109th CONGRESS
1st Session
S. 978
To amend the Internal Revenue Code of 1986 to provide tax incentives
for the purchase of qualified health insurance, and for other purposes.
IN THE SENATE OF THE UNITED STATES
May 9, 2005
Mr. SANTORUM (for himself and Mr. DEMINT) introduced the following bill;
which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide tax incentives
for the purchase of qualified health insurance, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the `Healthcare Tax Relief for the
Uninsured Act of 2005'.
(b) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Deduction of premiums for high deductible health plans.
Sec. 3. Refundable credit for contributions to health savings accounts of
small business employees.
Sec. 4. Refundable health insurance costs credit.
Sec. 5. Advance payment of credit to issuers of qualified health insurance.
SEC. 2. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.
(a) In General- Part VII of subchapter B of chapter 1 of the Internal Revenue
Code of 1986 (relating to additional itemized deductions for individuals)
is amended by redesignating section 224 as section 225 and by inserting after
section 223 the following new section:
`SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.
`(a) Deduction Allowed- In the case of an individual, there shall be allowed
as a deduction for the taxable year the aggregate amount paid by such individual
as premiums under a high deductible health plan with respect to months during
such year for which such individual is an eligible individual with respect
to such health plan.
`(b) Definitions- For purposes of this section--
`(1) ELIGIBLE INDIVIDUAL- The term `eligible individual' has the meaning
given such term by section 223(c)(1).
`(2) HIGH DEDUCTIBLE HEALTH PLAN- The term `high deductible health plan'
has the meaning given such term by section 223(c)(2).
`(1) DEDUCTION ALLOWABLE FOR ONLY 1 PLAN- For purposes of this section,
in the case of an individual covered by more than 1 high deductible health
plan for any month, the individual may only take into account amounts paid
for 1 of such plans for such month.
`(2) GROUP HEALTH PLAN COVERAGE-
`(A) IN GENERAL- No deduction shall be allowed to an individual under
subsection (a) for any amount paid for coverage under a high deductible
health plan for a month if that individual participates in any coverage
under a group health plan (within the meaning of section 5000 without
regard to section 5000(d)).
`(B) EXCEPTION FOR CERTAIN PERMITTED COVERAGE- Subparagraph (A) shall
not apply to an individual if the individual's only coverage under a group
health plan for a month is coverage described in clause (i) or (ii) of
section 223(c)(1)(B).
`(3) CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNT REQUIRED- A deduction shall
not be allowed under subsection (a) for a taxable year with respect to such
individual if a deduction is not allowable under section 223 with respect
to such individual for the taxable year.
`(4) MEDICAL AND HEALTH SAVINGS ACCOUNTS- Subsection (a) shall not apply
with respect to any amount which is paid or distributed out of an Archer
MSA or a health savings account which is not included in gross income under
section 220(f) or 223(f), as the case may be.
`(5) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE OF SELF-EMPLOYED INDIVIDUALS-
The amount taken into account by the taxpayer in computing the deduction
under section 162(l) shall not be taken into account under this section.
`(6) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount taken into
account by the taxpayer in computing the deduction under this section shall
not be taken into account under section 213.'.
(b) Deduction Allowed Whether or Not Individual Itemizes Other Deductions-
Subsection (a) of section 62 of such Code is amended by inserting before the
last sentence at the end the following new paragraph:
`(21) PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS- The deduction allowed by
section 224.'.
(c) Coordination With Section 35 Health Insurance Costs Credit- Section 35(g)(2)
of such Code is amended by striking `or 213' and inserting `, 213, or 224'.
(d) Clerical Amendment- The table of sections for part VII of subchapter B
of chapter 1 of such Code is amended by redesignating the item relating to
section 224 as an item relating to section 225 and by inserting before such
item the following new item:
`Sec. 224. Premiums for high deductible health plans.'.
(e) Effective Date- The amendments made by this section shall apply to taxable
years beginning after December 31, 2005.
SEC. 3. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS OF
SMALL BUSINESS EMPLOYEES.
(a) In General- Subpart C of part IV of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 is amended by redesignating section 36 as section 37
and by inserting after section 35 the following new section:
`SEC. 36. SMALL EMPLOYER CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.
