taxes on failures by hospital organizations.’’. 
(c) MANDATORY REVIEW OF TAX EXEMPTION FOR HOSPITALS.— 
The Secretary of the Treasury or the Secretary’s delegate shall 
review at least once every 3 years the community benefit activities 
of each hospital organization to which section 501(r) of the Internal 
Revenue Code of 1986 (as added by this section) applies. 
(d) ADDITIONAL REPORTING REQUIREMENTS.— 
(1) COMMUNITY HEALTH NEEDS ASSESSMENTS AND AUDITED 
FINANCIAL STATEMENTS.—Section 6033(b) of the Internal Rev-
enue Code of 1986 (relating to certain organizations described 
in section 501(c)(3)) is amended by striking ‘‘and’’ at the end
H. R. 3590—740 
of paragraph (14), by redesignating paragraph (15) as para-
graph (16), and by inserting after paragraph (14) the following 
new paragraph: 
‘‘(15) in the case of an organization to which the require-
ments of section 501(r) apply for the taxable year— 
‘‘(A) a description of how the organization is addressing 
the needs identified in each community health needs 
assessment conducted under section 501(r)(3) and a descrip-
tion of any such needs that are not being addressed 
together with the reasons why such needs are not being 
addressed, and 
‘‘(B) the audited financial statements of such organiza-
tion (or, in the case of an organization the financial state-
ments of which are included in a consolidated financial 
statement with other organizations, such consolidated 
financial statement).’’. 
(2) TAXES.—Section 6033(b)(10) of such Code is amended 
by striking ‘‘and’’ at the end of subparagraph (B), by inserting 
‘‘and’’ at the end of subparagraph (C), and by adding at the 
end the following new subparagraph: 
‘‘(D) section 4959 (relating to taxes on failures by hos-
pital organizations),’’. 
(e) REPORTS.— 
(1) REPORT ON LEVELS OF CHARITY CARE.—The Secretary 
of the Treasury, in consultation with the Secretary of Health 
and Human Services, shall submit to the Committees on Ways 
and Means, Education and Labor, and Energy and Commerce 
of the House of Representatives and to the Committees on 
Finance and Health, Education, Labor, and Pensions of the 
Senate an annual report on the following: 
(A) Information with respect to private tax-exempt, 
taxable, and government-owned hospitals regarding— 
(i) levels of charity care provided, 
(ii) bad debt expenses, 
(iii) unreimbursed costs for services provided with 
respect to means-tested government programs, and 
(iv) unreimbursed costs for services provided with 
respect to non-means tested government programs. 
(B) Information with respect to private tax-exempt hos-
pitals regarding costs incurred for community benefit activi-
ties. 
(2) REPORT ON TRENDS.— 
(A) STUDY.—The Secretary of the Treasury, in consulta-
tion with the Secretary of Health and Human Services, 
shall conduct a study on trends in the information required 
to be reported under paragraph (1). 
(B) REPORT.—Not later than 5 years after the date 
of the enactment of this Act, the Secretary of the Treasury, 
in consultation with the Secretary of Health and Human 
Services, shall submit a report on the study conducted 
under subparagraph (A) to the Committees on Ways and 
Means, Education and Labor, and Energy and Commerce 
of the House of Representatives and to the Committees 
on Finance and Health, Education, Labor, and Pensions 
of the Senate. 
(f) EFFECTIVE DATES.—
H. R. 3590—741 
(1) IN
GENERAL.—Except as provided in paragraphs (2) 
and (3), the amendments made by this section shall apply 
to taxable years beginning after the date of the enactment 
of this Act. 
(2) COMMUNITY HEALTH NEEDS ASSESSMENT.—The require-
ments of section 501(r)(3) of the Internal Revenue Code of 
1986, as added by subsection (a), shall apply to taxable years 
beginning after the date which is 2 years after the date of 
the enactment of this Act. 
(3) EXCISE TAX.—The amendments made by subsection (b) 
shall apply to failures occurring after the date of the enactment 
of this Act. 
SEC. 9008. IMPOSITION OF ANNUAL FEE ON BRANDED PRESCRIPTION 
PHARMACEUTICAL MANUFACTURERS AND IMPORTERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged in the busi-
ness of manufacturing or importing branded prescription drugs 
shall pay to the Secretary of the Treasury not later than the 
annual payment date of each calendar year beginning after 
2009 a fee in an amount determined under subsection (b). 
(2) ANNUAL PAYMENT DATE.—For purposes of this section, 
the term ‘‘annual payment date’’ means with respect to any 
calendar year the date determined by the Secretary, but in 
no event later than September 30 of such calendar year. 
(b) DETERMINATION OF FEE AMOUNT.— 
(1) IN GENERAL.—With respect to each covered entity, the 
fee under this section for any calendar year shall be equal 
to an amount that bears the same ratio to $2,300,000,000 
as— 
(A) the covered entity’s branded prescription drug sales 
taken into account during the preceding calendar year, 
bear to 
(B) the aggregate branded prescription drug sales of 
all covered entities taken into account during such pre-
ceding calendar year. 
(2) SALES TAKEN INTO ACCOUNT.—For purposes of para-
graph (1), the branded prescription drug sales taken into 
account during any calendar year with respect to any covered 
entity shall be determined in accordance with the following 
table: 
With respect to a covered entity’s aggregate 
branded prescription drug sales during the 
calendar year that are: 
The percentage of 
such sales taken 
into account is: 
Not more than $5,000,000 .......................
0 percent 
More than $5,000,000 but not more than 
$125,000,000.
10 percent 
More than $125,000,000 but not more 
than $225,000,000.
40 percent 
More than $225,000,000 but not more 
than $400,000,000.
75 percent 
More than $400,000,000 ...........................
100 percent.
H. R. 3590—742 
(3) SECRETARIAL
DETERMINATION.—The Secretary of the 
Treasury shall calculate the amount of each covered entity’s 
fee for any calendar year under paragraph (1). In calculating 
such amount, the Secretary of the Treasury shall determine 
such covered entity’s branded prescription drug sales on the 
basis of reports submitted under subsection (g) and through 
the use of any other source of information available to the 
Secretary of the Treasury. 
(c) TRANSFER OF FEES TO MEDICARE PART B TRUST FUND.— 
There is hereby appropriated to the Federal Supplementary Medical 
Insurance Trust Fund established under section 1841 of the Social 
Security Act an amount equal to the fees received by the Secretary 
of the Treasury under subsection (a). 
(d) COVERED ENTITY.— 
(1) IN GENERAL.—For purposes of this section, the term 
‘‘covered entity’’ means any manufacturer or importer with 
gross receipts from branded prescription drug sales. 
(2) CONTROLLED GROUPS.— 
(A) IN GENERAL.—For purposes of this subsection, all 
persons treated as a single employer under subsection (a) 
or (b) of section 52 of the Internal Revenue Code of 1986 
or subsection (m) or (o) of section 414 of such Code shall 
be treated as a single covered entity. 
(B) INCLUSION OF FOREIGN CORPORATIONS.—For pur-
poses of subparagraph (A), in applying subsections (a) and 
(b) of section 52 of such Code to this section, section 1563 
of such Code shall be applied without regard to subsection 
(b)(2)(C) thereof. 
(e) BRANDED PRESCRIPTION DRUG SALES.—For purposes of this 
section— 
(1) IN
GENERAL.—The term ‘‘branded prescription drug 
sales’’ means sales of branded prescription drugs to any speci-
fied government program or pursuant to coverage under any 
such program. 
(2) BRANDED PRESCRIPTION DRUGS.— 
(A) IN
GENERAL.—The term ‘‘branded prescription 
drug’’ means— 
(i) any prescription drug the application for which 
was submitted under section 505(b) of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)), or 
(ii) any biological product the license for which 
was submitted under section 351(a) of the Public 
Health Service Act (42 U.S.C. 262(a)). 
