109th CONGRESS
1st Session
H. R. 4219
To amend the Internal Revenue Code of 1986 to allow individuals a
refundable credit against income tax for the purchase of private health insurance.
IN THE HOUSE OF REPRESENTATIVES
November 3, 2005
Mr. MCHUGH introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow individuals a
refundable credit against income tax for the purchase of private health insurance.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Health Insurance Tax Relief Act of 2005'.
SEC. 2. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.
(a) In General- Subpart C of part IV of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 (relating to refundable credits) is amended by redesignating
section 36 as section 37 and by inserting after section 35 the following new
section:
`SEC. 36. HEALTH INSURANCE COSTS.
`(a) In General- In the case of an individual, there shall be allowed as a
credit against the tax imposed by this chapter an amount equal to the amount
paid during the taxable year for qualified health insurance for the taxpayer,
his spouse, and dependents.
`(1) IN GENERAL- The amount allowed as a credit under subsection (a) to
the taxpayer for the taxable year shall not exceed the sum of the monthly
limitations for coverage months during such taxable year for each individual
referred to in subsection (a) for whom the taxpayer paid during the taxable
year any amount for coverage under qualified health insurance.
`(A) REDUCTION BASED ON ADJUSTED GROSS INCOME- The amount determined under
paragraph (1) for any taxable year shall be reduced (but not below zero)
by the amount determined under subparagraph (B).
`(B) AMOUNT OF REDUCTION- The amount determined under this subparagraph
with respect to any amount determined under paragraph (1) shall be the
amount which bears the same ratio to such amount determined under paragraph
(1) as--
`(I) the taxpayer's adjusted gross income for such taxable year, over
`(II) the applicable dollar amount, bears to
The rules of subparagraphs (B) and (C) of section 219(g)(2) shall apply
to any reduction under this subparagraph.
`(C) DEFINITIONS- For purposes of this paragraph--
`(i) adjusted gross income shall be determined in the same manner as
under section 408A(c)(3)(C)(i), and
`(ii) the applicable dollar amount is--
`(I) in the case of a taxpayer filing a joint return, $105,000,
`(II) in the case of any other taxpayer (other than a married individual
filing a separate return), $65,000, and
`(III) in the case of a married individual filing a separate return,
zero.
`(A) IN GENERAL- The monthly limitation for an individual for each coverage
month of such individual during the taxable year is the amount equal to
1/12 of--
`(i) the base amount, plus
`(ii) 50 percent of the amount paid in excess of the base amount.
`(B) BASE AMOUNT- For purposes of this paragraph, the base amount is--
`(i) $1,000 if such individual is the taxpayer,
`(I) such individual is the spouse of the taxpayer,
`(II) the taxpayer and such spouse are married as of the first day
of such month, and
`(III) the taxpayer files a joint return for the taxable year, and
`(iii) $500 if such individual is an individual for whom a deduction
under section 151(c) is allowable to the taxpayer for such taxable year.
`(C) LIMITATION TO 2 DEPENDENTS- Not more than 2 individuals may be taken
into account by the taxpayer under subparagraph (B)(iii).
`(D) SPECIAL RULE FOR MARRIED INDIVIDUALS- In the case of an individual--
`(i) who is married (within the meaning of section 7703) as of the close
of the taxable year but does not file a joint return for such year,
and
`(ii) who does not live apart from such individual's spouse at all times
during the taxable year,
the limitation imposed by subparagraph (C) shall be divided equally between
the individual and the individual's spouse unless they agree on a different
division.
`(4) COVERAGE MONTH- For purposes of this subsection--
`(A) IN GENERAL- The term `coverage month' means, with respect to an individual,
any month if--
`(i) as of the first day of such month such individual is covered by
qualified health insurance, and
`(ii) the premium for coverage under such insurance for such month is
paid by the taxpayer.
`(B) EMPLOYER-SUBSIDIZED COVERAGE-
`(i) IN GENERAL- Such term shall not include any month for which such
individual participates in any subsidized health plan (within the meaning
of section 162(l)(2)) maintained by any employer of the taxpayer or
of the spouse of the taxpayer.
`(ii) PREMIUMS TO NONSUBSIDIZED PLANS- If an employer of the taxpayer
or the spouse of the taxpayer maintains a health plan which is not a
subsidized health plan (as so defined) and which constitutes qualified
health insurance, employee contributions to the plan shall be treated
as amounts paid for qualified health insurance.
`(C) CAFETERIA PLAN AND FLEXIBLE SPENDING ACCOUNT BENEFICIARIES- Such
term shall not include any month during a taxable year if any amount is
not includible in the gross income of the taxpayer for such year under
section 106 with respect to--
`(i) a benefit chosen under a cafeteria plan (as defined in section
125(d)), or
`(ii) a benefit provided under a flexible spending or similar arrangement.