`(a) General Rule- In the case of an eligible employer, there shall be allowed
as a credit against the tax imposed by this subtitle an amount equal to the
lesser of--
`(1) the amount contributed by the employer to any qualified health savings
account of any employee who is an eligible individual (as defined in section
223(c)(1)) during the taxable year and who is covered by a high deductible
health plan maintained by the employer, or
`(2) an amount equal to the product of--
`(A) $200 ($500 if coverage for all months described in subparagraph (B)(i)
is family coverage), and
`(i) the numerator of which is the number of months that the employee
was covered under a high deductible health plan maintained by the employer,
and
`(ii) the denominator of which is the number of months in the taxable
year.
`(b) Eligible Employer- For purposes of this section--
`(1) IN GENERAL- The term `eligible employer' means, with respect to any
taxable year, an employer which--
`(A) is a small employer, and
`(B) maintains a high deductible health plan under which all employees
of the employer reasonably expected to receive at least $5,000 of compensation
during the taxable year are eligible to participate.
An employer may exclude from consideration under subparagraph (B) employees
who are covered by an agreement described in section 410(b)(3)(A) if there
is evidence that health benefits were the subject of good faith bargaining.
`(2) EXCEPTION FOR GOVERNMENTAL AND TAX-EXEMPT EMPLOYERS- The term `eligible
employer' shall not include the Federal Government or any employer described
in section 457(e)(1).
`(A) IN GENERAL- The term `small employer' means, with respect to any
calendar year, any employer if such employer employed an average of 100
or fewer employees on business days during either of the 2 preceding calendar
years. For purposes of the preceding sentence, a preceding calendar year
may be taken into account only if the employer was in existence throughout
such year.
`(B) EMPLOYERS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of an employer
which was not in existence throughout the 1st preceding calendar year,
the determination under subparagraph (A) shall be based on the average
number of employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
`(C) SPECIAL RULE- Any reference in this paragraph to an employer shall
include a reference to any predecessor of such employer.
`(c) Definitions- For purposes of this section--
`(1) HIGH DEDUCTIBLE HEALTH PLAN- The term `high deductible health plan'
has the meaning given such term by section 223(c)(2).
`(2) QUALIFIED HEALTH SAVINGS ACCOUNT-
`(A) IN GENERAL- The term `qualified health savings account' means a health
savings account (as defined in section 223(d))--
`(i) which is designated (in such form as the Secretary may prescribe)
as a qualified account for purposes of this section or section 36A,
`(ii) which may not include any amount other than contributions described
in subsection (a) or section 36A(e), and earnings on such contributions,
and
`(iii) with respect to which section 223(f)(4)(A) is applied by substituting
`100 percent' for `10 percent'.
`(B) SUBACCOUNTS AND SEPARATE ACCOUNTING- The Secretary may prescribe
rules under which a subaccount within a health savings account, or separate
accounting with respect to contributions and earnings described in subparagraph
(A)(ii), may be treated in the same manner as a qualified health savings
account for purposes of this section and section 36A.
`(C) ROLLOVERS- A contribution of a distribution from a qualified health
savings account to another health savings account shall be treated as
a rollover contribution for purposes of section 223(f)(5) only if the
other account is a qualified health savings account.
`(d) Special Rules- For purposes of this section--
`(1) AGGREGATION RULES- All persons treated as a single employer under subsection
(a) or (b) of section 52, or subsection (n) or (o) of section 414, shall
be treated as one person.
`(2) DISALLOWANCE OF DEDUCTION- No deduction shall be allowed for that portion
of contributions to any health savings accounts for the taxable year which
is equal to the credit determined under subsection (a).
`(3) 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.'.
(b) 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 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 before the item relating
to section 37 the following new item:
`Sec. 36. Small employer contributions to health savings accounts.'.
(c) Effective Date- The amendments made by this section shall apply to contributions
made in taxable years beginning after December 31, 2005.
SEC. 4. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.
(1) IN GENERAL- Subpart C of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to refundable personal credits)
is amended by inserting after section 36 the following new section:
`SEC. 36A. HEALTH INSURANCE COSTS FOR UNINSURED INDIVIDUALS.
