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HR 3590 EAS/PP 
‘‘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 services.’’. 
(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 paragraph (80) the following: 
‘‘(81) provide that the State will comply with 
such regulations 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 pro-
gram established under title XXXII of the Public 
Health Service Act as the Secretary shall establish; 
and’’. 
(b) ASSURANCE OF ADEQUATE INFRASTRUCTURE FOR 
THE PROVISION OF PERSONAL CARE ATTENDANT WORK-
ERS.—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 As-
sistance Services and Supports Act, each State 
shall— 
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‘‘(A) assess the extent to which entities such 
as providers of home care, home health services, 
home and community service providers, public 
authorities created to provide personal care serv-
ices to individuals eligible for medical assistance 
under the State plan, and nonprofit organiza-
tions, are serving or have the capacity to serve 
as fiscal agents for, employers of, and providers 
of employment-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, includ-
ing in rural and underserved areas; 
‘‘(B) designate or create such entities to 
serve as fiscal agents for, employers of, and pro-
viders 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 un-
derserved areas; and 
‘‘(C) ensure that the designation or creation 
of such entities will not negatively alter or im-
pede existing programs, models, methods, or ad-
ministration of service delivery that provide for 
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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 serv-
ices.’’. 
(c) PERSONAL CARE ATTENDANTS WORKFORCE ADVI-
SORY 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 Per-
sonal Care Attendants Workforce 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: 
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(A) Individuals with disabilities of all ages. 
(B) Senior individuals. 
(C) Representatives of individuals with dis-
abilities. 
(D) Representatives of senior individuals. 
(E) Representatives of workforce and labor 
organizations. 
(F) Representatives of home and commu-
nity-based service providers. 
(G) Representatives of assisted living pro-
viders. 
(d) INCLUSION OF INFORMATION ON SUPPLEMENTAL 
COVERAGE IN THE NATIONAL CLEARINGHOUSE FOR LONG- 
TERM CARE INFORMATION; EXTENSION OF FUNDING.—Sec-
tion 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 program established under title 
XXXII of the Public Health Service Act and 
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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 Independ-
ence Benefit Plan under that program, and 
information regarding how benefits pro-
vided under a CLASS Independence Benefit 
Plan differ from disability insurance bene-
fits.’’; and 
(2) in paragraph (3), by striking ‘‘2010’’ and in-
serting ‘‘2015’’. 
(e) EFFECTIVE DATE.—The amendments made by sub-
sections (a), (b), and (d) take effect on January 1, 2011. 
(f) RULE OF CONSTRUCTION.—Nothing in this title or 
the amendments made by this title are intended to replace 
or displace public or private disability insurance benefits, 
including such benefits that are for income replacement. 
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TITLE IX—REVENUE 
PROVISIONS 
Subtitle A—Revenue Offset 
Provisions 
SEC. 9001. EXCISE TAX ON HIGH COST EMPLOYER-SPON-
SORED 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: 
‘‘SEC. 4980I. EXCISE TAX ON HIGH COST EMPLOYER-SPON-
SORED HEALTH COVERAGE. 
‘‘(a) IMPOSITION OF TAX.—If— 
‘‘(1) an employee is covered under any applica-
ble 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 sec-
tion— 
‘‘(1) IN
GENERAL.—The term ‘excess benefit’ 
means, with respect to any applicable employer-spon-
sored coverage made available by an employer to an 
employee during any taxable period, the sum of the 
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of the dollar amounts under clauses (i) and 
(ii) shall be increased to the amount equal 
to such amount as in effect for the 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 COVERAGE 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 
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the applicable percentage of the annual lim-
itation (determined without regard to this 
subparagraph or subparagraph (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 dur-
ing 2012 for employer-sponsored coverage 
under health plans. The Secretary’s estimate 
shall be made on the basis of aggregate pre-
miums 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 applica-
ble share of the excess benefit with respect to an em-
ployee for any taxable period. 
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‘‘(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 con-
sists of coverage under a group health plan 
which provides health insurance coverage, the 
health insurance issuer. 
‘‘(B) HSA AND
MSA
CONTRIBUTIONS.—If 
the applicable employer-sponsored coverage con-
sists of coverage under an arrangement under 
which the employer makes contributions de-
scribed 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 ex-
cess benefit as— 
‘‘(A) the cost of the applicable employer- 
sponsored coverage provided by the provider to 
the employee during such period, bears to 
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‘‘(B) the aggregate cost of all applicable em-
ployer-sponsored coverage provided to the em-
ployee by all coverage providers during such pe-
riod. 
‘‘(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-spon-
sored coverage made available to employees 
through a multiemployer plan (as defined in sec-
tion 414(f)), the plan sponsor shall make the cal-
culations, and provide the notice, required under 
subparagraph (A). 
‘‘(d) APPLICABLE EMPLOYER-SPONSORED COVERAGE; 
COST.—For purposes of this section— 
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HR 3590 EAS/PP 
‘‘(1) APPLICABLE
EMPLOYER-SPONSORED
COV-
ERAGE.— 
‘‘(A) IN
GENERAL.—The term ‘applicable 
employer-sponsored coverage’ means, with respect 
to any employee, coverage under any group 
health plan made available to the employee by 
an employer which is excludable from the em-
ployee’s gross income under section 106, or 
would be so excludable if it were employer-pro-
vided coverage (within the meaning of such sec-
tion 106). 
‘‘(B) EXCEPTIONS.—The term ‘applicable 
employer-sponsored coverage’ shall not include— 
‘‘(i) any coverage (whether through in-
surance 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 ex-
cludable from gross income and for which a 
deduction under section 162(l) is not allow-
able. 
‘‘(C) COVERAGE INCLUDES EMPLOYEE PAID 
PORTION.—Coverage shall be treated as applica-
ble employer-sponsored coverage without regard 
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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 section 401(c)(1), coverage under 
any group health plan providing health insur-
ance coverage shall be treated as applicable em-
ployer-sponsored coverage if a deduction is al-
lowable 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 in-
clude coverage under any group health plan es-
tablished and maintained primarily for its civil-
ian employees by the Government of the United 
States, by the government of any State or polit-
ical subdivision thereof, or by any agency or in-
strumentality 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 determining such 
cost, any portion of the cost of such coverage 
which is attributable to the tax imposed under 
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scribed in subsection (b) or (d) of section 106, the 
cost of the coverage shall be equal to the amount 
of employer contributions under the arrange-
ment. 