(B) PRESCRIPTION
DRUG.—For purposes of subpara-
graph (A)(i), the term ‘‘prescription drug’’ means any drug 
which is subject to section 503(b) of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 353(b)). 
(3) EXCLUSION OF ORPHAN DRUG SALES.—The term ‘‘branded 
prescription drug sales’’ shall not include sales of any drug 
or biological product with respect to which a credit was allowed 
for any taxable year under section 45C of the Internal Revenue 
Code of 1986. The preceding sentence shall not apply with 
respect to any such drug or biological product after the date 
on which such drug or biological product is approved by the 
Food and Drug Administration for marketing for any indication 
other than the treatment of the rare disease or condition with 
respect to which such credit was allowed.
H. R. 3590—743 
(4) SPECIFIED GOVERNMENT PROGRAM.—The term ‘‘specified 
government program’’ means— 
(A) the Medicare Part D program under part D of 
title XVIII of the Social Security Act, 
(B) the Medicare Part B program under part B of 
title XVIII of the Social Security Act, 
(C) the Medicaid program under title XIX of the Social 
Security Act, 
(D) any program under which branded prescription 
drugs are procured by the Department of Veterans Affairs, 
(E) any program under which branded prescription 
drugs are procured by the Department of Defense, or 
(F) the TRICARE retail pharmacy program under sec-
tion 1074g of title 10, United States Code. 
(f) TAX TREATMENT OF FEES.—The fees imposed by this sec-
tion— 
(1) for purposes of subtitle F of the Internal Revenue Code 
of 1986, shall be treated as excise taxes with respect to which 
only civil actions for refund under procedures of such subtitle 
shall apply, and 
(2) for purposes of section 275 of such Code, shall be consid-
ered to be a tax described in section 275(a)(6). 
(g) REPORTING REQUIREMENT.—Not later than the date deter-
mined by the Secretary of the Treasury following the end of any 
calendar year, the Secretary of Health and Human Services, the 
Secretary of Veterans Affairs, and the Secretary of Defense shall 
report to the Secretary of the Treasury, in such manner as the 
Secretary of the Treasury prescribes, the total branded prescription 
drug sales for each covered entity with respect to each specified 
government program under such Secretary’s jurisdiction using the 
following methodology: 
(1) MEDICARE PART D PROGRAM.—The Secretary of Health 
and Human Services shall report, for each covered entity and 
for each branded prescription drug of the covered entity covered 
by the Medicare Part D program, the product of— 
(A) the per-unit ingredient cost, as reported to the 
Secretary of Health and Human Services by prescription 
drug plans and Medicare Advantage prescription drug 
plans, minus any per-unit rebate, discount, or other price 
concession provided by the covered entity, as reported to 
the Secretary of Health and Human Services by the 
prescription drug plans and Medicare Advantage prescrip-
tion drug plans, and 
(B) the number of units of the branded prescription 
drug paid for under the Medicare Part D program. 
(2) MEDICARE PART B PROGRAM.—The Secretary of Health 
and Human Services shall report, for each covered entity and 
for each branded prescription drug of the covered entity covered 
by the Medicare Part B program under section 1862(a) of the 
Social Security Act, the product of— 
(A) the per-unit average sales price (as defined in 
section 1847A(c) of the Social Security Act) or the per- 
unit Part B payment rate for a separately paid branded 
prescription drug without a reported average sales price, 
and 
(B) the number of units of the branded prescription 
drug paid for under the Medicare Part B program.
H. R. 3590—744 
The Centers for Medicare and Medicaid Services shall establish 
a process for determining the units and the allocated price 
for purposes of this section for those branded prescription drugs 
that are not separately payable or for which National Drug 
Codes are not reported. 
(3) MEDICAID
PROGRAM.—The Secretary of Health and 
Human Services shall report, for each covered entity and for 
each branded prescription drug of the covered entity covered 
under the Medicaid program, the product of— 
(A) the per-unit ingredient cost paid to pharmacies 
by States for the branded prescription drug dispensed to 
Medicaid beneficiaries, minus any per-unit rebate paid by 
the covered entity under section 1927 of the Social Security 
Act and any State supplemental rebate, and 
(B) the number of units of the branded prescription 
drug paid for under the Medicaid program. 
(4) DEPARTMENT
OF
VETERANS
AFFAIRS
PROGRAMS.—The 
Secretary of Veterans Affairs shall report, for each covered 
entity and for each branded prescription drug of the covered 
entity the total amount paid for each such branded prescription 
drug procured by the Department of Veterans Affairs for its 
beneficiaries. 
(5) DEPARTMENT OF DEFENSE PROGRAMS AND TRICARE.— 
The Secretary of Defense shall report, for each covered entity 
and for each branded prescription drug of the covered entity, 
the sum of— 
(A) the total amount paid for each such branded 
prescription drug procured by the Department of Defense 
for its beneficiaries, and 
(B) for each such branded prescription drug dispensed 
under the TRICARE retail pharmacy program, the product 
of— 
(i) the per-unit ingredient cost, minus any per- 
unit rebate paid by the covered entity, and 
(ii) the number of units of the branded prescription 
drug dispensed under such program. 
(h) SECRETARY.—For purposes of this section, the term ‘‘Sec-
retary’’ includes the Secretary’s delegate. 
(i) GUIDANCE.—The Secretary of the Treasury shall publish 
guidance necessary to carry out the purposes of this section. 
(j) APPLICATION OF SECTION.—This section shall apply to any 
branded prescription drug sales after December 31, 2008. 
(k) CONFORMING AMENDMENT.—Section 1841(a) of the Social 
Security Act is amended by inserting ‘‘or section 9008(c) of the 
Patient Protection and Affordable Care Act of 2009’’ after ‘‘this 
part’’. 
SEC. 9009. IMPOSITION OF ANNUAL FEE ON MEDICAL DEVICE MANU-
FACTURERS AND IMPORTERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged in the busi-
ness of manufacturing or importing medical devices shall pay 
to the Secretary not later than the annual payment date of 
each calendar year beginning after 2009 a fee in an amount 
determined under subsection (b). 
(2) ANNUAL PAYMENT DATE.—For purposes of this section, 
the term ‘‘annual payment date’’ means with respect to any
H. R. 3590—745 
calendar year the date determined by the Secretary, but in 
no event later than September 30 of such calendar year. 
(b) DETERMINATION OF FEE AMOUNT.— 
(1) IN GENERAL.—With respect to each covered entity, the 
fee under this section for any calendar year shall be equal 
to an amount that bears the same ratio to $2,000,000,000 
as— 
(A) the covered entity’s gross receipts from medical 
device sales taken into account during the preceding cal-
endar year, bear to 
(B) the aggregate gross receipts of all covered entities 
from medical device sales taken into account during such 
preceding calendar year. 
(2) GROSS RECEIPTS FROM SALES TAKEN INTO ACCOUNT.— 
For purposes of paragraph (1), the gross receipts from medical 
device sales taken into account during any calendar year with 
respect to any covered entity shall be determined in accordance 
with the following table: 
With respect to a covered entity’s aggregate 
gross receipts from medical device sales dur-
ing the calendar year that are: 
The percentage of 
gross receipts taken 
into account is: 
Not more than $5,000,000 .......................
0 percent 
More than $5,000,000 but not more than 
$25,000,000.
50 percent 
More than $25,000,000 .............................
100 percent. 
(3) SECRETARIAL DETERMINATION.—The Secretary shall cal-
culate the amount of each covered entity’s fee for any calendar 
year under paragraph (1). In calculating such amount, the 
Secretary shall determine such covered entity’s gross receipts 
from medical device sales on the basis of reports submitted 
by the covered entity under subsection (f) and through the 
use of any other source of information available to the Sec-
retary. 