`(a) Allowance of Credit- In the case of an individual, there shall be allowed
as a credit against the tax imposed by this subtitle for the taxable year
an amount equal to the amount paid by the taxpayer during such taxable year
for qualified health insurance for the taxpayer and the taxpayer's 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 lesser of--
`(A) 90 percent of the sum of the amounts paid by the taxpayer for qualified
health insurance for each individual referred to in subsection (a) for
coverage months of such individual during the taxable year, or
`(A) IN GENERAL- For purposes of paragraph (1), amounts paid by the taxpayer
for qualified health insurance for an individual for any coverage month
of such individual during the taxable year shall not be taken into account
to the extent such amounts exceed the amount equal to 1/12 of--
`(i) $1,111 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) $1,111 if such individual has attained the age of 24 as of the
close of the taxable year and is a dependent of the taxpayer for such
taxable year,
`(iv) one-half of the amount described in clause (i) if such individual
has not attained the age of 24 as of the close of the taxable year and
is a dependent of the taxpayer for such taxable year.
`(B) LIMITATION TO 2 YOUNG DEPENDENTS- If there are more than 2 individuals
described in subparagraph (A)(iv) with respect to the taxpayer for any
coverage month, the aggregate amounts paid by the taxpayer for qualified
health insurance for such individuals which may be taken into account
under paragraph (1) shall not exceed 1/12 of the dollar amount in effect
under subparagraph (A)(i) for the coverage month.
`(C) SPECIAL RULE FOR MARRIED INDIVIDUALS- In the case of a taxpayer--
`(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 taxpayer's spouse at all times
during the taxable year,
any dollar limitation imposed under this paragraph on amounts paid for
qualified health insurance for individuals described in subparagraph (A)(iv)
shall be divided equally between the taxpayer and the taxpayer's spouse
unless they agree on a different division.
`(3) INCOME PHASEOUT OF CREDIT PERCENTAGE FOR ONE-PERSON COVERAGE-
`(A) PHASEOUT FOR UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING SPOUSES
AND HEADS OF HOUSEHOLDS)- In the case of an individual (other than a surviving
spouse, the head of a household, or a married individual) with one-person
coverage, if such individual has modified adjusted gross income--
`(i) in excess of $15,000 for a taxable year but not in excess of $20,000,
the 90 percent under paragraph (1)(B) shall be reduced by the number
of percentage points which bears the same ratio to 40 percentage points
as--
`(I) the excess of modified adjusted gross income in excess of $15,000,
bears to
`(ii) in excess of $20,000 for a taxable year, the 90 percent under
paragraph (1)(B) shall be reduced by the sum of 40 percentage points
plus the number of percentage points which bears the same ratio to 50
percentage points as--
`(I) the excess of modified adjusted gross income in excess of $20,000,
bears to
`(B) PHASEOUT FOR OTHER INDIVIDUALS- In the case of a taxpayer (other
than an individual described in subparagraph (A) or (C)) with one-person
coverage, if the taxpayer has modified adjusted gross income in excess
of $25,000 for a taxable year, the 90 percent under paragraph (1)(B) shall
be reduced by the number of percentage points which bears the same ratio
to 90 percentage points as--
`(i) the excess of modified adjusted gross income in excess of $25,000,
bears to
`(C) MARRIED FILING SEPARATE RETURN- In the case of a taxpayer who is
married filing a separate return for the taxable year and who has one-person
coverage, if the taxpayer has modified adjusted gross income in excess
of $12,500 for the taxable year, the 90 percent under paragraph (1)(B)
shall be reduced by the number of percentage points which bears the same
ratio to 90 percentage points as--
`(i) the excess of modified adjusted gross income in excess of $12,500,
bears to
`(4) INCOME PHASEOUT OF CREDIT PERCENTAGE FOR COVERAGE OF MORE THAN ONE
PERSON-
`(A) IN GENERAL- Except as provided in subparagraph (B), in the case of
a taxpayer with coverage of more than one person, if the taxpayer has
modified adjusted gross income in excess of $25,000 for a taxable year,
the 90 percent under paragraph (1)(B) shall be reduced by the number of
percentage points which bears the same ratio to 90 percentage points as--
`(i) the excess of modified adjusted gross income in excess of $25,000,
bears to
`(B) MARRIED FILING SEPARATE RETURN- In the case of a taxpayer who is
married filing a separate return for the taxable year and who has coverage
of more than one person, if the taxpayer has modified adjusted gross income
in excess of $12,500 for the taxable year, the 90 percent under paragraph
(1)(B) shall be reduced by the number of percentage points which bears
the same ratio to 90 percentage points as--
`(i) the excess of modified adjusted gross income in excess of $12,500,
bears to
`(5) ROUNDING- Any percentage resulting from a reduction under paragraphs
(3) and (4) shall be rounded to the nearest one-tenth of a percent.