‘‘(D) ALLOCATION ON A MONTHLY BASIS.— 
If cost is determined 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 CAL-
CULATE EXCESS BENEFIT.— 
‘‘(1) IN GENERAL.—If, for any taxable period, 
the tax imposed by subsection (a) exceeds the tax de-
termined under such subsection with respect to the 
total excess benefit calculated 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 ex-
cess, plus interest at the underpayment rate de-
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termined under section 6621 for the period be-
ginning on the due date for the payment of tax 
imposed by subsection (a) to which the excess re-
lates and ending on the date of payment of the 
penalty. 
‘‘(2) LIMITATIONS ON PENALTY.— 
‘‘(A) PENALTY NOT TO APPLY WHERE FAIL-
URE NOT DISCOVERED EXERCISING REASONABLE 
DILIGENCE.—No penalty shall be imposed by 
paragraph (1)(B) on any failure to properly cal-
culate the excess benefit during any period for 
which it is established to the satisfaction of the 
Secretary that the employer or plan sponsor nei-
ther 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 rea-
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sonable 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 in-
equitable 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 coverage 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 cov-
erage in a group health plan which provides 
minimum essential coverage (as defined in sec-
tion 5000A(f)) to the employee and at least one 
other beneficiary, and the benefits provided 
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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 PRO-
FESSION.—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), employ-
ees in fire protection activities (as such term is de-
fined in section 3(y) of the Fair Labor Standards Act 
of 1938), individuals who provide out-of-hospital 
emergency medical care (including emergency medical 
technicians, paramedics, and first-responders), and 
individuals engaged in the construction, mining, ag-
riculture (not including food processing), forestry, 
and fishing industries. Such term includes an em-
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ployee who is retired from a high-risk profession de-
scribed in the preceding sentence, if such employee 
satisfied the requirements of such sentence for a pe-
riod 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 sec-
tion 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, ex-
cept 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) 
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of the Employee Retirement Income Security Act of 
1974. 
‘‘(8) TAXABLE PERIOD.—The term ‘taxable pe-
riod’ means the calendar year or such shorter period 
as the Secretary may prescribe. The Secretary may 
have different taxable periods for employers of vary-
ing sizes. 
‘‘(9) AGGREGATION RULES.—All employers treat-
ed as a single employer under subsection (b), (c), (m), 
or (o) of section 414 shall be treated as a single em-
ployer. 
‘‘(10) DENIAL OF DEDUCTION.—For denial of a 
deduction for the tax imposed by this section, see sec-
tion 275(a)(6). 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out this sec-
tion.’’. 
(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 Decem-
ber 31, 2012. 
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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 applica-
ble employer-sponsored 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 
‘‘(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 Decem-
ber 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 following: ‘‘Such term shall include an 
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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.’’. 
(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 medi-
cine or drug is a prescribed drug (determined without re-
gard to whether such drug is available without a prescrip-
tion) or is insulin.’’. 
(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS 
AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Section 
106 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection: 
‘‘(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED 
TO PRESCRIBED DRUGS AND INSULIN.—For purposes of 
this section and section 105, reimbursement for expenses in-
curred for a medicine or a drug shall be treated as a reim-
bursement for medical expenses 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.’’. 
(d) EFFECTIVE DATES.— 
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(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.— 
The amendments 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 subsection (c) shall apply to expenses incurred 
with respect to taxable years beginning after Decem-
ber 31, 2010. 
SEC. 9004. INCREASE IN ADDITIONAL TAX ON DISTRIBU-
TIONS FROM HSAS AND ARCHER MSAS NOT 
USED FOR QUALIFIED MEDICAL EXPENSES. 
(a) HSAS.—Section 223(f)(4)(A) of the Internal Rev-
enue Code of 1986 is amended by striking ‘‘10 percent’’ and 
inserting ‘‘20 percent’’. 
(b) ARCHER MSAS.—Section 220(f)(4)(A) of the Inter-
nal Revenue Code of 1986 is amended by striking ‘‘15 per-
cent’’ 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 
ARRANGEMENTS UNDER CAFETERIA PLANS. 
(a) IN GENERAL.—Section 125 of the Internal Revenue 
Code of 1986 is amended— 
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(1) by redesignating subsections (i) and (j) as 
subsections (j) and (k), respectively, and 
(2) by inserting after subsection (h) the following 
new subsection: 
‘‘(i) LIMITATION ON HEALTH FLEXIBLE SPENDING 
ARRANGEMENTS.—For purposes of this section, if a benefit 
is provided under a cafeteria plan through employer con-
tributions to a health flexible spending arrangement, such 
benefit shall not be treated as a qualified benefit unless the 
cafeteria plan provides that an employee may not elect for 
any taxable year to have salary reduction contributions 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 Decem-
ber 31, 2010. 
SEC. 9006. EXPANSION OF INFORMATION REPORTING RE-
QUIREMENTS. 
(a) IN GENERAL.—Section 6041 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsections: 
‘‘(h) APPLICATION
TO
CORPORATIONS.—Notwith-
standing any regulation prescribed by the Secretary before 
the date of the enactment of this subsection, for purposes 
of this section the term ‘person’ includes any corporation 
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that is not an organization exempt from tax under section 
501(a). 
‘‘(i) REGULATIONS.—The Secretary may prescribe 
such regulations and other guidance as may be appropriate 
or necessary to carry out the purposes of this section, in-
cluding rules to prevent duplicative reporting of trans-
actions.’’. 