(c) COVERED ENTITY.— 
(1) IN GENERAL.—For purposes of this section, the term 
‘‘covered entity’’ means any manufacturer or importer with 
gross receipts from medical device sales. 
(2) CONTROLLED GROUPS.— 
(A) IN GENERAL.—For purposes of this subsection, all 
persons treated as a single employer under subsection (a) 
or (b) of section 52 of the Internal Revenue Code of 1986 
or subsection (m) or (o) of section 414 of such Code shall 
be treated as a single covered entity. 
(B) INCLUSION OF FOREIGN CORPORATIONS.—For pur-
poses of subparagraph (A), in applying subsections (a) and 
(b) of section 52 of such Code to this section, section 1563 
of such Code shall be applied without regard to subsection 
(b)(2)(C) thereof. 
(d) MEDICAL DEVICE SALES.—For purposes of this section— 
(1) IN GENERAL.—The term ‘‘medical device sales’’ means 
sales for use in the United States of any medical device, other 
than the sales of a medical device that— 
(A) has been classified in class II under section 513 
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
H. R. 3590—746 
360c) and is primarily sold to consumers at retail for not 
more than $100 per unit, or 
(B) has been classified in class I under such section. 
(2) UNITED STATES.—For purposes of paragraph (1), the 
term ‘‘United States’’ means the several States, the District 
of Columbia, the Commonwealth of Puerto Rico, and the posses-
sions of the United States. 
(3) MEDICAL DEVICE.—For purposes of paragraph (1), the 
term ‘‘medical device’’ means any device (as defined in section 
201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
321(h))) intended for humans. 
(e) TAX TREATMENT OF FEES.—The fees imposed by this sec-
tion— 
(1) for purposes of subtitle F of the Internal Revenue Code 
of 1986, shall be treated as excise taxes with respect to which 
only civil actions for refund under procedures of such subtitle 
shall apply, and 
(2) for purposes of section 275 of such Code, shall be consid-
ered to be a tax described in section 275(a)(6). 
(f) REPORTING REQUIREMENT.— 
(1) IN GENERAL.—Not later than the date determined by 
the Secretary following the end of any calendar year, each 
covered entity shall report to the Secretary, in such manner 
as the Secretary prescribes, the gross receipts from medical 
device sales of such covered entity during such calendar year. 
(2) PENALTY FOR FAILURE TO REPORT.— 
(A) IN GENERAL.—In the case of any failure to make 
a report containing the information required by paragraph 
(1) on the date prescribed therefor (determined with regard 
to any extension of time for filing), unless it is shown 
that such failure is due to reasonable cause, there shall 
be paid by the covered entity failing to file such report, 
an amount equal to— 
(i) $10,000, plus 
(ii) the lesser of— 
(I) an amount equal to $1,000, multiplied by 
the number of days during which such failure con-
tinues, or 
(II) the amount of the fee imposed by this 
section for which such report was required. 
(B) TREATMENT
OF
PENALTY.—The penalty imposed 
under subparagraph (A)— 
(i) shall be treated as a penalty for purposes of 
subtitle F of the Internal Revenue Code of 1986, 
(ii) shall be paid on notice and demand by the 
Secretary and in the same manner as tax under such 
Code, and 
(iii) with respect to which only civil actions for 
refund under procedures of such subtitle F shall apply. 
(g) SECRETARY.—For purposes of this section, the term ‘‘Sec-
retary’’ means the Secretary of the Treasury or the Secretary’s 
delegate. 
(h) GUIDANCE.—The Secretary shall publish guidance necessary 
to carry out the purposes of this section, including identification 
of medical devices described in subsection (d)(1)(A) and with respect 
to the treatment of gross receipts from sales of medical devices
H. R. 3590—747 
to another covered entity or to another entity by reason of the 
application of subsection (c)(2). 
(i) APPLICATION OF SECTION.—This section shall apply to any 
medical device sales after December 31, 2008. 
SEC. 9010. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PRO-
VIDERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged in the busi-
ness of providing health insurance shall pay to the Secretary 
not later than the annual payment date of each calendar year 
beginning after 2009 a fee in an amount determined under 
subsection (b). 
(2) ANNUAL PAYMENT DATE.—For purposes of this section, 
the term ‘‘annual payment date’’ means with respect to any 
calendar year the date determined by the Secretary, but in 
no event later than September 30 of such calendar year. 
(b) DETERMINATION OF FEE AMOUNT.— 
(1) IN GENERAL.—With respect to each covered entity, the 
fee under this section for any calendar year shall be equal 
to an amount that bears the same ratio to $6,700,000,000 
as— 
(A) the sum of— 
(i) the covered entity’s net premiums written with 
respect to health insurance for any United States 
health risk that are taken into account during the 
preceding calendar year, plus 
(ii) 200 percent of the covered entity’s third party 
administration agreement fees that are taken into 
account during the preceding calendar year, bears to 
(B) the sum of— 
(i) the aggregate net premiums written with 
respect to such health insurance of all covered entities 
that are taken into account during such preceding cal-
endar year, plus 
(ii) 200 percent of the aggregate third party 
administration agreement fees of all covered entities 
that are taken into account during such preceding cal-
endar year. 
(2) AMOUNTS TAKEN INTO ACCOUNT.—For purposes of para-
graph (1)— 
(A) NET PREMIUMS WRITTEN.—The net premiums writ-
ten with respect to health insurance for any United States 
health risk that are taken into account during any calendar 
year with respect to any covered entity shall be determined 
in accordance with the following table: 
With respect to a covered entity’s net pre-
miums written during the calendar year that 
are: 
The percentage of 
net premiums writ-
ten that are taken 
into account is: 
Not more than $25,000,000 .....................
0 percent 
More than $25,000,000 but not more 
than $50,000,000.
50 percent 
More than $50,000,000 .............................
100 percent.
H. R. 3590—748 
(B) THIRD PARTY ADMINISTRATION AGREEMENT FEES.— 
The third party administration agreement fees that are 
taken into account during any calendar year with respect 
to any covered entity shall be determined in accordance 
with the following table: 
With respect to a covered entity’s third party 
administration agreement fees during the 
calendar year that are: 
The percentage of 
third party admin-
istration agreement 
fees that are taken 
into account is: 
Not more than $5,000,000 .......................
0 percent 
More than $5,000,000 but not more than 
$10,000,000.
50 percent 
More than $10,000,000 .............................
100 percent. 
(3) SECRETARIAL DETERMINATION.—The Secretary shall cal-
culate the amount of each covered entity’s fee for any calendar 
year under paragraph (1). In calculating such amount, the 
Secretary shall determine such covered entity’s net premiums 
written with respect to any United States health risk and 
third party administration agreement fees on the basis of 
reports submitted by the covered entity under subsection (g) 
and through the use of any other source of information available 
to the Secretary. 
(c) COVERED ENTITY.— 
(1) IN GENERAL.—For purposes of this section, the term 
‘‘covered entity’’ means any entity which provides health insur-
ance for any United States health risk. 
(2) EXCLUSION.—Such term does not include— 
(A) any employer to the extent that such employer 
self-insures its employees’ health risks, or 
(B) any governmental entity (except to the extent such 
an entity provides health insurance coverage through the 
community health insurance option under section 1323). 
(3) CONTROLLED GROUPS.— 
(A) IN GENERAL.—For purposes of this subsection, all 
persons treated as a single employer under subsection (a) 
or (b) of section 52 of the Internal Revenue Code of 1986 
or subsection (m) or (o) of section 414 of such Code shall 
be treated as a single covered entity (or employer for pur-
poses of paragraph (2)). 
(B) INCLUSION OF FOREIGN CORPORATIONS.—For pur-
poses of subparagraph (A), in applying subsections (a) and 
(b) of section 52 of such Code to this section, section 1563 
of such Code shall be applied without regard to subsection 
(b)(2)(C) thereof. 