`(D) MEDICARE AND MEDICAID- Such term shall not include any month with
respect to an individual if, as of the first day of such month, such individual--
`(i) is entitled to any benefits under title XVIII of the Social Security
Act, or
`(ii) is a participant in the program under title XIX or XXI of such
Act.
`(E) CERTAIN OTHER COVERAGE- Such term shall not include any month during
a taxable year with respect to an individual if, at any time during such
year, any benefit is provided to such individual under--
`(i) chapter 89 of title 5, United States Code,
`(ii) chapter 55 of title 10, United States Code,
`(iii) chapter 17 of title 38, United States Code, or
`(iv) any medical care program under the Indian Health Care Improvement
Act.
`(F) PRISONERS- Such term shall not include any month with respect to
an individual if, as of the first day of such month, such individual is
imprisoned under Federal, State, or local authority.
`(G) INSUFFICIENT PRESENCE IN UNITED STATES- Such term shall not include
any month during a taxable year with respect to an individual if such
individual is present in the United States on fewer than 183 days during
such year (determined in accordance with section 7701(b)(7)).
`(5) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS- In the case of a taxpayer who is eligible to deduct any amount
under section 162(l) for the taxable year, this section shall apply only
if the taxpayer elects not to claim any amount as a deduction under such
section for such year.
`(c) Reduced Credit for Participants in Health Plans of Employers- In the
case of any individual who participates in a subsidized health plan (within
the meaning of section 162(l)(2)) maintained by any employer of the taxpayer
or of the spouse of the taxpayer (not including a cafeteria plan (as defined
in section 125(d)), there shall be allowed to the taxpayer one-quarter of
the credit that would be allowed to the taxpayer under subsection (a) (determined
without regard to the participation in the health plan) if the monthly limitation
were determined without the addition of the amount described in subsection
(b)(3)(A)(ii).
`(d) Qualified Health Insurance- For purposes of this section--
`(1) IN GENERAL- The term `qualified health insurance' means insurance which
constitutes medical care as defined in section 213(d) without regard to--
`(A) paragraph (1)(C) thereof, and
`(B) so much of paragraph (1)(D) thereof as relates to qualified long-term
care insurance contracts.
`(2) EXCLUSION OF CERTAIN OTHER CONTRACTS- Such term shall not include insurance
if a substantial portion of its benefits are excepted benefits (as defined
in section 9832(c)).
`(e) Medical and Health Savings Account Contributions-
`(1) IN GENERAL- If a deduction would (but for paragraph (2)) be allowed
under section 220 or 223 to the taxpayer for a payment for the taxable year
to the medical or health savings account of an individual, subsection (a)
shall be applied by treating such payment as a payment for qualified health
insurance for such individual.
`(2) DENIAL OF DOUBLE BENEFIT- No deduction shall be allowed under section
220 or 223 for that portion of the payments otherwise allowable as a deduction
under section 220 or 223 (as the case may be) for the taxable year which
is equal to the amount of credit allowed for such taxable year by reason
of this subsection.
`(1) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount which would
(but for this paragraph) be taken into account by the taxpayer under section
213 for the taxable year shall be reduced by the credit (if any) allowed
by this section to the taxpayer for such year.
`(2) DENIAL OF CREDIT TO DEPENDENTS- No credit shall be allowed under this
section to any individual with respect to whom a deduction under section
151 is allowable to another taxpayer for a taxable year beginning in the
calendar year in which such individual's taxable year begins.
`(3) DENIAL OF DOUBLE BENEFIT- No credit shall be allowed under subsection
(a) if the credit under section 35 is allowed and no credit shall be allowed
under 35 if a credit is allowed under this section.
`(4) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer
for any taxable year if such taxpayer elects to have this section not apply
for such taxable year.
`(5) INFLATION ADJUSTMENT- In the case of any taxable year beginning in
a calendar year after 2005, each dollar amount contained in subsection (b)(3)(B)
shall be increased by an amount equal to--
`(A) such dollar amount, multiplied by
`(B) the cost-of-living adjustment determined under section 1(f)(3) for
the calendar year in which the taxable year begins, determined by substituting
`calendar year 2004' for `calendar year 1992' in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be rounded to
the nearest multiple of $50 ($25 in the case of the dollar amount in subsection
(b)(3)(B)(iii)).'.
(b) Information Reporting-
(1) IN GENERAL- Subpart B of part III of subchapter A of chapter 61 of such
Code (relating to information concerning transactions with other persons)
is amended by inserting after section 6050T the following new section:
`SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH INSURANCE.
`(a) In General- Any person who, in connection with a trade or business conducted
by such person, receives payments during any calendar year from any individual
for coverage of such individual or any other individual under creditable health
insurance, shall make the return described in subsection (b) (at such time
as the Secretary may by regulations prescribe) with respect to each individual
from whom such payments were received.