(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 ‘‘emolu-
ments, 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) CHARITABLE HOSPITAL ORGANIZATION.—Sec-
tion 501 of the Internal Revenue Code of 1986 (relating to 
exemption from tax on corporations, certain trusts, etc.) is 
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amended by redesignating subsection (r) as subsection (s) 
and by inserting after subsection (q) the following new sub-
section: 
‘‘(r) ADDITIONAL REQUIREMENTS FOR CERTAIN HOS-
PITALS.— 
‘‘(1) IN GENERAL.—A hospital organization to 
which this subsection applies shall not be treated as 
described in subsection (c)(3) unless the organiza-
tion— 
‘‘(A) meets the community health needs as-
sessment requirements described in paragraph 
(3), 
‘‘(B) meets the financial assistance policy 
requirements described in paragraph (4), 
‘‘(C) meets the requirements on charges de-
scribed in paragraph (5), and 
‘‘(D) meets the billing and collection re-
quirement described in paragraph (6). 
‘‘(2) HOSPITAL ORGANIZATIONS TO WHICH SUB-
SECTION APPLIES.— 
‘‘(A) IN
GENERAL.—This subsection shall 
apply to— 
‘‘(i) an organization which operates a 
facility which is required by a State to be 
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licensed, registered, or similarly recognized 
as a hospital, and 
‘‘(ii) any other organization which the 
Secretary determines has the provision of 
hospital care as its principal function or 
purpose constituting the basis for its exemp-
tion under subsection (c)(3) (determined 
without regard to this subsection). 
‘‘(B) ORGANIZATIONS WITH MORE THAN 1 
HOSPITAL FACILITY.—If a hospital organization 
operates more than 1 hospital facility— 
‘‘(i) the organization shall meet the re-
quirements of this subsection separately 
with respect to each such facility, and 
‘‘(ii) the organization shall not be 
treated as described in subsection (c)(3) 
with respect to any such facility for which 
such requirements are not separately met. 
‘‘(3) 
COMMUNITY
HEALTH
NEEDS
ASSESS-
MENTS.— 
‘‘(A) IN GENERAL.—An organization meets 
the requirements of this paragraph with respect 
to any taxable year only if the organization— 
‘‘(i) has conducted a community health 
needs assessment which meets the require-
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ments of subparagraph (B) in such taxable 
year or in either of the 2 taxable years im-
mediately preceding such taxable year, and 
‘‘(ii) has adopted an implementation 
strategy to meet the community health needs 
identified through such assessment. 
‘‘(B) COMMUNITY HEALTH NEEDS ASSESS-
MENT.—A community health needs assessment 
meets the requirements of this paragraph if such 
community health needs assessment— 
‘‘(i) takes into account input from per-
sons who represent the broad interests of the 
community served by the hospital facility, 
including those with special knowledge of or 
expertise in public health, and 
‘‘(ii) is made widely available to the 
public. 
‘‘(4) FINANCIAL ASSISTANCE POLICY.—An orga-
nization meets the requirements of this paragraph if 
the organization establishes the following policies: 
‘‘(A) FINANCIAL
ASSISTANCE
POLICY.—A 
written financial assistance policy which in-
cludes— 
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‘‘(i) eligibility criteria for financial as-
sistance, and whether such assistance in-
cludes free or discounted care, 
‘‘(ii) the basis for calculating amounts 
charged to patients, 
‘‘(iii) the method for applying for fi-
nancial assistance, 
‘‘(iv) in the case of an organization 
which does not have a separate billing and 
collections policy, the actions the organiza-
tion may take in the event of non-payment, 
including collections action and reporting 
to credit agencies, and 
‘‘(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, without discrimination, 
care for emergency medical conditions (within 
the meaning of section 1867 of the Social Secu-
rity Act (42 U.S.C. 1395dd)) to individuals re-
gardless of their eligibility under the financial 
assistance policy described in subparagraph (A). 
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‘‘(5) LIMITATION
ON
CHARGES.—An organiza-
tion meets the requirements of this paragraph if the 
organization— 
‘‘(A) limits amounts charged for emergency 
or other medically necessary care provided to in-
dividuals eligible for assistance under the finan-
cial 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
REQUIRE-
MENTS.—An organization meets the requirement of 
this paragraph only if the organization does not en-
gage in extraordinary collection actions before the or-
ganization 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 sub-
section, including guidance relating to what con-
stitutes reasonable efforts to determine the eligibility 
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of a patient under a financial assistance policy for 
purposes 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 requirements) is amended by adding at 
the end the following new section: 
‘‘SEC. 4959. TAXES ON FAILURES BY HOSPITAL ORGANIZA-
TIONS. 
‘‘If a hospital organization to which section 501(r) ap-
plies 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 sec-
tions 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 Sec-
retary’s delegate shall review at least once every 3 years 
the community benefit activities of each hospital organiza-
tion to which section 501(r) of the Internal Revenue Code 
of 1986 (as added by this section) applies. 
(d) ADDITIONAL REPORTING REQUIREMENTS.— 
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(1) COMMUNITY HEALTH NEEDS ASSESSMENTS 
AND
AUDITED
FINANCIAL
STATEMENTS.—Section 
6033(b) of the Internal Revenue Code of 1986 (relat-
ing to certain organizations described in section 
501(c)(3)) is amended by striking ‘‘and’’ at the end 
of paragraph (14), by redesignating paragraph (15) 
as paragraph (16), and by inserting after paragraph 
(14) the following new paragraph: 
‘‘(15) in the case of an organization to which the 
requirements of section 501(r) apply for the taxable 
year— 
‘‘(A) a description of how the organization 
is addressing the needs identified in each com-
munity health needs assessment conducted under 
section 501(r)(3) and a description of any such 
needs that are not being addressed together with 
the reasons why such needs are not being ad-
dressed, and 
‘‘(B) the audited financial statements of 
such organization (or, in the case of an organi-
zation the financial statements of which are in-
cluded in a consolidated financial statement 
with other organizations, such consolidated fi-
nancial statement).’’. 
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(2) TAXES.—Section 6033(b)(10) of such Code is 
amended by striking ‘‘and’’ at the end of subpara-
graph (B), by inserting ‘‘and’’ at the end of subpara-
graph (C), and by adding at the end the following 
new subparagraph: 
‘‘(D) section 4959 (relating to taxes on fail-
ures by hospital 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 sub-
mit to the Committees on Ways and Means, Edu-
cation 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 gov-
ernment programs, and 
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(iv) unreimbursed costs for services 
provided with respect to non-means tested 
government programs. 