(d) UNITED STATES HEALTH RISK.—For purposes of this section, 
the term ‘‘United States health risk’’ means the health risk of 
any individual who is— 
(1) a United States citizen, 
(2) a resident of the United States (within the meaning 
of section 7701(b)(1)(A) of the Internal Revenue Code of 1986), 
or 
(3) located in the United States, with respect to the period 
such individual is so located.
H. R. 3590—749 
(e) THIRD PARTY ADMINISTRATION AGREEMENT FEES.—For pur-
poses of this section, the term ‘‘third party administration agree-
ment fees’’ means, with respect to any covered entity, amounts 
received from an employer which are in excess of payments made 
by such covered entity for health benefits under an arrangement 
under which such employer self-insures the United States health 
risk of its employees. 
(f) TAX TREATMENT OF FEES.—The fees imposed by this sec-
tion— 
(1) for purposes of subtitle F of the Internal Revenue Code 
of 1986, shall be treated as excise taxes with respect to which 
only civil actions for refund under procedures of such subtitle 
shall apply, and 
(2) for purposes of section 275 of such Code shall be consid-
ered to be a tax described in section 275(a)(6). 
(g) REPORTING REQUIREMENT.— 
(1) IN GENERAL.—Not later than the date determined by 
the Secretary following the end of any calendar year, each 
covered entity shall report to the Secretary, in such manner 
as the Secretary prescribes, the covered entity’s net premiums 
written with respect to health insurance for any United States 
health risk and third party administration agreement fees for 
such calendar year. 
(2) PENALTY FOR FAILURE TO REPORT.— 
(A) IN GENERAL.—In the case of any failure to make 
a report containing the information required by paragraph 
(1) on the date prescribed therefor (determined with regard 
to any extension of time for filing), unless it is shown 
that such failure is due to reasonable cause, there shall 
be paid by the covered entity failing to file such report, 
an amount equal to— 
(i) $10,000, plus 
(ii) the lesser of— 
(I) an amount equal to $1,000, multiplied by 
the number of days during which such failure con-
tinues, or 
(II) the amount of the fee imposed by this 
section for which such report was required. 
(B) TREATMENT
OF
PENALTY.—The penalty imposed 
under subparagraph (A)— 
(i) shall be treated as a penalty for purposes of 
subtitle F of the Internal Revenue Code of 1986, 
(ii) shall be paid on notice and demand by the 
Secretary and in the same manner as tax under such 
Code, and 
(iii) with respect to which only civil actions for 
refund under procedures of such subtitle F shall apply. 
(h) ADDITIONAL DEFINITIONS.—For purposes of this section— 
(1) SECRETARY.—The term ‘‘Secretary’’ means the Secretary 
of the Treasury or the Secretary’s delegate. 
(2) UNITED STATES.—The term ‘‘United States’’ means the 
several States, the District of Columbia, the Commonwealth 
of Puerto Rico, and the possessions of the United States. 
(3) HEALTH INSURANCE.—The term ‘‘health insurance’’ shall 
not include insurance for long-term care or disability. 
(i) GUIDANCE.—The Secretary shall publish guidance necessary 
to carry out the purposes of this section.
H. R. 3590—750 
(j) APPLICATION OF SECTION.—This section shall apply to any 
net premiums written after December 31, 2008, with respect to 
health insurance for any United States health risk, and any third 
party administration agreement fees received after such date. 
SEC. 9011. STUDY AND REPORT OF EFFECT ON VETERANS HEALTH 
CARE. 
(a) IN GENERAL.—The Secretary of Veterans Affairs shall con-
duct a study on the effect (if any) of the provisions of sections 
9008, 9009, and 9010 on— 
(1) the cost of medical care provided to veterans, and 
(2) veterans’ access to medical devices and branded 
prescription drugs. 
(b) REPORT.—The Secretary of Veterans Affairs shall report 
the results of the study under subsection (a) to the Committee 
on Ways and Means of the House of Representatives and to the 
Committee on Finance of the Senate not later than December 
31, 2012. 
SEC. 9012. ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE 
TO MEDICARE PART D SUBSIDY. 
(a) IN GENERAL.—Section 139A of the Internal Revenue Code 
of 1986 is amended by striking the second sentence. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2010. 
SEC. 9013. MODIFICATION OF ITEMIZED DEDUCTION FOR MEDICAL 
EXPENSES. 
(a) IN GENERAL.—Subsection (a) of section 213 of the Internal 
Revenue Code of 1986 is amended by striking ‘‘7.5 percent’’ and 
inserting ‘‘10 percent’’. 
(b) TEMPORARY WAIVER OF INCREASE FOR CERTAIN SENIORS.— 
Section 213 of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subsection: 
‘‘(f) SPECIAL RULE FOR 2013, 2014, 2015, AND 2016.—In the 
case of any taxable year beginning after December 31, 2012, and 
ending before January 1, 2017, subsection (a) shall be applied 
with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 
percent’ if such taxpayer or such taxpayer’s spouse has attained 
age 65 before the close of such taxable year.’’. 
(c) CONFORMING
AMENDMENT.—Section 56(b)(1)(B) of the 
Internal Revenue Code of 1986 is amended by striking ‘‘by sub-
stituting ‘10 percent’ for ‘7.5 percent’ ’’ and inserting ‘‘without regard 
to subsection (f) of such section’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2012. 
SEC. 9014. LIMITATION ON EXCESSIVE REMUNERATION PAID BY CER-
TAIN HEALTH INSURANCE PROVIDERS. 
(a) IN GENERAL.—Section 162(m) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new subpara-
graph: 
‘‘(6) SPECIAL RULE FOR APPLICATION TO CERTAIN HEALTH 
INSURANCE PROVIDERS.— 
‘‘(A) IN GENERAL.—No deduction shall be allowed under 
this chapter—
H. R. 3590—751 
‘‘(i) in the case of applicable individual remunera-
tion which is for any disqualified taxable year begin-
ning after December 31, 2012, and which is attrib-
utable to services performed by an applicable indi-
vidual during such taxable year, to the extent that 
the amount of such remuneration exceeds $500,000, 
or 
‘‘(ii) in the case of deferred deduction remuneration 
for any taxable year beginning after December 31, 
2012, which is attributable to services performed by 
an applicable individual during any disqualified tax-
able year beginning after December 31, 2009, to the 
extent that the amount of such remuneration exceeds 
$500,000 reduced (but not below zero) by the sum 
of— 
‘‘(I) the applicable individual remuneration for 
such disqualified taxable year, plus 
‘‘(II) the portion of the deferred deduction 
remuneration for such services which was taken 
into account under this clause in a preceding tax-
able year (or which would have been taken into 
account under this clause in a preceding taxable 
year if this clause were applied by substituting 
‘December 31, 2009’ for ‘December 31, 2012’ in 
the matter preceding subclause (I)). 
‘‘(B) DISQUALIFIED TAXABLE YEAR.—For purposes of this 
paragraph, the term ‘disqualified taxable year’ means, with 
respect to any employer, any taxable year for which such 
employer is a covered health insurance provider. 
‘‘(C) COVERED HEALTH INSURANCE PROVIDER.—For pur-
poses of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘covered health insur-
ance provider’ means— 
‘‘(I) with respect to taxable years beginning 
after December 31, 2009, and before January 1, 
2013, any employer which is a health insurance 
issuer (as defined in section 9832(b)(2)) and which 
receives premiums from providing health insur-
ance coverage (as defined in section 9832(b)(1)), 
and 
‘‘(II) with respect to taxable years beginning 
after December 31, 2012, any employer which is 
a health insurance issuer (as defined in section 
9832(b)(2)) and with respect to which not less than 
25 percent of the gross premiums received from 
providing health insurance coverage (as defined 
in section 9832(b)(1)) is from minimum essential 
coverage (as defined in section 5000A(f)). 
