HR 5843 - COBRA Enhancement and Healthcare Relief Act of 2006

109th CONGRESS
2d Session

H. R. 5843

To amend the COBRA continuation Act provisions to extend COBRA continuation coverage from 18 months to 36 months, to provide a tax credit for the cost of such coverage, and to reduce the income tax rate reduction for families with incomes of more than a million dollars.

IN THE HOUSE OF REPRESENTATIVES

July 19, 2006

Mr. RYAN of Ohio (for himself and Mr. STRICKLAND) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Education and the Workforce, Energy and Commerce, and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

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 `COBRA Enhancement and Healthcare Relief Act of 2006'.

SEC. 2. EXTENSION OF COBRA CONTINUATION COVERAGE.

(a) Under ERISA- Section 602(2)(A) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1162(2)(A)) is amended--

(1) by amending clause (i) to read as follows:

`(i) GENERAL RULE- In the case of a qualifying event not described in section 603(6), the date that is 36 months after the date of the qualifying event.';

(2) by striking clauses (ii), (iv), and (v) and by striking the sentence beginning `In the case of a qualified beneficiary'; and

(3) by redesignating clause (iii) as clause (ii).

(b) Under PHSA- Section 2202(2)(A) of the Public Health Service Act (42 U.S.C. 300bb-2(2)(A)) is amended to read as follows:

`(A) MAXIMUM REQUIRED PERIOD- The date that is 36 months after the date of the qualifying event.'.

(1) by amending subclause (I) to read as follows:

`(I) GENERAL RULE- In the case of a qualifying event not described in paragraph (3)(F), the date that is 36 months after the date of the qualifying event.';

(2) by striking subclauses (II), (IV), and (V) and by striking the sentence beginning `In the case of a qualified beneficiary'; and

(3) by redesignating subclause (III) as subclause (II).

(d) Under FEHBP- Section 8905a(e) of title 5, United States Code, is amended--

(1) in paragraph (1)(A), by striking `18 months' and inserting `36 months';

(2) in paragraph (1)(C), by striking `24 months' and inserting `36 months'; and

(3) in paragraph (2)(C), by striking `18-month' and inserting `36-month'.

(e) Effective Date- The amendments made by this section shall apply to qualifying events occurring on or after the date that is 18 months before the date of the enactment of this Act.

SEC. 3. TAX CREDIT FOR COST OF COBRA CONTINUATION COVERAGE.

(a) In General- Subpart C 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. COBRA CONTINUATION COVERAGE.

`(a) In General- In the case of an individual, there shall be allowed as a credit against the tax imposed by subtitle A an amount equal to the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under COBRA continuation coverage for months beginning in the taxable year.

`(b) Limitations-

`(1) IN GENERAL- The amount allowable as a credit under subsection (a) for the taxable year shall not exceed the sum of the monthly limitations for months during such taxable year.

`(2) MONTHLY LIMITATION- The monthly limitation for any month is the product of the credit percentage for such month multiplied by the amounts paid by the taxpayer for such month which may be taken into account under subsection (a).

`(3) CREDIT PERCENTAGE- The credit percentage for any month in any period of COBRA continuation coverage is--

`(A) 100 percent, in the case of the first 12 months of such period,

`(B) 50 percent, in the case of the first 12 months after the months to which subparagraph (A) applies, and

`(C) zero, in the case of any month thereafter.

`(c) Qualifying Family Member- For purposes of this section, the term `qualifying family member' means the taxpayer's spouse and any dependent of the taxpayer.

`(d) COBRA Continuation Coverage- For purposes of this section, the term `COBRA continuation coverage' means coverage under a COBRA continuation provision (as defined in section 9832(d)(1)).

`(e) Other Specified Coverage- Amounts paid for COBRA continuation coverage of any individual for any month shall not be taken into account under subsection (a) if such individual has other specified coverage for such month (within the meaning of section 35(f)).

`(f) Special Rules-

`(1) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT- With respect to any taxable year, the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a) shall be reduced (but not below zero) by the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in such taxable year.

`(2) COORDINATION WITH OTHER DEDUCTIONS- Amounts taken into account under subsection (a) shall not be taken into account in determining any deduction allowed under section 162(l) or 213.

`(3) COORDINATION WITH OTHER HEALTH INSURANCE COSTS CREDIT- Amounts taken into account under subsection (a) with respect to coverage for any month shall not be taken into account in determining the credit allowed under section 35. Any taxpayer who would (but for the preceding sentence) be allowed a credit under section 35 may elect not to have this section apply with respect to amounts paid for coverage for any month during the taxable year.

`(4) MEDICAL AND HEALTH SAVINGS ACCOUNTS- Amounts distributed from an Archer MSA (as defined in section 220(d)) or from a health savings account (as defined in section 223(d)) shall not be taken into account under subsection (a).

`(5) 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.

`(6) SEPARATE RETURNS- The spouse of the taxpayer shall not be treated as a qualifying family member for purposes of this section if the taxpayer files a separate return for the taxable year.

`(7) INSURANCE WHICH COVERS OTHER INDIVIDUALS - For purposes of this section, rules similar to the rules of section 213(d)(6) shall apply with respect to any contract for COBRA continuation coverage under which amounts are payable for coverage of an individual other than the taxpayer and qualifying family members.

`(8) TREATMENT OF PAYMENTS- For purposes of this section--

`(A) PAYMENTS BY SECRETARY- Payments made by the Secretary on behalf of any individual under section 7529 (relating to advance payment of credit for cost of COBRA continuation coverage) shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.