(B) Information with respect to private tax- 
exempt hospitals regarding costs incurred for 
community benefit activities. 
(2) REPORT ON TRENDS.— 
(A) STUDY.—The Secretary of the Treasury, 
in consultation 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 Sec-
retary 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.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this sec-
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tion shall apply to taxable years beginning after the 
date of the enactment of this Act. 
(2) COMMUNITY HEALTH NEEDS ASSESSMENT.— 
The requirements 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 PRE-
SCRIPTION PHARMACEUTICAL MANUFACTUR-
ERS AND IMPORTERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged 
in the business of manufacturing or importing brand-
ed 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 
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by the Secretary, but in no event later than Sep-
tember 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 prescrip-
tion 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 preceding calendar year. 
(2) SALES TAKEN INTO ACCOUNT.—For purposes 
of paragraph (1), the branded prescription drug sales 
taken into account during any calendar year with re-
spect to any covered entity shall be determined in ac-
cordance with the following table: 
With respect to a covered entity’s aggregate branded pre-
scription drug sales during the calendar year that are: 
The percentage of such 
sales taken into ac-
count 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. 
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(3) SECRETARIAL
DETERMINATION.—The Sec-
retary 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 Sec-
retary 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 Sup-
plementary 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 prescrip-
tion drug sales. 
(2) CONTROLLED GROUPS.— 
(A) IN GENERAL.—For purposes of this sub-
section, 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) 
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or (o) of section 414 of such Code shall be treated 
as a single covered entity. 
(B) INCLUSION
OF
FOREIGN
CORPORA-
TIONS.—For purposes 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 sub-
section (b)(2)(C) thereof. 
(e) BRANDED PRESCRIPTION DRUG SALES.—For pur-
poses of this section— 
(1) IN GENERAL.—The term ‘‘branded prescrip-
tion drug sales’’ means sales of branded prescription 
drugs to any specified government program or pursu-
ant to coverage under any such program. 
(2) BRANDED PRESCRIPTION DRUGS.— 
(A) IN GENERAL.—The term ‘‘branded pre-
scription drug’’ means— 
(i) any prescription drug the applica-
tion for which was submitted under section 
505(b) of the Federal Food, Drug, and Cos-
metic 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)). 
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(B) PRESCRIPTION DRUG.—For purposes of 
subparagraph (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 in-
clude sales of any drug or biological product with re-
spect 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 treat-
ment of the rare disease or condition with respect to 
which such credit was allowed. 
(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, 
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(D) any program under which branded pre-
scription drugs are procured by the Department 
of Veterans Affairs, 
(E) any program under which branded pre-
scription drugs are procured by the Department 
of Defense, or 
(F) the TRICARE retail pharmacy pro-
gram under section 1074g of title 10, United 
States Code. 
(f) TAX TREATMENT OF FEES.—The fees imposed by 
this section— 
(1) for purposes of subtitle F of the Internal Rev-
enue 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 considered to be a tax described in section 
275(a)(6). 
(g) REPORTING REQUIREMENT.—Not later than the 
date determined 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 
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covered entity with respect to each specified government 
program under such Secretary’s jurisdiction using the fol-
lowing methodology: 
(1) MEDICARE
PART
D
PROGRAM.—The Sec-
retary of Health and Human Services shall report, 
for each covered entity and for each branded prescrip-
tion drug of the covered entity covered by the Medi-
care 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 Advan-
tage 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 
prescription drug plans, and 
(B) the number of units of the branded pre-
scription drug paid for under the Medicare Part 
D program. 
(2) MEDICARE
PART
B
PROGRAM.—The Sec-
retary of Health and Human Services shall report, 
for each covered entity and for each branded prescrip-
tion drug of the covered entity covered by the Medi-
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care Part B program under section 1862(a) of the So-
cial Security Act, the product of— 
(A) the per-unit average sales price (as de-
fined in section 1847A(c) of the Social Security 
Act) or the per-unit Part B payment rate for a 
separately paid branded prescription drug with-
out a reported average sales price, and 
(B) the number of units of the branded pre-
scription drug paid for under the Medicare Part 
B program. 
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 re-
ported. 
(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 pro-
gram, the product of— 
(A) the per-unit ingredient cost paid to 
pharmacies by States for the branded prescrip-
tion drug dispensed to Medicaid beneficiaries, 
minus any per-unit rebate paid by the covered 
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entity under section 1927 of the Social Security 
Act and any State supplemental rebate, and 
(B) the number of units of the branded pre-
scription drug paid for under the Medicaid pro-
gram. 
(4) DEPARTMENT OF VETERANS AFFAIRS PRO-
GRAMS.—The Secretary of Veterans Affairs shall re-
port, 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 De-
partment 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 en-
tity, and 
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(ii) the number of units of the branded 
prescription drug dispensed under such pro-
gram. 
(h) SECRETARY.—For purposes of this section, the 
term ‘‘Secretary’’ 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 Decem-
ber 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 DE-
VICE MANUFACTURERS AND IMPORTERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged 
in the business of manufacturing or importing med-
ical devices shall pay to the Secretary not later than 
the annual payment date of each calendar year begin-
ning after 2009 a fee in an amount determined under 
subsection (b). 
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(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 Sep-
tember 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 calendar year, bear to 
(B) the aggregate gross receipts of all cov-
ered 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 fol-
lowing table: 
With respect to a covered entity’s aggregate gross re-
ceipts from medical device sales during the calendar 
year that are: 
The percentage of gross 
receipts taken into ac-
count is: 
Not more than $5,000,000 ..........................................
0 percent 
More 
than 
$5,000,000 
but 
not 
more 
than 
$25,000,000.
50 percent 
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With respect to a covered entity’s aggregate gross re-
ceipts from medical device sales during the calendar 
year that are: 
The percentage of gross 
receipts taken into ac-
count is: 
More than $25,000,000 ...............................................
100 percent. 
(3) SECRETARIAL
DETERMINATION.—The Sec-
retary shall calculate the amount of each covered enti-
ty’s fee for any calendar year under paragraph (1). 