`(6) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income'
means adjusted gross income determined--
`(A) without regard to this section and sections 911, 931, and 933, and
`(B) after application of sections 86, 135, 137, 219, 221, and 469.
`(c) Coverage Month- For purposes of this section--
`(1) IN GENERAL- The term `coverage month' means, with respect to an individual,
any month if--
`(A) as of the first day of such month such individual is covered by qualified
health insurance, and
`(B) the premium for coverage under such insurance for such month is paid
by the taxpayer.
`(2) GROUP HEALTH PLAN COVERAGE-
`(A) IN GENERAL- The term `coverage month' shall not include any month
for which such individual participates in any group health plan (within
the meaning of section 5000 without regard to section 5000(d)).
`(B) EXCEPTION FOR CERTAIN PERMITTED COVERAGE- Subparagraph (A) shall
not apply to an individual if the individual's only coverage under a group
health plan for a month is coverage described in clause (i) or (ii) of
section 223(c)(1)(B).
`(3) EMPLOYER-PROVIDED COVERAGE- The term `coverage month' 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 (other than coverage
described in clause (i) or (ii) of section 223(c)(1)(B)).
`(4) MEDICARE, MEDICAID, AND SCHIP- The term `coverage month' shall not
include any month with respect to an individual if, as of the first day
of such month, such individual--
`(A) is entitled to any benefits under part A of title XVIII of the Social
Security Act or is enrolled under part B of such title, or
`(B) is enrolled in the program under title XIX or XXI of such Act (other
than under section 1928 of such Act).
`(5) CERTAIN OTHER COVERAGE- The term `coverage month' shall not include
any month with respect to an individual if, at any time during such month,
any benefit is provided to such individual under--
`(A) chapter 89 of title 5, United States Code, or
`(B) chapter 55 of title 10, United States Code.
`(6) PRISONERS- The term `coverage month' 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.
`(7) INSUFFICIENT PRESENCE IN UNITED STATES- The term `coverage month' 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)).
`(d) Qualified Health Insurance- For purposes of this section--
`(1) IN GENERAL- The term `qualified health insurance' means health insurance
coverage (as defined in section 9832(b)(1)) which--
`(A) is coverage described in paragraph (2), and
`(B) meets the requirements of paragraph (3).
`(2) ELIGIBLE COVERAGE- Coverage described in this paragraph is the following:
`(A) Coverage under individual health insurance.
`(B) Coverage through a private sector health care coverage purchasing
pool.
`(C) Coverage through a State health care coverage purchasing pool.
`(D) Coverage under a State high risk pool described in subparagraph (C)
of section 35(e)(1).
`(E) Coverage, after December 31, 2006, under an eligible State buyin
program.
`(3) REQUIREMENTS- The requirements of this paragraph are as follows:
`(A) COST LIMITS- The coverage meets the requirements of section 223(c)(2)(A)(ii).
`(B) MAXIMUM BENEFITS- Under the coverage, the annual and lifetime maximum
benefits are not less than $700,000.
`(C) BROAD COVERAGE- The coverage includes inpatient and outpatient care,
emergency benefits, and physician care.
`(D) GUARANTEED RENEWABILITY- Such coverage is guaranteed renewable by
the provider.
`(4) ELIGIBLE STATE BUYIN PROGRAM- For purposes of paragraph (2)(E)--
`(A) IN GENERAL- The term `eligible State buyin program' means a State
program under which an individual who--
`(i) is not eligible for assistance under the State medicaid program
under title XIX of the Social Security Act,
`(ii) is not eligible for assistance under the State children's health
insurance program under title XXI of such Act, or
`(iii) is not a State employee,
is able to buy health insurance coverage through a purchasing arrangement
entered into between the State and a private sector health care purchasing
group or health plan.