`(b) Form and Manner of Returns- A return is described in this subsection
if such return--
`(1) is in such form as the Secretary may prescribe, and
`(A) the name, address, and TIN of the individual from whom payments described
in subsection (a) were received,
`(B) the name, address, and TIN of each individual who was provided by
such person with coverage under creditable health insurance by reason
of such payments and the period of such coverage, and
`(C) such other information as the Secretary may reasonably prescribe.
`(c) Creditable Health Insurance- For purposes of this section, the term `creditable
health insurance' means qualified health insurance (as defined in section
36(d)) other than--
`(1) insurance under a subsidized group health plan maintained by an employer,
or
`(2) to the extent provided in regulations prescribed by the Secretary,
any other insurance covering an individual if no credit is allowable under
section 36 with respect to such coverage.
`(d) Statements to Be Furnished to Individuals With Respect to Whom Information
Is Required- Every person required to make a return under subsection (a) shall
furnish to each individual whose name is required under subsection (b)(2)(A)
to be set forth in such return a written statement showing--
`(1) the aggregate amount of payments described in subsection (a) received
by the person required to make such return from the individual to whom the
statement is required to be furnished, and
`(2) the information required under subsection (b)(2)(B) with respect to
such payments.
The written statement required under the preceding sentence shall be furnished
on or before January 31 of the year following the calendar year for which
the return under subsection (a) is required to be made.
`(e) Returns Which Would Be Required to Be Made by 2 or More Persons- Except
to the extent provided in regulations prescribed by the Secretary, in the
case of any amount received by any person on behalf of another person, only
the person first receiving such amount shall be required to make the return
under subsection (a).'.
(2) ASSESSABLE PENALTIES-
(A) Subparagraph (B) of section 6724(d)(1) of such Code (relating to definitions)
is amended by redesignating clauses (xiii) through (xviii) as clauses
(xiv) through (xix), respectively, and by inserting after clause (xii)
the following new clause:
`(xiii) section 6050U (relating to returns relating to payments for
qualified health insurance),'.
(B) Paragraph (2) of section 6724(d) of such Code is amended by striking
`or' at the end of the next to last subparagraph, by striking the period
at the end of the last subparagraph and inserting `, or', and by adding
at the end the following new subparagraph:
`(CC) section 6050U(d) (relating to returns relating to payments for qualified
health insurance).'.
(3) CLERICAL AMENDMENT- The table of sections for subpart B of part III
of subchapter A of chapter 61 of such Code is amended by inserting after
the item relating to section 6050T the following new item:
`Sec. 6050U. Returns relating to payments for qualified health insurance.'.
(c) Conforming Amendments-
(1) Paragraph (2) of section 1324(b) of title 31, United States Code, is
amended by inserting before the period `, or from section 36 of such Code'.
(2) The table of sections for subpart C of part IV of subchapter A of chapter
1 of such Code is amended by redesignating the item relating to section
36 as an item relating to section 37 and by inserting after section 35 the
following new item:
`Sec. 36. Health insurance costs.'.
(d) Effective Date- The amendments made by this section shall apply to taxable
years beginning after December 31, 2004.
SEC. 3. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH INSURANCE.
(a) In General- Chapter 77 of the Internal Revenue Code of 1986 (relating
to miscellaneous provisions) is amended by adding at the end the following
new section:
`SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS OF
QUALIFIED HEALTH INSURANCE.
`(a) General Rule- In the case of an eligible individual, the Secretary shall
make payments to the provider of such individual's qualified health insurance
equal to such individual's qualified health insurance credit advance amount
with respect to such provider.
`(b) Eligible Individual- For purposes of this section, the term `eligible
individual' means any individual--
`(1) who purchases qualified health insurance (as defined in section 36(d)),
and
`(2) for whom a qualified health insurance credit eligibility certificate
is in effect.
`(c) Qualified Health Insurance Credit Eligibility Certificate- For purposes
of this section, a qualified health insurance credit eligibility certificate
is a statement furnished by an individual to the Secretary which--
`(1) certifies that the individual will be eligible to receive the credit
provided by section 36 for the taxable year,
`(2) estimates the amount of such credit for such taxable year, and
`(3) provides such other information as the Secretary may require for purposes
of this section.
`(d) Qualified Health Insurance Credit Advance Amount- For purposes of this
section, the term `qualified health insurance credit advance amount' means,
with respect to any provider of qualified health insurance, the Secretary's
estimate of the amount of credit allowable under section 36 to the individual
for the taxable year which is attributable to the insurance provided to the
individual by such provider.
`(e) Regulations- The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.'.
(b) Clerical Amendment- The table of sections for chapter 77 of such Code
is amended by adding at the end the following new item:
`Sec. 7529. Advance payment of health insurance credit for purchasers of
qualified health insurance.'.
(c) Effective Date- The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
END
