(B) CLERICAL AMENDMENT.—The table of 
sections of part I of subchapter B of chapter 68 
of such Code is amended by adding at the end 
the following new item: 
‘‘Sec. 6720C. Penalty for failure to notify health plan of cessation of eligibility 
for COBRA premium assistance.’’. 
(C) EFFECTIVE DATE.—The amendments 
made by this paragraph shall apply to failures 
occurring after the date of the enactment of 
this Act. 
(14) COORDINATION WITH HCTC.— 
(A) IN GENERAL.—Subsection (g) of sec-
tion 35 of the Internal Revenue Code of 1986 
is amended by redesignating paragraph (9) as 
paragraph (10) and inserting after paragraph 
(8) the following new paragraph: 
‘‘(9) COBRA PREMIUM
ASSISTANCE.—In the 
case of an assistance eligible individual who receives 
premium reduction for COBRA continuation cov-
erage under section 4(a) of the Health Care Protec-
tion Act for any month during the taxable year, such 
individual shall not be treated as an eligible indi-
vidual, a certified individual, or a qualifying family 
member for purposes of this section or section 7527 
with respect to such month.’’. 
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(B) EFFECTIVE
DATE.—The amendment 
made by subparagraph (A) shall apply to tax-
able years ending after the date of the enact-
ment of this Act. 
(15) EXCLUSION OF COBRA PREMIUM ASSIST-
ANCE FROM GROSS INCOME.— 
(A) IN GENERAL.—Part III of subchapter 
B of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 
139B the following new section: 
‘‘SEC. 139C. COBRA PREMIUM ASSISTANCE. 
‘‘In the case of an assistance eligible individual (as 
defined in section 4 of the Health Care Protection Act), 
gross income does not include any premium reduction pro-
vided under subsection (a) of such section.’’. 
(B) CLERICAL AMENDMENT.—The table of 
sections for part III of subchapter B of chapter 
1 of such Code is amended by inserting after 
the item relating to section 139B the following 
new item: 
‘‘Sec. 139C. COBRA premium assistance.’’. 
(C) EFFECTIVE DATE.—The amendments 
made by this paragraph shall apply to taxable 
years ending after the date of the enactment of 
this Act. 
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(b) ELIMINATION OF PREMIUM SUBSIDY FOR HIGH- 
INCOME INDIVIDUALS.— 
(1) RECAPTURE OF SUBSIDY FOR HIGH-INCOME 
INDIVIDUALS.—If— 
(A) premium assistance is provided under 
this section with respect to any COBRA con-
tinuation coverage which covers the taxpayer, 
the taxpayer’s spouse, or any dependent (within 
the meaning of section 152 of the Internal Rev-
enue Code of 1986, determined without regard 
to subsections (b)(1), (b)(2), and (d)(1)(B) 
thereof) of the taxpayer during any portion of 
the taxable year, and 
(B) the taxpayer’s modified adjusted gross 
income for such taxable year exceeds $125,000 
($250,000 in the case of a joint return), 
then the tax imposed by chapter 1 of such Code with 
respect to the taxpayer for such taxable year shall 
be increased by the amount of such assistance. 
(2) PHASE-IN OF RECAPTURE.— 
(A) IN GENERAL.—In the case of a tax-
payer whose modified adjusted gross income for 
the taxable year does not exceed $145,000 
($290,000 in the case of a joint return), the in-
crease in the tax imposed under paragraph (1) 
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shall not exceed the phase-in percentage of such 
increase (determined without regard to this 
paragraph). 
(B) PHASE-IN
PERCENTAGE.—For pur-
poses of this subsection, the term ‘‘phase-in 
percentage’’ means the ratio (expressed as a 
percentage) obtained by dividing— 
(i) the excess of described in subpara-
graph (B) of paragraph (1), by 
(ii) $20,000 ($40,000 in the case of a 
joint return). 
(3) OPTION FOR HIGH-INCOME INDIVIDUALS TO 
WAIVE ASSISTANCE AND AVOID RECAPTURE.—Not-
withstanding subsection (a)(3), an individual shall 
not be treated as an assistance eligible individual for 
purposes of this section and section 6431 of the In-
ternal Revenue Code of 1986 if such individual— 
(A) makes a permanent election (at such 
time and in such form and manner as the Sec-
retary of the Treasury may prescribe) to waive 
the right to the premium assistance provided 
under this section, and 
(B) notifies the entity to whom premiums 
are reimbursed under section 6431(a) of such 
Code of such election. 
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(4) MODIFIED ADJUSTED GROSS INCOME.—For 
purposes of this subsection, the term ‘‘modified ad-
justed gross income’’ means the adjusted gross in-
come (as defined in section 62 of the Internal Rev-
enue Code of 1986) of the taxpayer for the taxable 
year increased by any amount excluded from gross 
income under section 911, 931, or 933 of such Code. 
(5) CREDITS
NOT
ALLOWED
AGAINST
TAX, 
ETC.—For purposes determining regular tax liability 
under section 26(b) of such Code, the increase in tax 
under this subsection shall not be treated as a tax 
imposed under chapter 1 of such Code. 
(6) REGULATIONS.—The Secretary of the 
Treasury shall issue such regulations or other guid-
ance as are necessary or appropriate to carry out 
this subsection, including requirements that the enti-
ty to whom premiums are reimbursed under section 
6431(a) of the Internal Revenue Code of 1986 re-
port to the Secretary, and to each assistance eligible 
individual, the amount of premium assistance pro-
vided under subsection (a) with respect to each such 
individual. 
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(7) EFFECTIVE DATE.—The provisions of this 
subsection shall apply to taxable years ending after 
the date of the enactment of this Act. 
Æ 
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