‘‘(ii) AGGREGATION RULES.—Two or more persons 
who are treated as a single employer under subsection 
(b), (c), (m), or (o) of section 414 shall be treated 
as a single employer, except that in applying section 
1563(a) for purposes of any such subsection, para-
graphs (2) and (3) thereof shall be disregarded. 
‘‘(D) APPLICABLE INDIVIDUAL REMUNERATION.—For pur-
poses of this paragraph, the term ‘applicable individual
H. R. 3590—752 
remuneration’ means, with respect to any applicable indi-
vidual for any disqualified taxable year, the aggregate 
amount allowable as a deduction under this chapter for 
such taxable year (determined without regard to this sub-
section) for remuneration (as defined in paragraph (4) with-
out regard to subparagraphs (B), (C), and (D) thereof) for 
services performed by such individual (whether or not 
during the taxable year). Such term shall not include any 
deferred deduction remuneration with respect to services 
performed during the disqualified taxable year. 
‘‘(E) DEFERRED DEDUCTION REMUNERATION.—For pur-
poses of this paragraph, the term ‘deferred deduction remu-
neration’ means remuneration which would be applicable 
individual remuneration for services performed in a dis-
qualified taxable year but for the fact that the deduction 
under this chapter (determined without regard to this para-
graph) for such remuneration is allowable in a subsequent 
taxable year. 
‘‘(F) APPLICABLE
INDIVIDUAL.—For purposes of this 
paragraph, the term ‘applicable individual’ means, with 
respect to any covered health insurance provider for any 
disqualified taxable year, any individual— 
‘‘(i) who is an officer, director, or employee in such 
taxable year, or 
‘‘(ii) who provides services for or on behalf of such 
covered health insurance provider during such taxable 
year. 
‘‘(G) COORDINATION.—Rules similar to the rules of sub-
paragraphs (F) and (G) of paragraph (4) shall apply for 
purposes of this paragraph. 
‘‘(H) REGULATORY AUTHORITY.—The Secretary may pre-
scribe such guidance, rules, or regulations as are necessary 
to carry out the purposes of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2009, 
with respect to services performed after such date. 
SEC. 9015. ADDITIONAL HOSPITAL INSURANCE TAX ON HIGH-INCOME 
TAXPAYERS. 
(a) FICA.— 
(1) IN GENERAL.—Section 3101(b) of the Internal Revenue 
Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting the fol-
lowing: 
‘‘(1) IN GENERAL.—In addition’’, 
(B) by striking ‘‘the following percentages of the’’ and 
inserting ‘‘1.45 percent of the’’, 
(C) by striking ‘‘(as defined in section 3121(b))—’’ and 
all that follows and inserting ‘‘(as defined in section 
3121(b)).’’, and 
(D) by adding at the end the following new paragraph: 
‘‘(2) ADDITIONAL TAX.—In addition to the tax imposed by 
paragraph (1) and the preceding subsection, there is hereby 
imposed on every taxpayer (other than a corporation, estate, 
or trust) a tax equal to 0.5 percent of wages which are received 
with respect to employment (as defined in section 3121(b))
H. R. 3590—753 
during any taxable year beginning after December 31, 2012, 
and which are in excess of— 
‘‘(A) in the case of a joint return, $250,000, and 
‘‘(B) in any other case, $200,000.’’. 
(2) COLLECTION OF TAX.—Section 3102 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(f) SPECIAL RULES FOR ADDITIONAL TAX.— 
‘‘(1) IN GENERAL.—In the case of any tax imposed by section 
3101(b)(2), subsection (a) shall only apply to the extent to 
which the taxpayer receives wages from the employer in excess 
of $200,000, and the employer may disregard the amount of 
wages received by such taxpayer’s spouse. 
‘‘(2) COLLECTION
OF
AMOUNTS
NOT
WITHHELD.—To the 
extent that the amount of any tax imposed by section 3101(b)(2) 
is not collected by the employer, such tax shall be paid by 
the employee. 
‘‘(3) TAX PAID BY RECIPIENT.—If an employer, in violation 
of this chapter, fails to deduct and withhold the tax imposed 
by section 3101(b)(2) and thereafter the tax is paid by the 
employee, the tax so required to be deducted and withheld 
shall not be collected from the employer, but this paragraph 
shall in no case relieve the employer from liability for any 
penalties or additions to tax otherwise applicable in respect 
of such failure to deduct and withhold.’’. 
(b) SECA.— 
(1) IN GENERAL.—Section 1401(b) of the Internal Revenue 
Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting the fol-
lowing: 
‘‘(1) IN GENERAL.—In addition’’, and 
(B) by adding at the end the following new paragraph: 
‘‘(2) ADDITIONAL TAX.— 
‘‘(A) IN GENERAL.—In addition to the tax imposed by 
paragraph (1) and the preceding subsection, there is hereby 
imposed on every taxpayer (other than a corporation, 
estate, or trust) for each taxable year beginning after 
December 31, 2012, a tax equal to 0.5 percent of the self- 
employment income for such taxable year which is in excess 
of— 
‘‘(i) in the case of a joint return, $250,000, and 
‘‘(ii) in any other case, $200,000. 
‘‘(B) COORDINATION WITH FICA.—The amounts under 
clauses (i) and (ii) of subparagraph (A) shall be reduced 
(but not below zero) by the amount of wages taken into 
account in determining the tax imposed under section 
3121(b)(2) with respect to the taxpayer.’’. 
(2) NO DEDUCTION FOR ADDITIONAL TAX.— 
(A) IN
GENERAL.—Section 164(f) of such Code is 
amended by inserting ‘‘(other than the taxes imposed by 
section 1401(b)(2))’’ after ‘‘section 1401)’’. 
(B) DEDUCTION FOR NET EARNINGS FROM SELF-EMPLOY-
MENT.—Subparagraph (B) of section 1402(a)(12) is amended 
by inserting ‘‘(determined without regard to the rate 
imposed under paragraph (2) of section 1401(b))’’ after ‘‘for 
such year’’.
H. R. 3590—754 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply with respect to remuneration received, and taxable 
years beginning, after December 31, 2012. 
SEC. 9016. MODIFICATION OF SECTION 833 TREATMENT OF CERTAIN 
HEALTH ORGANIZATIONS. 
(a) IN GENERAL.—Subsection (c) of section 833 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following 
new paragraph: 
‘‘(5) NONAPPLICATION OF SECTION IN CASE OF LOW MEDICAL 
LOSS RATIO.—Notwithstanding the preceding paragraphs, this 
section shall not apply to any organization unless such 
organization’s percentage of total premium revenue expended 
on reimbursement for clinical services provided to enrollees 
under its policies during such taxable year (as reported under 
section 2718 of the Public Health Service Act) is not less than 
85 percent.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2009. 
SEC. 9017. EXCISE TAX ON ELECTIVE COSMETIC MEDICAL PROCE-
DURES. 
(a) IN GENERAL.—Subtitle D of the Internal Revenue Code 
of 1986, as amended by this Act, is amended by adding at the 
end the following new chapter: 
‘‘CHAPTER 49—ELECTIVE COSMETIC MEDICAL 
PROCEDURES 
‘‘Sec. 5000B. Imposition of tax on elective cosmetic medical procedures. 
‘‘SEC. 5000B. IMPOSITION OF TAX ON ELECTIVE COSMETIC MEDICAL 
PROCEDURES. 
‘‘(a) IN GENERAL.—There is hereby imposed on any cosmetic 
surgery and medical procedure a tax equal to 5 percent of the 
amount paid for such procedure (determined without regard to 
this section), whether paid by insurance or otherwise. 
