Keep America Competitive Tax Credit Act of 2006

109th CONGRESS
2d Session

S. 2558

To amend the Internal Revenue Code of 1986 to provide a tax credit to employers for employee catastrophic health care costs and to health insurance companies for insurer catastrophic health care costs, and for other purposes.

IN THE SENATE OF THE UNITED STATES

April 6, 2006

Ms. STABENOW introduced the following bill; which was read twice and referred to the Committee on Finance

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 `Keep America Competitive Tax Credit Act of 2006'.

SEC. 2. TAX CREDITS FOR CATASTROPHIC HEALTH CARE COSTS.

(a) In General- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45N. CATASTROPHIC HEALTH CARE COSTS.

`(a) General Rule- For purposes of section 38--

`(1) in the case of an eligible employer, the catastrophic health care employer credit determined under this section for any taxable year is an amount equal to 50 percent of the employee catastrophic health care costs paid or incurred by the taxpayer during the taxable year, and

`(2) in the case of an eligible health insurance issuer, the catastrophic health care pooling credit determined under this section for any taxable year is an amount equal to 50 percent of the insurer catastrophic health care costs paid or incurred by the taxpayer during the taxable year.

`(b) Catastrophic Health Care Costs- For purposes of this section--

`(1) EMPLOYEE CATASTROPHIC HEALTH CARE COSTS- The term `employee catastrophic health care costs' means, with respect to any taxable year, costs for medical care (as defined in section 9832(d)(3)) provided through a group health plan to qualified employees and retired qualified employees, and dependents thereof, but only with respect to such costs which exceed $50,000, on an individual basis.

`(2) INSURER CATASTROPHIC HEALTH CARE COSTS- The term `insurer catastrophic health care costs' means, with respect to any taxable year, claims for medical care (as defined in section 9832(d)(3)) provided under health insurance policies for customers in the large group market, small group market, and the individual market, but only with respect to such claims which exceed $50,000, on an individual basis.

`(3) INFLATION ADJUSTMENT-

`(A) IN GENERAL- In the case of a taxable year beginning after 2007, the $50,000 amount in paragraphs (1) and (2) shall be increased by an amount equal to--

`(i) such dollar amount, multiplied by

`(ii) 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 2006' for `calendar year 1992' in subparagraph (B) thereof.

`(B) ROUNDING- If any amount as adjusted under subparagraph (A) is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

`(c) Eligible Employer- For purposes of this section, the term `eligible employer' means, with respect to any taxable year, any employer which--

`(1) offered coverage for employee catastrophic health care costs during the entire preceding taxable year, and

`(2) make efforts to improve employees' health and wellness and to reduce costs through offering wellness plans, disease management, and other employee benefit programs.

`(d) Eligible Health Insurance Issuer- For purposes of this section, the term `eligible health insurance issuer' means, with respect to any taxable year, any health insurance issuer which--

`(1) provides wellness plans to customers, and

`(2) provides a mechanism acceptable to the Secretary for determining that such issuer has passed through the credit allowed under this section with respect to any insurance line to all policyholders of such insurance line.

`(e) Qualified Employee- For purposes of this section--

`(1) IN GENERAL- The term `qualified employee' means, with respect to any period, an employee of an employer if such employee is not enrolled for--

`(A) any benefits under title XVIII, XIX, or XXI of the Social Security Act, or

`(B) any other publicly-sponsored health insurance program,

which provides coverage for employee catastrophic health care costs.

`(2) TREATMENT OF CERTAIN EMPLOYEES- For purposes of paragraph (1), the term `employee'--

`(A) shall not include an employee within the meaning of section 401(c)(1), and

`(B) shall include a leased employee within the meaning of section 414(n).

`(f) Wellness Plan- For purposes of this section, the term `wellness plan' means any employee benefit program which helps to reduce or to manage chronic conditions, including heart disease, cancer, stroke, diabetes, chronic obstructive pulmonary disease, and asthma.

`(g) Health Plan Definitions- For purposes of this section--

`(1) GROUP HEALTH PLAN- The term `group health plan' has the meaning given such term by section 607(1) of the Employee Retirement Income Security Act of 1974, but does not include any plan which may be offered in the small group market or the individual market.

`(2) OTHER DEFINITIONS- The terms `health insurance issuer', `individual market', `large group market', and `small group market' have the meanings given such terms by section 2791 of the Public Health Service Act.

`(h) Portion of Credit Made Refundable-

`(1) IN GENERAL- The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of--

`(A) the credit which would be allowed under subsection (a)(1) without regard to this subsection and the limitation under section 38(c), or

`(B) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection) would increase if the limitation imposed by section 38(c) for any taxable year were increased by the amount of employer payroll taxes imposed on the taxpayer during the calendar year in which the taxable year begins.

The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of the credit otherwise allowable under subsection (a) without regard to section 38(c).

`(2) EMPLOYER PAYROLL TAXES- For purposes of this subsection--

`(A) IN GENERAL- The term `employer payroll taxes' means the taxes imposed by--

`(i) section 3111(b), and

`(ii) sections 3211(a) and 3221(a) (determined at a rate equal to the rate under section 3111(b)).

`(B) SPECIAL RULE- A rule similar to the rule of section 24(d)(2)(C) shall apply for purposes of subparagraph (A).

`(i) Certain Rules Made Applicable- For purposes of this section, rules similar to the rules of section 52 shall apply.'.

(b) Credit Treated as Business Credit- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) is amended by striking `and' at the end of paragraph (29), by striking the period at the end of paragraph (30) and inserting `, plus', and by adding at the end the following new paragraph:

`(31) the credit determined under section 45N(a)(2).'.

(c) Credit Allowed Against the Alternative Minimum Tax- Section 38(c)(4)(B) of the Internal Revenue Code of 1986 (defining specified credits) is amended by striking the period at the end of clause (ii)(II) and inserting `, and', and by adding at the end the following new clause:

`(iii) the credit determined under section 45N(a)(2).'.

(d) Conforming Amendments-

(1) The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 45N. Catastrophic health care costs.'.

(2) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `, or from section 45N(a)(1) of such Code'.

(e) Effective Date- The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2006.

(f) Continuing Evaluations and Reports to Congress-

(1) INITIAL EVALUATION- Not later than 1 year after the first taxable year in which a credit under section 45N of the Internal Revenue Code of 1986 (as added by this section) is allowed, the Secretary of Labor shall review and make recommendations to Congress on--

(A) problems that employers and insurers are having in accessing such credit,

(B) how to expand the availability of such credit to such employers and insurers, and

Such review shall include how to make the credit more accessible to employers with a high ratio of retirees to active employees, with a high number of retirees not eligible for Medicare, with a history of providing retiree health care coverage, and with a history of employing wellness and similar health benefits to reduce chronic conditions.

(2) CONTINUING EVALUATION- Not later than 4 years and 8 years after the date of the report required under paragraph (1), the Secretaries of Labor and Health and Human Services shall evaluate and report to Congress on the effect of the credit under section 45N of such Code and include in such report consideration of the following:

(A) Has the availability of such credit increased health insurance coverage?

(B) Has such availability made health insurance more affordable?

(D) Has such availability had any effect on reducing chronic conditions?

(E) What effect has such credit had on State insurance markets and State high risk pools.

END