`(B) REQUIREMENTS- Subparagraph (A) shall only apply to a State program
if--
`(i) the program uses private sector health care purchasing groups or
health plans, and
`(ii) the State maintains separate risk pools for participants under
the State program.
`(i) IN GENERAL- A State program shall not fail to be treated as an
eligible State buyin program merely because the State subsidizes the
costs of an individual in buying health insurance coverage under the
program.
`(ii) EXCEPTION- Clause (i) shall not apply if the State subsidy under
the program for any adult for any consecutive 12-month period exceeds
the applicable dollar amount.
`(iii) APPLICABLE DOLLAR AMOUNT-
`(I) IN GENERAL- For purposes of clause (ii), the applicable dollar
amount is $2,000.
`(II) REDUCTION- In the case of a family with annual income in excess
of 133 percent of the applicable poverty line (as determined in accordance
with criteria established by the Director of the Office of Management
and Budget) but not in excess of 200 percent of such line, the dollar
amount under clause (i) shall be ratably reduced (but not below $500)
for each dollar of such excess. In the case of a family with annual
income in excess of 200 percent of such line, the applicable dollar
amount shall be zero.
`(e) Arrangements Under Which Insurers Contribute to HSA-
`(1) IN GENERAL- For purposes of this section, health insurance shall not
be treated as qualified health insurance if the insurer makes contributions
to a health savings account of the taxpayer unless such insurance is provided
under an arrangement described in paragraph (2).
`(2) ARRANGEMENTS DESCRIBED-
`(A) AMOUNTS PAID FOR COVERAGE EXCEED MONTHLY LIMITATION- In the case
of amounts paid under an arrangement for health insurance for a coverage
month in excess of the amount in effect under subsection (b)(2)(A) for
such month, an arrangement is described in this subparagraph if under
the arrangement--
`(i) the aggregate amount contributed by the insurer to any health savings
account of the taxpayer does not exceed 90 percent of the excess of--
`(I) the amount paid by the taxpayer for qualified health insurance
under such arrangement for such month, over
`(II) the amount in effect under subsection (b)(2)(A) for such month,
and
`(ii) the amount contributed by the insurer to a qualified health savings
account of the taxpayer, reduced by the amount of the excess under clause
(i), does not exceed 27 percent of the amount in effect under subsection
(b)(2)(A) for such month.
`(B) AMOUNTS PAID FOR COVERAGE LESS THAN MONTHLY LIMITATION- In the case
of an arrangement under which the amount paid for qualified health insurance
for a coverage month does not exceed the amount in effect under subsection
(b)(2)(A) for such month, an arrangement is described in this subparagraph
if--
`(i) under the arrangement the value of the insured benefits (excluding
overhead) exceeds 65 percent of the amount paid for qualified health
insurance for such month, and
`(ii) the amount contributed by the insurer to a qualified health savings
account of the taxpayer does not exceed 27 percent of the amount in
effect under subsection (b)(2)(A) for such month.
`(3) QUALIFIED HEALTH SAVINGS ACCOUNT- The term `qualified health savings
account' has the meaning given such term by section 36(c)(2).
`(f) Dependents- For purposes of this section--
`(1) DEPENDENT DEFINED- The term `dependent' has the meaning given to such
term by section 152 (determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof).
`(2) SPECIAL RULE FOR DEPENDENT CHILD OF DIVORCED PARENTS- An individual
who is a child to whom section 152(e) applies shall be treated as a dependent
of the custodial parent for a coverage month unless the custodial and noncustodial
parent provide otherwise.
`(3) 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(c) is allowable to another taxpayer for a taxable year beginning in
the calendar year in which such individual's taxable year begins.
`(g) Inflation Adjustments-
`(1) CREDIT AND HEALTH INSURANCE AMOUNTS- In the case of any taxable year
beginning after 2006, each dollar amount referred to in subsections (b)(1)(B),
(b)(2)(A), (d)(3)(B), and (d)(4)(C)(iii)(I) shall be increased by an amount
equal to--
`(A) such dollar amount, multiplied by
`(B) the cost-of-living adjustment determined under section 213(d)(10)(B)(ii)
for the calendar year in which the taxable year begins, determined by
substituting `2005' for `1996' in subclause (II) thereof.