‘‘(b) COSMETIC SURGERY AND MEDICAL PROCEDURE.—For pur-
poses of this section, the term ‘cosmetic surgery and medical proce-
dure’ means any cosmetic surgery (as defined in section 213(d)(9)(B)) 
or other similar procedure which— 
‘‘(1) is performed by a licensed medical professional, and 
‘‘(2) is not necessary to ameliorate a deformity arising 
from, or directly related to, a congenital abnormality, a personal 
injury resulting from an accident or trauma, or disfiguring 
disease. 
‘‘(c) PAYMENT OF TAX.— 
‘‘(1) IN GENERAL.—The tax imposed by this section shall 
be paid by the individual on whom the procedure is performed. 
‘‘(2) COLLECTION.—Every person receiving a payment for 
procedures on which a tax is imposed under subsection (a) 
shall collect the amount of the tax from the individual on 
whom the procedure is performed and remit such tax quarterly 
to the Secretary at such time and in such manner as provided 
by the Secretary. 
‘‘(3) SECONDARY LIABILITY.—Where any tax imposed by sub-
section (a) is not paid at the time payments for cosmetic surgery 
and medical procedures are made, then to the extent that
H. R. 3590—755 
such tax is not collected, such tax shall be paid by the person 
who performs the procedure.’’. 
(b) CLERICAL AMENDMENT.—The table of chapters for subtitle 
D of the Internal Revenue Code of 1986, as amended by this 
Act, is amended by inserting after the item relating to chapter 
48 the following new item: 
‘‘CHAPTER 49—ELECTIVE COSMETIC MEDICAL PROCEDURES’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to procedures performed on or after January 1, 2010. 
Subtitle B—Other Provisions 
SEC. 9021. EXCLUSION OF HEALTH BENEFITS PROVIDED BY INDIAN 
TRIBAL GOVERNMENTS. 
(a) IN GENERAL.—Part III of subchapter B of chapter 1 of 
the Internal Revenue Code of 1986 is amended by inserting after 
section 139C the following new section: 
‘‘SEC. 139D. INDIAN HEALTH CARE BENEFITS. 
‘‘(a) GENERAL RULE.—Except as otherwise provided in this sec-
tion, gross income does not include the value of any qualified 
Indian health care benefit. 
‘‘(b) QUALIFIED INDIAN HEALTH CARE BENEFIT.—For purposes 
of this section, the term ‘qualified Indian health care benefit’ 
means— 
‘‘(1) any health service or benefit provided or purchased, 
directly or indirectly, by the Indian Health Service through 
a grant to or a contract or compact with an Indian tribe or 
tribal organization, or through a third-party program funded 
by the Indian Health Service, 
‘‘(2) medical care provided or purchased by, or amounts 
to reimburse for such medical care provided by, an Indian 
tribe or tribal organization for, or to, a member of an Indian 
tribe, including a spouse or dependent of such a member, 
‘‘(3) coverage under accident or health insurance (or an 
arrangement having the effect of accident or health insurance), 
or an accident or health plan, provided by an Indian tribe 
or tribal organization for medical care to a member of an 
Indian tribe, include a spouse or dependent of such a member, 
and 
‘‘(4) any other medical care provided by an Indian tribe 
or tribal organization that supplements, replaces, or substitutes 
for a program or service relating to medical care provided 
by the Federal government to Indian tribes or members of 
such a tribe. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) INDIAN TRIBE.—The term ‘Indian tribe’ has the meaning 
given such term by section 45A(c)(6). 
‘‘(2) TRIBAL ORGANIZATION.—The term ‘tribal organization’ 
has the meaning given such term by section 4(l) of the Indian 
Self-Determination and Education Assistance Act. 
‘‘(3) MEDICAL CARE.—The term ‘medical care’ has the same 
meaning as when used in section 213. 
‘‘(4) ACCIDENT OR HEALTH INSURANCE; ACCIDENT OR HEALTH 
PLAN.—The terms ‘accident or health insurance’ and ‘accident
H. R. 3590—756 
or health plan’ have the same meaning as when used in section 
105. 
‘‘(5) DEPENDENT.—The term ‘dependent’ has the meaning 
given such term by section 152, determined without regard 
to subsections (b)(1), (b)(2), and (d)(1)(B) thereof. 
‘‘(d) DENIAL
OF DOUBLE BENEFIT.—Subsection (a) shall not 
apply to the amount of any qualified Indian health care benefit 
which is not includible in gross income of the beneficiary of such 
benefit under any other provision of this chapter, or to the amount 
of any such benefit for which a deduction is allowed to such bene-
ficiary under any other provision of this chapter.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for part III 
of subchapter B of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 
139C the following new item: 
‘‘Sec. 139D. Indian health care benefits.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to benefits and coverage provided after the date of 
the enactment of this Act. 
(d) NO INFERENCE.—Nothing in the amendments made by this 
section shall be construed to create an inference with respect to 
the exclusion from gross income of— 
(1) benefits provided by an Indian tribe or tribal organiza-
tion that are not within the scope of this section, and 
(2) benefits provided prior to the date of the enactment 
of this Act. 
SEC. 9022. ESTABLISHMENT OF SIMPLE CAFETERIA PLANS FOR SMALL 
BUSINESSES. 
(a) IN GENERAL.—Section 125 of the Internal Revenue Code 
of 1986 (relating to cafeteria plans), as amended by this Act, is 
amended by redesignating subsections (j) and (k) as subsections 
(k) and (l), respectively, and by inserting after subsection (i) the 
following new subsection: 
‘‘(j) SIMPLE CAFETERIA PLANS FOR SMALL BUSINESSES.— 
‘‘(1) IN
GENERAL.—An eligible employer maintaining a 
simple cafeteria plan with respect to which the requirements 
of this subsection are met for any year shall be treated as 
meeting any applicable nondiscrimination requirement during 
such year. 
‘‘(2) SIMPLE CAFETERIA PLAN.—For purposes of this sub-
section, the term ‘simple cafeteria plan’ means a cafeteria 
plan— 
‘‘(A) which is established and maintained by an eligible 
employer, and 
‘‘(B) with respect to which the contribution require-
ments of paragraph (3), and the eligibility and participation 
requirements of paragraph (4), are met. 
‘‘(3) CONTRIBUTION REQUIREMENTS.— 
‘‘(A) IN GENERAL.—The requirements of this paragraph 
are met if, under the plan the employer is required, without 
regard to whether a qualified employee makes any salary 
reduction contribution, to make a contribution to provide 
qualified benefits under the plan on behalf of each qualified 
employee in an amount equal to— 
‘‘(i) a uniform percentage (not less than 2 percent) 
of the employee’s compensation for the plan year, or
H. R. 3590—757 
‘‘(ii) an amount which is not less than the lesser 
of— 
‘‘(I) 6 percent of the employee’s compensation 
for the plan year, or 
‘‘(II) twice the amount of the salary reduction 
contributions of each qualified employee. 
‘‘(B) MATCHING CONTRIBUTIONS ON BEHALF OF HIGHLY 
COMPENSATED AND KEY EMPLOYEES.—The requirements of 
subparagraph (A)(ii) shall not be treated as met if, under 
the plan, the rate of contributions with respect to any 
salary reduction contribution of a highly compensated or 
key employee at any rate of contribution is greater than 
that with respect to an employee who is not a highly 
compensated or key employee. 
‘‘(C) ADDITIONAL CONTRIBUTIONS.—Subject to subpara-
graph (B), nothing in this paragraph shall be treated as 
prohibiting an employer from making contributions to pro-
vide qualified benefits under the plan in addition to con-
tributions required under subparagraph (A). 
‘‘(D) DEFINITIONS.—For purposes of this paragraph— 
‘‘(i) SALARY REDUCTION CONTRIBUTION.—The term 
‘salary reduction contribution’ means, with respect to 
a cafeteria plan, any amount which is contributed to 
the plan at the election of the employee and which 
is not includible in gross income by reason of this 
section. 