In calculating such amount, the Secretary shall deter-
mine 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 
Secretary. 
(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 sub-
section, 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
CORPORA-
TIONS.—For purposes of subparagraph (A), in 
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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 sub-
section (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 de-
vice that— 
(A) has been classified in class II under sec-
tion 513 of the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 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 para-
graph (1), 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) MEDICAL DEVICE.—For purposes of para-
graph (1), the term ‘‘medical device’’ means any de-
vice (as defined in section 201(h) of the Federal Food, 
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Drug, and Cosmetic Act (21 U.S.C. 321(h))) intended 
for humans. 
(e) TAX TREATMENT OF FEES.—The fees imposed by 
this section— 
(1) for purposes of subtitle F of the Internal Rev-
enue 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 considered to be a tax described in section 
275(a)(6). 
(f) REPORTING REQUIREMENT.— 
(1) IN GENERAL.—Not later than the date deter-
mined by the Secretary following the end of any cal-
endar year, each covered entity shall report to the 
Secretary, in such manner as the Secretary pre-
scribes, 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 fail-
ure to make a report containing the information 
required by paragraph (1) on the date prescribed 
therefor (determined with regard to any exten-
sion of time for filing), unless it is shown that 
such failure is due to reasonable cause, there 
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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 dur-
ing which such failure continues, 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 Rev-
enue Code of 1986, 
(ii) shall be paid on notice and de-
mand 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 ‘‘Secretary’’ means the Secretary of the Treasury or 
the Secretary’s delegate. 
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(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 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 INSUR-
ANCE PROVIDERS. 
(a) IMPOSITION OF FEE.— 
(1) IN GENERAL.—Each covered entity engaged 
in the business of providing health insurance shall 
pay to the Secretary not later than the annual pay-
ment 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 Sep-
tember 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 
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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 cal-
endar year, plus 
(ii) 200 percent of the covered entity’s 
third party administration agreement fees 
that are taken into account during the pre-
ceding 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 calendar 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 calendar year. 
(2) AMOUNTS TAKEN INTO ACCOUNT.—For pur-
poses of paragraph (1)— 
(A) NET
PREMIUMS
WRITTEN.—The net 
premiums written with respect to health insur-
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ance for any United States health risk that are 
taken into account during any calendar year 
with respect to any covered entity shall be deter-
mined in accordance with the following table: 
With respect to a covered entity’s net premiums written 
during the calendar year that are: 
The percentage of net 
premiums written 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. 
(B) THIRD PARTY ADMINISTRATION AGREE-
MENT
FEES.—The third party administration 
agreement fees that are taken into account dur-
ing any calendar year with respect to any cov-
ered entity shall be determined in accordance 
with the following table: 
With respect to a covered entity’s third party adminis-
tration agreement fees during the calendar year that 
are: 
The percentage of third 
party administration 
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 Sec-
retary shall calculate the amount of each covered enti-
ty’s fee for any calendar year under paragraph (1). 
In calculating such amount, the Secretary shall deter-
mine such covered entity’s net premiums written with 
respect to any United States health risk and third 
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party administration agreement fees on the basis of 
reports submitted by the covered entity under sub-
section (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 insurance 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 insur-
ance option under section 1323). 
(3) CONTROLLED GROUPS.— 
(A) IN GENERAL.—For purposes of this sub-
section, 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)). 
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(B) INCLUSION
OF
FOREIGN
CORPORA-
TIONS.—For purposes 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 sub-
section (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 Rev-
enue Code of 1986), or 
(3) located in the United States, with respect to 
the period such individual is so located. 
(e) THIRD
PARTY
ADMINISTRATION
AGREEMENT 
FEES.—For purposes of this section, the term ‘‘third party 
administration agreement 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 em-
ployer self-insures the United States health risk of its em-
ployees. 
(f) TAX TREATMENT OF FEES.—The fees imposed by 
this section— 
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(1) for purposes of subtitle F of the Internal Rev-
enue 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 considered to be a tax described in section 
275(a)(6). 
(g) REPORTING REQUIREMENT.— 
(1) IN GENERAL.—Not later than the date deter-
mined by the Secretary following the end of any cal-
endar year, each covered entity shall report to the 
Secretary, in such manner as the Secretary pre-
scribes, 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 fail-
ure to make a report containing the information 
required by paragraph (1) on the date prescribed 
therefor (determined with regard to any exten-
sion 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— 
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(i) $10,000, plus 
(ii) the lesser of— 
(I) an amount equal to $1,000, 
multiplied by the number of days dur-
ing which such failure continues, 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 Rev-
enue Code of 1986, 
(ii) shall be paid on notice and de-
mand 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 dele-
gate. 
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(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 in-
surance’’ 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. 
(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 conduct 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 
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Committee on Ways and Means of the House of Representa-
tives and to the Committee on Finance of the Senate not 
later than December 31, 2012. 
SEC. 9012. ELIMINATION OF DEDUCTION FOR EXPENSES AL-
LOCABLE TO MEDICARE PART D SUBSIDY. 
(a) IN GENERAL.—Section 139A of the Internal Rev-
enue Code of 1986 is amended by striking the second sen-
tence. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 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 De-
cember 31, 2012, and ending before January 1, 2017, sub-
section (a) shall be applied with respect to a taxpayer by 
substituting ‘7.5 percent’ for ‘10 percent’ if such taxpayer 
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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 strik-
ing ‘‘by substituting ‘10 percent’ for ‘7.5 percent’ ’’ and in-
serting ‘‘without regard to subsection (f) of such section’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2012. 
SEC. 9014. LIMITATION ON EXCESSIVE REMUNERATION 
PAID BY CERTAIN HEALTH INSURANCE PRO-
VIDERS. 
