‘‘(3) OTHER SPECIFIED COVERAGE.—An indi-
vidual has other specified coverage for any month if, 
as of the first day of such month— 
‘‘(A) MEDICARE, MEDICAID, SCHIP.—Such 
individual— 
‘‘(i) is entitled to benefits under part 
A of title XVIII of the Social Security Act 
or enrolled under part B of such title, 
‘‘(ii) is enrolled in the program under 
title XIX of the Social Security Act (other 
than under section 1928 of such Act), or 
‘‘(iii) is enrolled in the program under 
title XXI of the Social Security Act. 
‘‘(B) IMPRISONMENT.—Such individual is 
imprisoned under Federal, State, or local au-
thority. 
‘‘(C) 
PHYSICAL
PRESENCE
REQUIRE-
MENTS.—Such individual is present in the 
United States on fewer than 183 days during 
the taxable year (determined in accordance with 
section 7701(b)(7)). 
‘‘(e) OTHER DEFINITIONS.— 
‘‘(1) DEPENDENTS.—For purposes of this sec-
tion— 
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‘‘(A) DEPENDENT
DEFINED.—The term 
‘dependent’ has the meaning given such term by 
section 152 (determined without regard to sub-
sections (b)(1), (b)(2), and (d)(1)(B) thereof). 
‘‘(B) SPECIAL
RULE
FOR
DEPENDENT 
CHILD OF DIVORCED PARENTS.—An individual 
who is a child to whom section 152(e) applies 
shall be treated as a dependent of the custodial 
parent for a coverage month unless the custo-
dial and noncustodial parent provide otherwise. 
‘‘(C) DENIAL
OF
CREDIT
TO
DEPEND-
ENTS.—No credit shall be allowed under this 
section to any individual with respect to whom 
a deduction under section 151(c) is allowable to 
another taxpayer for a taxable year beginning 
in the calendar year in which such individual’s 
taxable year begins. 
‘‘(f) INFLATION ADJUSTMENTS.— 
‘‘(1) 
CREDIT
AND
HEALTH
INSURANCE 
AMOUNTS.—In the case of any taxable year begin-
ning after 2007, each dollar amount referred to in 
subsection (b)(2)(A) shall be increased by an 
amount equal to— 
‘‘(A) such dollar amount, multiplied by 
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‘‘(B) the cost-of-living adjustment deter-
mined under section 213(d)(10)(B)(ii) for the 
calendar year in which the taxable year begins, 
determined by substituting ‘2006’ for ‘1996’ in 
subclause (II) thereof. 
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10, such amount shall be 
rounded to the nearest multiple of $10. 
‘‘(2) INCOME
PHASEOUT
AMOUNTS.—In the 
case of any taxable year beginning after 2007, each 
dollar amount referred to in paragraphs (4) and (5) 
of subsection (b) shall be increased by an amount 
equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2006’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
If any amount as adjusted under the preceding sen-
tence is not a multiple of $50, such amount shall be 
rounded to the next lowest multiple of $50. 
‘‘(g) SPECIAL RULES.— 
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‘‘(1) COORDINATION
WITH
DEDUCTION
FOR 
PREMIUMS
FOR
HIGH
DEDUCTIBLE
HEALTH 
PLANS.—No credit shall be allowable under this sec-
tion for a taxable year if a deduction is allowed 
under section 224 for the taxable year. 
‘‘(2) COORDINATION
WITH
DEDUCTION
FOR 
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—No credit shall be allowable under this 
section for a taxable year if a deduction is allowed 
under section 162(l) for the taxable year. 
‘‘(3) COORDINATION
WITH
ADVANCE
PAY-
MENT.—Rules similar to the rules of section 
35(g)(1) shall apply to any credit to which this sec-
tion applies. 
‘‘(4) COORDINATION WITH SECTION 35.—If a 
taxpayer is eligible for the credit allowed under this 
section and section 35 for any month, the taxpayer 
shall elect which credit is to be allowed with respect 
to such month. 
‘‘(h) EXPENSES MUST BE SUBSTANTIATED.—A pay-
ment for insurance to which subsection (a) applies may 
be taken into account under this section only if the tax-
payer substantiates such payment in such form as the Sec-
retary may prescribe. 
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‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out the pur-
poses of this section.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, as amended by this Act, is 
amended by inserting ‘‘or section 36A’’ after ‘‘sec-
tion 36’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 (as amended by this Act) is 
amended by inserting after the item relating to sec-
tion 36 the following new item: 
‘‘Sec. 36A. Health insurance coverage under high deductible health plan.’’. 
(c) EFFECTIVE DATES.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 5. ADVANCE PAYMENT OF CREDIT AS PREMIUM PAY-
MENT FOR HIGH DEDUCTIBLE HEALTH IN-
SURANCE. 
(a) IN GENERAL.—Chapter 77 of the Internal Rev-
enue Code of 1986 (relating to miscellaneous provisions) 
is amended by adding at the end the following: 
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‘‘SEC. 7529. ADVANCE PAYMENT OF CREDIT AS PREMIUM 
PAYMENT FOR HIGH DEDUCTIBLE HEALTH 
INSURANCE. 
‘‘Not later than January 1, 2008, the Secretary shall 
establish a program for making payments to providers of 
qualified coverage under a high deductible health plan (as 
defined by subsection (c) of section 36A) on behalf of indi-
viduals eligible for the credit under section 36A. Such pay-
ments shall be made on the basis of modified adjusted 
gross income of eligible individuals for the preceding tax-
able year.’’. 
(b) DISCLOSURE
OF RETURN INFORMATION
FOR 
PURPOSES OF ADVANCE PAYMENT OF CREDIT AS PRE-
MIUMS FOR HIGH DEDUCTIBLE HEALTH INSURANCE.— 
(1) IN
GENERAL.—Subsection (l) of section 
6103 of such Code is amended by adding at the end 
the following new paragraph: 
‘‘(21) DISCLOSURE OF RETURN INFORMATION 
FOR PURPOSES OF ADVANCE PAYMENT OF CREDIT 
AS PREMIUMS FOR HIGH DEDUCTIBLE HEALTH IN-
SURANCE.—The Secretary may, on behalf of individ-
uals eligible for the credit under section 36A, dis-
close to a provider of qualified coverage under a high 
deductible health plan (as defined by subsection (c) 
of section 36A), and persons acting on behalf of 
such provider, return information with respect to 
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