‘‘(ii) QUALIFIED
EMPLOYEE.—The term ‘qualified 
employee’ means, with respect to a cafeteria plan, any 
employee who is not a highly compensated or key 
employee and who is eligible to participate in the plan. 
‘‘(iii) HIGHLY COMPENSATED EMPLOYEE.—The term 
‘highly compensated employee’ has the meaning given 
such term by section 414(q). 
‘‘(iv) KEY EMPLOYEE.—The term ‘key employee’ has 
the meaning given such term by section 416(i). 
‘‘(4) MINIMUM
ELIGIBILITY
AND
PARTICIPATION
REQUIRE-
MENTS.— 
‘‘(A) IN GENERAL.—The requirements of this paragraph 
shall be treated as met with respect to any year if, under 
the plan— 
‘‘(i) all employees who had at least 1,000 hours 
of service for the preceding plan year are eligible to 
participate, and 
‘‘(ii) each employee eligible to participate in the 
plan may, subject to terms and conditions applicable 
to all participants, elect any benefit available under 
the plan. 
‘‘(B) CERTAIN EMPLOYEES MAY BE EXCLUDED.—For pur-
poses of subparagraph (A)(i), an employer may elect to 
exclude under the plan employees— 
‘‘(i) who have not attained the age of 21 before 
the close of a plan year, 
‘‘(ii) who have less than 1 year of service with 
the employer as of any day during the plan year, 
‘‘(iii) who are covered under an agreement which 
the Secretary of Labor finds to be a collective bar-
gaining agreement if there is evidence that the benefits
H. R. 3590—758 
covered under the cafeteria plan were the subject of 
good faith bargaining between employee representa-
tives and the employer, or 
‘‘(iv) who are described in section 410(b)(3)(C) 
(relating to nonresident aliens working outside the 
United States). 
A plan may provide a shorter period of service or younger 
age for purposes of clause (i) or (ii). 
‘‘(5) ELIGIBLE EMPLOYER.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘eligible employer’ means, 
with respect to any year, any employer if such employer 
employed an average of 100 or fewer employees on business 
days during either of the 2 preceding years. For purposes 
of this subparagraph, a year may only be taken into account 
if the employer was in existence throughout the year. 
‘‘(B) EMPLOYERS NOT IN EXISTENCE DURING PRECEDING 
YEAR.—If an employer was not in existence throughout 
the preceding year, the determination under subparagraph 
(A) shall be based on the average number of employees 
that it is reasonably expected such employer will employ 
on business days in the current year. 
‘‘(C) GROWING EMPLOYERS RETAIN TREATMENT AS SMALL 
EMPLOYER.— 
‘‘(i) IN GENERAL.—If— 
‘‘(I) an employer was an eligible employer for 
any year (a ‘qualified year’), and 
‘‘(II) such employer establishes a simple cafe-
teria plan for its employees for such year, 
then, notwithstanding the fact the employer fails to 
meet the requirements of subparagraph (A) for any 
subsequent year, such employer shall be treated as 
an eligible employer for such subsequent year with 
respect to employees (whether or not employees during 
a qualified year) of any trade or business which was 
covered by the plan during any qualified year. 
‘‘(ii) EXCEPTION.—This subparagraph shall cease 
to apply if the employer employs an average of 200 
or more employees on business days during any year 
preceding any such subsequent year. 
‘‘(D) SPECIAL RULES.— 
‘‘(i) PREDECESSORS.—Any reference in this para-
graph to an employer shall include a reference to any 
predecessor of such employer. 
‘‘(ii) AGGREGATION RULES.—All persons treated as 
a single employer under subsection (a) or (b) of section 
52, or subsection (n) or (o) of section 414, shall be 
treated as one person. 
‘‘(6) APPLICABLE
NONDISCRIMINATION
REQUIREMENT.—For 
purposes of this subsection, the term ‘applicable nondiscrimina-
tion requirement’ means any requirement under subsection 
(b) of this section, section 79(d), section 105(h), or paragraph 
(2), (3), (4), or (8) of section 129(d). 
‘‘(7) COMPENSATION.—The term ‘compensation’ has the 
meaning given such term by section 414(s).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to years beginning after December 31, 2010.
H. R. 3590—759 
SEC. 9023. QUALIFYING THERAPEUTIC DISCOVERY PROJECT CREDIT. 
(a) IN GENERAL.—Subpart E of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by 
inserting after section 48C the following new section: 
‘‘SEC. 48D. QUALIFYING THERAPEUTIC DISCOVERY PROJECT CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 46, the qualifying 
therapeutic discovery project credit for any taxable year is an 
amount equal to 50 percent of the qualified investment for such 
taxable year with respect to any qualifying therapeutic discovery 
project of an eligible taxpayer. 
‘‘(b) QUALIFIED INVESTMENT.— 
‘‘(1) IN GENERAL.—For purposes of subsection (a), the quali-
fied investment for any taxable year is the aggregate amount 
of the costs paid or incurred in such taxable year for expenses 
necessary for and directly related to the conduct of a qualifying 
therapeutic discovery project. 
‘‘(2) LIMITATION.—The amount which is treated as qualified 
investment for all taxable years with respect to any qualifying 
therapeutic discovery project shall not exceed the amount cer-
tified by the Secretary as eligible for the credit under this 
section. 
‘‘(3) EXCLUSIONS.—The qualified investment for any taxable 
year with respect to any qualifying therapeutic discovery project 
shall not take into account any cost— 
‘‘(A) for remuneration for an employee described in 
section 162(m)(3), 
‘‘(B) for interest expenses, 
‘‘(C) for facility maintenance expenses, 
‘‘(D) which is identified as a service cost under section 
1.263A–1(e)(4) of title 26, Code of Federal Regulations, 
or 
‘‘(E) for any other expense as determined by the Sec-
retary as appropriate to carry out the purposes of this 
section. 
‘‘(4) 
CERTAIN
PROGRESS
EXPENDITURE
RULES
MADE 
APPLICABLE.—In the case of costs described in paragraph (1) 
that are paid for property of a character subject to an allowance 
for depreciation, rules similar to the rules of subsections (c)(4) 
and (d) of section 46 (as in effect on the day before the date 
of the enactment of the Revenue Reconciliation Act of 1990) 
shall apply for purposes of this section. 
‘‘(5) APPLICATION OF SUBSECTION.—An investment shall be 
considered a qualified investment under this subsection only 
if such investment is made in a taxable year beginning in 
2009 or 2010. 
‘‘(c) DEFINITIONS.— 
‘‘(1) QUALIFYING
THERAPEUTIC
DISCOVERY
PROJECT.—The 
term ‘qualifying therapeutic discovery project’ means a project 
which is designed— 
‘‘(A) to treat or prevent diseases or conditions by con-
ducting pre-clinical activities, clinical trials, and clinical 
studies, or carrying out research protocols, for the purpose 
of securing approval of a product under section 505(b) 
of the Federal Food, Drug, and Cosmetic Act or section 
351(a) of the Public Health Service Act,
H. R. 3590—760 
‘‘(B) to diagnose diseases or conditions or to determine 
molecular factors related to diseases or conditions by devel-
oping molecular diagnostics to guide therapeutic decisions, 
or 
‘‘(C) to develop a product, process, or technology to 
further the delivery or administration of therapeutics. 
‘‘(2) ELIGIBLE TAXPAYER.— 
‘‘(A) IN GENERAL.—The term ‘eligible taxpayer’ means 
a taxpayer which employs not more than 250 employees 
in all businesses of the taxpayer at the time of the submis-
sion of the application under subsection (d)(2). 
‘‘(B) AGGREGATION RULES.—All persons treated as a 
single employer under subsection (a) or (b) of section 52, 
or subsection (m) or (o) of section 414, shall be so treated 
for purposes of this paragraph. 