(a) IN GENERAL.—Section 162(m) of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subparagraph: 
‘‘(6) SPECIAL RULE FOR APPLICATION TO CER-
TAIN HEALTH INSURANCE PROVIDERS.— 
‘‘(A) IN GENERAL.—No deduction shall be 
allowed under this chapter— 
‘‘(i) in the case of applicable indi-
vidual remuneration which is for any dis-
qualified taxable year beginning after De-
cember 31, 2012, and which is attributable 
to services performed by an applicable indi-
vidual during such taxable year, to the ex-
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tent that the amount of such remuneration 
exceeds $500,000, or 
‘‘(ii) in the case of deferred deduction 
remuneration for any taxable year begin-
ning after December 31, 2012, which is at-
tributable to services performed by an ap-
plicable individual during any disqualified 
taxable 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 re-
muneration for such disqualified tax-
able year, plus 
‘‘(II) the portion of the deferred 
deduction remuneration for such serv-
ices 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)). 
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‘‘(B) DISQUALIFIED
TAXABLE
YEAR.—For 
purposes of this paragraph, the term ‘disquali-
fied taxable year’ means, with respect to any em-
ployer, any taxable year for which such employer 
is a covered health insurance provider. 
‘‘(C) COVERED
HEALTH
INSURANCE
PRO-
VIDER.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘covered 
health insurance provider’ means— 
‘‘(I) with respect to taxable years 
beginning after December 31, 2009, 
and before January 1, 2013, any em-
ployer which is a health insurance 
issuer 
(as 
defined 
in 
section 
9832(b)(2)) and which receives pre-
miums 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 insur-
ance 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 
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health insurance coverage (as defined 
in section 9832(b)(1)) is from min-
imum 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, 
paragraphs (2) and (3) thereof shall be dis-
regarded. 
‘‘(D) APPLICABLE INDIVIDUAL REMUNERA-
TION.—For purposes of this paragraph, the term 
‘applicable individual remuneration’ means, 
with respect to any applicable individual for 
any disqualified taxable year, the aggregate 
amount allowable as a deduction under this 
chapter for such taxable year (determined with-
out regard to this subsection) for remuneration 
(as defined in paragraph (4) without 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 
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with respect to services performed during the dis-
qualified taxable year. 
‘‘(E) DEFERRED
DEDUCTION
REMUNERA-
TION.—For purposes of this paragraph, the term 
‘deferred deduction remuneration’ means remu-
neration 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 with-
out regard to this paragraph) for such remunera-
tion is allowable in a subsequent taxable year. 
‘‘(F) APPLICABLE
INDIVIDUAL.—For pur-
poses of this paragraph, the term ‘applicable in-
dividual’ means, with respect to any covered 
health insurance provider for any disqualified 
taxable year, any individual— 
‘‘(i) who is an officer, director, or em-
ployee in such taxable year, or 
‘‘(ii) who provides services for or on 
behalf of such covered health insurance pro-
vider during such taxable year. 
‘‘(G) COORDINATION.—Rules similar to the 
rules of subparagraphs (F) and (G) of paragraph 
(4) shall apply for purposes of this paragraph. 
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‘‘(H) REGULATORY AUTHORITY.—The Sec-
retary may prescribe 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 Decem-
ber 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 Inter-
nal Revenue Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting 
the following: 
‘‘(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 sub-
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section, 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 re-
spect to employment (as defined in section 3121(b)) 
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 Revenue Code of 1986 is amended by adding 
at the end the following new subsection: 
‘‘(f) SPECIAL RULES FOR ADDITIONAL TAX.— 
‘‘(1) IN GENERAL.—In the case of any tax im-
posed 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 re-
ceived by such taxpayer’s spouse. 
‘‘(2) COLLECTION
OF
AMOUNTS
NOT
WITH-
HELD.—To the extent that the amount of any tax im-
posed by section 3101(b)(2) is not collected by the em-
ployer, 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 with-
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hold the tax imposed by section 3101(b)(2) and there-
after the tax is paid by the employee, the tax so re-
quired to be deducted and withheld shall not be col-
lected 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 Inter-
nal Revenue Code of 1986 is amended— 
(A) by striking ‘‘In addition’’ and inserting 
the following: 
‘‘(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 tax-
payer (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— 
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‘‘(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 subpara-
graph (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 ‘‘sec-
tion 1401)’’. 
(B) DEDUCTION FOR NET EARNINGS FROM 
SELF-EMPLOYMENT.—Subparagraph (B) of sec-
tion 1402(a)(12) is amended by inserting ‘‘(de-
termined without regard to the rate imposed 
under paragraph (2) of section 1401(b))’’ after 
‘‘for such year’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply with respect to remuneration received, 
and taxable years beginning, after December 31, 2012. 
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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 pre-
ceding 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 Decem-
ber 31, 2009. 
SEC. 9017. EXCISE TAX ON ELECTIVE COSMETIC MEDICAL 
PROCEDURES. 
(a) IN GENERAL.—Subtitle D of the Internal Revenue 
Code of 1986, as amended by this Act, is amended by add-
ing at the end the following new chapter: 
‘‘CHAPTER 49—ELECTIVE COSMETIC 
MEDICAL PROCEDURES 
‘‘Sec. 5000B. Imposition of tax on elective cosmetic medical procedures. 
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‘‘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
PROCE-
DURE.—For purposes of this section, the term ‘cosmetic sur-
gery and medical procedure’ means any cosmetic surgery 
(as defined in section 213(d)(9)(B)) or other similar proce-
dure which— 
‘‘(1) is performed by a licensed medical profes-
sional, and 
‘‘(2) is not necessary to ameliorate a deformity 
arising from, or directly related to, a congenital ab-
normality, a personal injury resulting from an acci-
dent or trauma, or disfiguring disease. 
‘‘(c) PAYMENT OF TAX.— 
‘‘(1) IN GENERAL.—The tax imposed by this sec-
tion shall be paid by the individual on whom the pro-
cedure 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 
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performed and remit such tax quarterly to the Sec-
retary at such time and in such manner as provided 
by the Secretary. 
‘‘(3) SECONDARY LIABILITY.—Where any tax im-
posed by subsection (a) is not paid at the time pay-
ments for cosmetic surgery and medical procedures 
are made, then to the extent that such tax is not col-
lected, such tax shall be paid by the person who per-
forms 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 Jan-
uary 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 in-
serting after section 139C the following new section: 
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‘‘SEC. 139D. INDIAN HEALTH CARE BENEFITS. 