`(B) PAYMENTS BY TAXPAYER- Payments made by the taxpayer for coverage months shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.

`(9) REGULATIONS- The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, section 6050U, and section 7529.'.

(b) Advance Payment of Credit as Premium Payment for COBRA Continuation Coverage- Chapter 77 of the Internal Revenue Code of 1986 (relating to miscellaneous provisions) is amended by adding at the end the following:

`SEC. 7529. ADVANCE PAYMENT OF CREDIT AS PREMIUM PAYMENT FOR COBRA CONTINUATION COVERAGE.

`(a) In General- Not later than 90 days after the date of the enactment of this Act, the Secretary shall establish a program for making payments to providers of COBRA continuation coverage (as defined in section 36(d)) on behalf of taxpayers eligible for the credit under section 36.

`(b) Limitations-

`(1) TERMINATION AFTER FIRST 12 MONTHS OF COVERAGE- The Secretary shall not make any payment under subsection (a) with respect to any individual for COBRA continuation coverage of such individual for any month after the first 12 months of any period of COBRA continuation coverage.

`(2) DOLLAR LIMITATION- The Secretary may make payments under subsection (a) only to the extent that the such payment does not exceed 100 percent of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under COBRA continuation coverage for the months to which such payment relates.'.

(1) IN GENERAL- Subsection (l) of section 6103 of such Code is amended by adding at the end the following new paragraph:

`(21) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF ADVANCE PAYMENT OF CREDIT AS PREMIUM PAYMENT FOR COBRA CONTINUATION COVERAGE- The Secretary may, on behalf of taxpayers eligible for the credit under section 36, disclose to a provider of COBRA continuation coverage (as defined in section 36(d)), and persons acting on behalf of such provider, return information with respect to any such taxpayer only to the extent necessary (as prescribed by regulations issued by the Secretary) to carry out the program established by section 7529 (relating to advance payment of credit as premium payment for COBRA continuation coverage).'.

(2) CONFIDENTIALITY OF INFORMATION- Paragraph (3) of section 6103(a) of such Code is amended by striking `or (20)' and inserting `(20), or (21)'.

(3) UNAUTHORIZED DISCLOSURE- Paragraph (2) of section 7213(a) of such Code is amended by striking `or (20)' and inserting `(20), or (21)'.

(d) 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 CREDIT FOR COBRA CONTINUATION COVERAGE.

`(a) Requirement of Reporting- Every person who is entitled to receive payments for any month of any calendar year under section 7529 (relating to advance payment of credit as premium payment for COBRA continuation coverage) with respect to any individual shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to each such individual.

`(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

`(2) contains--

`(A) the name, address, and TIN of each individual referred to in subsection (a),

`(B) the number of months for which amounts were entitled to be received with respect to such individual under section 7529 (relating to advance payment of credit as premium payment for COBRA continuation coverage),

`(C) the amount entitled to be received for each such month, and

`(D) such other information as the Secretary may prescribe.

`(c) 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 to be set forth in such return a written statement showing--

`(1) the name and address of the person required to make such return and the phone number of the information contact for such person, and

`(2) the information required to be shown on the return with respect to such individual.

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.'.

(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 credit for COBRA continuation coverage),'.

(B) Paragraph (2) of section 6724(d) of such Code is amended by striking `or' at the end of subparagraph (AA), by striking the period at the end of subparagraph (BB) and inserting `, or', and by adding after subparagraph (BB) the following new subparagraph:

`(CC) section 6050U (relating to returns relating to credit for COBRA continuation coverage).'.

(e) Conforming Amendments-

(1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting `or section 36' after `section 35'.

(2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating the item relating to section 36 as an item relating to section 37 and by inserting after the item relating to section 35 the following new item:

`Sec. 36. COBRA continuation coverage.'.

(3) The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at the end the following new item:

`Sec. 6050U. Returns relating to credit for COBRA continuation coverage.'.

(4) 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 credit as premium payment for COBRA continuation coverage.'.

(f) Effective Date- The amendments made by this section shall apply to amounts paid for coverage months beginning after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 4. REDUCTION IN BENEFIT OF RATE REDUCTION FOR FAMILIES WITH INCOMES OVER $1,000,000.

(a) General Rule- Section 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

`(j) Reduction in Benefit of Rate Reduction for Families With Incomes Over $1,000,000-

`(1) IN GENERAL- If the adjusted gross income of a taxpayer exceeds the threshold amount, the tax imposed by this section (determined without regard to this subsection) shall be increased by an amount equal to the applicable percentage of so much of the adjusted gross income as exceeds the threshold amount.

`(2) THRESHOLD AMOUNTS- For purposes of this subsection, the term `threshold amount' means--

`(A) $1,000,000 in the case of a joint return, and

`(B) $500,000 in the case of any other return.

`(3) APPLICABLE PERCENTAGE- For purposes of this subsection, the term `applicable percentage' means, with respect to any taxable year, such percentage as is estimated by the Secretary to result in an increase in the revenues to the Treasury for such taxable year which is equal to the decrease (if any) in the revenues to the Treasury that the Secretary estimates results from the application of sections 36 and 7529 for such taxable year.

`(4) TAX NOT TO APPLY TO ESTATES AND TRUSTS- This subsection shall not apply to an estate or trust.

`(5) SPECIAL RULE- For purposes of section 55, the amount of the regular tax shall be determined without regard to this subsection.'.

(b) Effective Date- The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

(c) Application of EGTRRA Sunset- The amendment made by this section shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 to the same extent and in the same manner as section 101 of such Act.

(d) Section 15 Not to Apply- The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

END