‘‘(3) FACILITY MAINTENANCE EXPENSES.—The term ‘facility 
maintenance expenses’ means costs paid or incurred to main-
tain a facility, including— 
‘‘(A) mortgage or rent payments, 
‘‘(B) insurance payments, 
‘‘(C) utility and maintenance costs, and 
‘‘(D) costs of employment of maintenance personnel. 
‘‘(d) QUALIFYING THERAPEUTIC DISCOVERY PROJECT PROGRAM.— 
‘‘(1) ESTABLISHMENT.— 
‘‘(A) IN GENERAL.—Not later than 60 days after the 
date of the enactment of this section, the Secretary, in 
consultation with the Secretary of Health and Human Serv-
ices, shall establish a qualifying therapeutic discovery 
project program to consider and award certifications for 
qualified investments eligible for credits under this section 
to qualifying therapeutic discovery project sponsors. 
‘‘(B) LIMITATION.—The total amount of credits that may 
be 
allocated 
under 
the 
program 
shall 
not 
exceed 
$1,000,000,000 for the 2-year period beginning with 2009. 
‘‘(2) CERTIFICATION.— 
‘‘(A) APPLICATION PERIOD.—Each applicant for certifi-
cation under this paragraph shall submit an application 
containing such information as the Secretary may require 
during the period beginning on the date the Secretary 
establishes the program under paragraph (1). 
‘‘(B) TIME
FOR
REVIEW
OF
APPLICATIONS.—The Sec-
retary shall take action to approve or deny any application 
under subparagraph (A) within 30 days of the submission 
of such application. 
‘‘(C) MULTI-YEAR
APPLICATIONS.—An application for 
certification under subparagraph (A) may include a request 
for an allocation of credits for more than 1 of the years 
described in paragraph (1)(B). 
‘‘(3) SELECTION CRITERIA.—In determining the qualifying 
therapeutic discovery projects with respect to which qualified 
investments may be certified under this section, the Secretary— 
‘‘(A) shall take into consideration only those projects 
that show reasonable potential— 
‘‘(i) to result in new therapies— 
‘‘(I) to treat areas of unmet medical need, or 
‘‘(II) to prevent, detect, or treat chronic or 
acute diseases and conditions,
H. R. 3590—761 
‘‘(ii) to reduce long-term health care costs in the 
United States, or 
‘‘(iii) to significantly advance the goal of curing 
cancer within the 30-year period beginning on the date 
the Secretary establishes the program under paragraph 
(1), and 
‘‘(B) shall take into consideration which projects have 
the greatest potential— 
‘‘(i) to create and sustain (directly or indirectly) 
high quality, high-paying jobs in the United States, 
and 
‘‘(ii) to advance United States competitiveness in 
the fields of life, biological, and medical sciences. 
‘‘(4) DISCLOSURE
OF
ALLOCATIONS.—The Secretary shall, 
upon making a certification under this subsection, publicly 
disclose the identity of the applicant and the amount of the 
credit with respect to such applicant. 
‘‘(e) SPECIAL RULES.— 
‘‘(1) BASIS ADJUSTMENT.—For purposes of this subtitle, if 
a credit is allowed under this section for an expenditure related 
to property of a character subject to an allowance for deprecia-
tion, the basis of such property shall be reduced by the amount 
of such credit. 
‘‘(2) DENIAL OF DOUBLE BENEFIT.— 
‘‘(A) BONUS
DEPRECIATION.—A credit shall not be 
allowed under this section for any investment for which 
bonus depreciation is allowed under section 168(k), 
1400L(b)(1), or 1400N(d)(1). 
‘‘(B) DEDUCTIONS.—No deduction under this subtitle 
shall be allowed for the portion of the expenses otherwise 
allowable as a deduction taken into account in determining 
the credit under this section for the taxable year which 
is equal to the amount of the credit determined for such 
taxable year under subsection (a) attributable to such por-
tion. This subparagraph shall not apply to expenses related 
to property of a character subject to an allowance for depre-
ciation the basis of which is reduced under paragraph 
(1), or which are described in section 280C(g). 
‘‘(C) CREDIT FOR RESEARCH ACTIVITIES.— 
‘‘(i) IN
GENERAL.—Except as provided in clause 
(ii), any expenses taken into account under this section 
for a taxable year shall not be taken into account 
for purposes of determining the credit allowable under 
section 41 or 45C for such taxable year. 
‘‘(ii) EXPENSES
INCLUDED
IN
DETERMINING
BASE 
PERIOD
RESEARCH
EXPENSES.—Any expenses for any 
taxable year which are qualified research expenses 
(within the meaning of section 41(b)) shall be taken 
into account in determining base period research 
expenses for purposes of applying section 41 to subse-
quent taxable years. 
‘‘(f) COORDINATION WITH DEPARTMENT OF TREASURY GRANTS.— 
In the case of any investment with respect to which the Secretary 
makes a grant under section 9023(e) of the Patient Protection 
and Affordable Care Act of 2009— 
‘‘(1) DENIAL
OF
CREDIT.—No credit shall be determined 
under this section with respect to such investment for the
H. R. 3590—762 
taxable year in which such grant is made or any subsequent 
taxable year. 
‘‘(2) RECAPTURE OF CREDITS FOR PROGRESS EXPENDITURES 
MADE BEFORE GRANT.—If a credit was determined under this 
section with respect to such investment for any taxable year 
ending before such grant is made— 
‘‘(A) the tax imposed under subtitle A on the taxpayer 
for the taxable year in which such grant is made shall 
be increased by so much of such credit as was allowed 
under section 38, 
‘‘(B) the general business carryforwards under section 
39 shall be adjusted so as to recapture the portion of 
such credit which was not so allowed, and 
‘‘(C) the amount of such grant shall be determined 
without regard to any reduction in the basis of any property 
of a character subject to an allowance for depreciation 
by reason of such credit. 
‘‘(3) TREATMENT
OF
GRANTS.—Any such grant shall not 
be includible in the gross income of the taxpayer.’’. 
(b) INCLUSION AS PART OF INVESTMENT CREDIT.—Section 46 
of the Internal Revenue Code of 1986 is amended— 
(1) by adding a comma at the end of paragraph (2), 
(2) by striking the period at the end of paragraph (5) 
and inserting ‘‘, and’’, and 
(3) by adding at the end the following new paragraph: 
‘‘(6) the qualifying therapeutic discovery project credit.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 49(a)(1)(C) of the Internal Revenue Code of 
1986 is amended— 
(A) by striking ‘‘and’’ at the end of clause (iv), 
(B) by striking the period at the end of clause (v) 
and inserting ‘‘, and’’, and 
(C) by adding at the end the following new clause: 
‘‘(vi) the basis of any property to which paragraph 
(1) of section 48D(e) applies which is part of a quali-
fying therapeutic discovery project under such section 
48D.’’. 
(2) Section 280C of such Code is amended by adding at 
the end the following new subsection: 
‘‘(g) QUALIFYING THERAPEUTIC DISCOVERY PROJECT CREDIT.— 
‘‘(1) IN GENERAL.—No deduction shall be allowed for that 
portion of the qualified investment (as defined in section 48D(b)) 
otherwise allowable as a deduction for the taxable year which— 
‘‘(A) would be qualified research expenses (as defined 
in section 41(b)), basic research expenses (as defined in 
section 41(e)(2)), or qualified clinical testing expenses (as 
defined in section 45C(b)) if the credit under section 41 
or section 45C were allowed with respect to such expenses 
for such taxable year, and 
‘‘(B) is equal to the amount of the credit determined 
for such taxable year under section 48D(a), reduced by— 
‘‘(i) the amount disallowed as a deduction by reason 
of section 48D(e)(2)(B), and 
‘‘(ii) the amount of any basis reduction under sec-
tion 48D(e)(1). 
‘‘(2) SIMILAR RULE WHERE TAXPAYER CAPITALIZES RATHER 
THAN DEDUCTS EXPENSES.—In the case of expenses described