‘‘(a) GENERAL RULE.—Except as otherwise provided 
in this section, 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 In-
dian 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, pro-
vided 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 In-
dian tribe or tribal organization that supplements, re-
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places, 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 sec-
tion 4(l) of the Indian Self-Determination and Edu-
cation Assistance Act. 
‘‘(3) MEDICAL CARE.—The term ‘medical care’ 
has the same meaning as when used in section 213. 
‘‘(4) ACCIDENT OR HEALTH INSURANCE; ACCI-
DENT
OR
HEALTH
PLAN.—The terms ‘accident or 
health insurance’ and ‘accident 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 
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which a deduction is allowed to such beneficiary 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 Rev-
enue 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 infer-
ence with respect to the exclusion from gross income of— 
(1) benefits provided by an Indian tribe or tribal 
organization that are not within the scope of this sec-
tion, and 
(2) benefits provided prior to the date of the en-
actment 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: 
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‘‘(j) SIMPLE CAFETERIA PLANS FOR SMALL BUSI-
NESSES.— 
‘‘(1) IN GENERAL.—An eligible employer main-
taining 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 non-
discrimination requirement during such year. 
‘‘(2) SIMPLE CAFETERIA PLAN.—For purposes of 
this subsection, 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 
requirements of paragraph (3), and the eligi-
bility and participation requirements of para-
graph (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— 
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‘‘(i) a uniform percentage (not less 
than 2 percent) of the employee’s compensa-
tion for the plan year, or 
‘‘(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 sal-
ary reduction contributions of each 
qualified employee. 
‘‘(B) MATCHING
CONTRIBUTIONS
ON
BE-
HALF OF HIGHLY COMPENSATED AND KEY EM-
PLOYEES.—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 con-
tribution is greater than that with respect to an 
employee who is not a highly compensated or key 
employee. 
‘‘(C) ADDITIONAL CONTRIBUTIONS.—Subject 
to subparagraph (B), nothing in this paragraph 
shall be treated as prohibiting an employer from 
making contributions to provide qualified bene-
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‘‘(4) MINIMUM ELIGIBILITY AND PARTICIPATION 
REQUIREMENTS.— 
‘‘(A) IN
GENERAL.—The requirements of 
this paragraph shall be treated as met with re-
spect 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 partici-
pate 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
EX-
CLUDED.—For purposes 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 serv-
ice with the employer as of any day during 
the plan year, 
‘‘(iii) who are covered under an agree-
ment which the Secretary of Labor finds to 
be a collective bargaining agreement if there 
is evidence that the benefits covered under 
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the cafeteria plan were the subject of good 
faith bargaining between employee rep-
resentatives 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 em-
ployer’ means, with respect to any year, any em-
ployer 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 DUR-
ING 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 em-
ploy on business days in the current year. 
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‘‘(C) GROWING EMPLOYERS RETAIN TREAT-
MENT 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 cafeteria plan for its employees 
for such year, 
then, notwithstanding the fact the employer 
fails to meet the requirements of subpara-
graph (A) for any subsequent year, such 
employer shall be treated as an eligible em-
ployer for such subsequent year with respect 
to employees (whether or not employees dur-
ing a qualified year) of any trade or busi-
ness 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.— 
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‘‘(i) PREDECESSORS.—Any reference 
in this paragraph to an employer shall in-
clude a reference to any predecessor of such 
employer. 
‘‘(ii) AGGREGATION RULES.—All per-
sons treated as a single employer under sub-
section (a) or (b) of section 52, or subsection 
(n) or (o) of section 414, shall be treated as 
one person. 
‘‘(6) APPLICABLE NONDISCRIMINATION REQUIRE-
MENT.—For purposes of this subsection, the term ‘ap-
plicable nondiscrimination requirement’ means any 
requirement under subsection (b) of this section, sec-
tion 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. 
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 
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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 tax-
able year is an amount equal to 50 percent of the qualified 
investment for such taxable year with respect to any quali-
fying therapeutic discovery project of an eligible taxpayer. 
‘‘(b) QUALIFIED INVESTMENT.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), the qualified investment for any taxable year is 
the aggregate amount of the costs paid or incurred in 
such taxable year for expenses necessary for and di-
rectly related to the conduct of a qualifying thera-
peutic discovery project. 
‘‘(2) LIMITATION.—The amount which is treated 
as qualified investment for all taxable years with re-
spect to any qualifying therapeutic discovery project 
shall not exceed the amount certified 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 ac-
count any cost— 
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‘‘(A) for remuneration for an employee de-
scribed 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 Secretary 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 char-
acter 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 invest-
ment 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.— 
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‘‘(1) 
QUALIFYING
THERAPEUTIC
DISCOVERY 
PROJECT.—The term ‘qualifying therapeutic discovery 
project’ means a project which is designed— 
‘‘(A) to treat or prevent diseases or condi-
tions by conducting pre-clinical activities, clin-
ical 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, 
‘‘(B) to diagnose diseases or conditions or to 
determine molecular factors related to diseases or 
conditions by developing molecular diagnostics to 
guide therapeutic decisions, or 
‘‘(C) to develop a product, process, or tech-
nology to further the delivery or administration 
of therapeutics. 
‘‘(2) ELIGIBLE TAXPAYER.— 
‘‘(A) IN GENERAL.—The term ‘eligible tax-
payer’ means a taxpayer which employs not 
more than 250 employees in all businesses of the 
taxpayer at the time of the submission of the ap-
plication under subsection (d)(2). 
‘‘(B) AGGREGATION
RULES.—All persons 
treated as a single employer under subsection (a) 
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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 maintain 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 Services, 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 spon-
sors. 
‘‘(B) LIMITATION.—The total amount of 
credits that may be allocated under the program 
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shall not exceed $1,000,000,000 for the 2-year pe-
riod beginning with 2009. 
‘‘(2) CERTIFICATION.— 
‘‘(A) APPLICATION
PERIOD.—Each appli-
cant for certification under this paragraph shall 
submit an application containing such informa-
tion as the Secretary may require during the pe-
riod beginning on the date the Secretary estab-
lishes the program under paragraph (1). 