If any amount as adjusted under the preceding sentence is not a multiple
of $10, such amount shall be rounded to the nearest multiple of $10.
`(2) INCOME PHASEOUT AMOUNTS- In the case of any taxable year beginning
after 2006, each dollar amount referred to in paragraph (3) and (4) of subsection
(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 2005' for `calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a multiple
of $50, such amount shall be rounded to the next lowest multiple of $50.
`(1) COORDINATION WITH MEDICAL EXPENSE DEDUCTION AND DEDUCTION FOR PREMIUMS
FOR HIGH DEDUCTIBLE HEALTH PLANS- The amount which would (but for this paragraph)
be taken into account by the taxpayer under section 213 or 224 for the taxable
year shall be reduced by the credit (if any) allowed by this section to
the taxpayer for such year.
`(2) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS- No credit shall be allowable under this section for a taxable
year if a deduction is allowed under section 162(l) for the taxable year.
`(3) COORDINATION WITH ADVANCE PAYMENT- Rules similar to the rules of section
35(g)(1) shall apply to any credit to which this section applies.
`(4) COORDINATION WITH SECTION 35- If a taxpayer is eligible for the credit
allowed under this section and section 35 for any month, the taxpayer shall
elect which credit is to be allowed with respect to such month.
`(i) Expenses Must Be Substantiated- A payment for insurance to which subsection
(a) applies may be taken into account under this section only if the taxpayer
substantiates such payment in such form as the Secretary may prescribe.
`(j) Regulations- The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.'.
(b) Information Reporting-
(1) IN GENERAL- Subpart B of part III of subchapter A of chapter 61 of the
Internal Revenue Code of 1986 (relating to information concerning transactions
with other persons) is amended by inserting after section 6050T the following:
`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,
`(C) the aggregate amount of payments described in subsection (a), and
`(D) 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
36A(d)).
`(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 name and address of the person required to make such return and
the phone number of the information contact for such person,
`(2) 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
`(3) 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:
`(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 subparagraph (AA), by striking the period at the end
of the subparagraph (BB) and inserting `, or', and by adding at the end
the following:
`(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:
`Sec. 6050U. Returns relating to payments for qualified health insurance.'.
(c) Criminal Penalty for Fraud- Subchapter B of chapter 75 of the Internal
Revenue Code of 1986 (relating to other offenses) is amended by adding at
the end the following:
`SEC. 7276. PENALTIES FOR OFFENSES RELATING TO HEALTH INSURANCE TAX CREDIT.
`Any person who knowingly misuses Department of the Treasury names, symbols,
titles, or initials to convey the false impression of association with, or
approval or endorsement by, the Department of the Treasury of any insurance
products or health coverage in connection with the credit for health insurance
costs under section 36A shall on conviction thereof be fined not more than
$10,000, or imprisoned not more than 1 year, or both.'.
(d) 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 36A of such Code'.
(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 inserting after the
item relating to section 36 the following new item:
`Sec. 36A. Health insurance costs for uninsured individuals.'.
(3) The table of sections for subchapter B of chapter 75 of such Code is
amended by adding at the end the following:
`Sec. 7276. Penalties for offenses relating to health insurance tax credit.'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments made
by this section shall apply to taxable years beginning after December 31,
2005.
(2) PENALTIES- The amendments made by subsections (c) and (d)(4) shall take
effect on the date of the enactment of this Act.
SEC. 5. ADVANCE PAYMENT OF CREDIT TO ISSUERS 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:
`SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE
INDIVIDUALS.
`Not later than July 1, 2007, the Secretary shall establish a program for
making payments to providers of qualified health insurance (as defined in
section 36A(d)) on behalf of individuals eligible for the credit under section
36A. Such payments shall be made on the basis of modified adjusted gross income
of eligible individuals for the preceding taxable year.'.
(b) Clerical Amendment- The table of sections for chapter 77 of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
`Sec. 7529. Advance payment of credit for health insurance costs of eligible
individuals.'.
(c) Effective Date- The amendments made by this section shall take effect
on July 1, 2007.
END