‘‘(B) TIME
FOR
REVIEW
OF
APPLICA-
TIONS.—The Secretary shall take action to ap-
prove or deny any application under subpara-
graph (A) within 30 days of the submission of 
such application. 
‘‘(C) MULTI-YEAR APPLICATIONS.—An ap-
plication 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— 
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‘‘(i) to result in new therapies— 
‘‘(I) to treat areas of unmet med-
ical need, or 
‘‘(II) to prevent, detect, or treat 
chronic or acute diseases and condi-
tions, 
‘‘(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 estab-
lishes 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 com-
petitiveness in the fields of life, biological, 
and medical sciences. 
‘‘(4) DISCLOSURE OF ALLOCATIONS.—The Sec-
retary shall, upon making a certification under this 
subsection, publicly disclose the identity of the appli-
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cant 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 sub-
ject to an allowance for depreciation, the basis of such 
property shall be reduced by the amount of such cred-
it. 
‘‘(2) DENIAL OF DOUBLE BENEFIT.— 
‘‘(A) BONUS DEPRECIATION.—A credit shall 
not be allowed under this section for any invest-
ment 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) attrib-
utable to such portion. This subparagraph shall 
not apply to expenses related to property of a 
character subject to an allowance for deprecia-
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tion the basis of which is reduced under para-
graph (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 ac-
count 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 DETER-
MINING
BASE
PERIOD
RESEARCH
EX-
PENSES.—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 ap-
plying section 41 to subsequent 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 de-
termined under this section with respect to such in-
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vestment for the 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 recap-
ture the portion of such credit which was not so 
allowed, and 
‘‘(C) the amount of such grant shall be de-
termined 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 tax-
payer.’’. 
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(b) INCLUSION AS PART OF INVESTMENT CREDIT.— 
Section 46 of the Internal Revenue Code of 1986 is amend-
ed— 
(1) by adding a comma at the end of paragraph 
(2), 
(2) by striking the period at the end of para-
graph (5) and inserting ‘‘, and’’, and 
(3) by adding at the end the following new para-
graph: 
‘‘(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) ap-
plies which is part of a qualifying thera-
peutic discovery project under such section 
48D.’’. 
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(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 al-
lowed 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 ex-
penses (as defined in section 41(e)(2)), or quali-
fied clinical testing expenses (as defined in sec-
tion 45C(b)) if the credit under section 41 or sec-
tion 45C were allowed with respect to such ex-
penses for such taxable year, and 
‘‘(B) is equal to the amount of the credit de-
termined for such taxable year under section 
48D(a), reduced by— 
‘‘(i) the amount disallowed as a deduc-
tion by reason of section 48D(e)(2)(B), and 
‘‘(ii) the amount of any basis reduction 
under section 48D(e)(1). 
‘‘(2) SIMILAR RULE WHERE TAXPAYER CAPITAL-
IZES
RATHER
THAN
DEDUCTS
EXPENSES.—In the 
case of expenses described in paragraph (1)(A) taken 
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into account in determining the credit under section 
48D for the taxable year, if— 
‘‘(A) the amount of the portion of the credit 
determined under such section with respect to 
such expenses, exceeds 
‘‘(B) the amount allowable as a deduction 
for such taxable year for such expenses (deter-
mined without regard to paragraph (1)), 
the amount chargeable to capital account for the tax-
able year for such expenses shall be reduced by the 
amount of such excess. 
‘‘(3) CONTROLLED GROUPS.—Paragraph (3) of 
subsection (b) shall apply for purposes of this sub-
section.’’. 
(d) CLERICAL AMENDMENT.—The table of sections for 
subpart E of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting 
after the item relating to section 48C the following new 
item: 
‘‘Sec. 48D. Qualifying therapeutic discovery project credit.’’. 
(e) GRANTS FOR QUALIFIED INVESTMENTS IN THERA-
PEUTIC DISCOVERY PROJECTS IN LIEU OF TAX CREDITS.— 
(1) IN GENERAL.—Upon application, the Sec-
retary of the Treasury shall, subject to the require-
ments of this subsection, provide a grant to each per-
son who makes a qualified investment in a qualifying 
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therapeutic discovery project in the amount of 50 per-
cent of such investment. No grant shall be made under 
this subsection with respect to any investment unless 
such investment is made during a taxable year begin-
ning in 2009 or 2010. 
(2) APPLICATION.— 
(A) IN GENERAL.—At the stated election of 
the applicant, an application for certification 
under section 48D(d)(2) of the Internal Revenue 
Code of 1986 for a credit under such section for 
the taxable year of the applicant which begins in 
2009 shall be considered to be an application for 
a grant under paragraph (1) for such taxable 
year. 
(B) TAXABLE YEARS BEGINNING IN 2010.— 
An application for a grant under paragraph (1) 
for a taxable year beginning in 2010 shall be 
submitted— 
(i) not earlier than the day after the 
last day of such taxable year, and 
(ii) not later than the due date (in-
cluding extensions) for filing the return of 
tax for such taxable year. 
(C) INFORMATION TO BE SUBMITTED.—An 
application for a grant under paragraph (1) 
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shall include such information and be in such 
form as the Secretary may require to state the 
amount of the credit allowable (but for the re-
ceipt of a grant under this subsection) under sec-
tion 48D for the taxable year for the qualified 
investment with respect to which such applica-
tion is made. 
(3) TIME FOR PAYMENT OF GRANT.— 
(A) IN
GENERAL.—The Secretary of the 
Treasury shall make payment of the amount of 
any grant under paragraph (1) during the 30- 
day period beginning on the later of— 
(i) the date of the application for such 
grant, or 
(ii) the date the qualified investment 
for which the grant is being made is made. 
(B) REGULATIONS.—In the case of invest-
ments of an ongoing nature, the Secretary shall 
issue regulations to determine the date on which 
a qualified investment shall be deemed to have 
been made for purposes of this paragraph. 
(4) QUALIFIED INVESTMENT.—For purposes of 
this subsection, the term ‘‘qualified investment’’ 
means a qualified investment that is certified under 
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