HR 4113 IH

To amend the Internal Revenue Code of 1986 to allow a refundable tax credit for health insurance costs, and for other purposes.

March 29, 2000

Mr. ARMEY (for himself and Mr. DOOLEY of California) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to allow a refundable tax credit for health insurance costs, 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.

This Act may be cited as the `Health Coverage, Access, Relief, and Equity (C.A.R.E.) Act'.

SEC. 2. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

(a) 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 redesignating section 35 as section 36 and inserting after section 34 the following new section:

`SEC. 35. HEALTH INSURANCE COSTS.

`(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 during the taxable year for qualified health insurance for the taxpayer and the taxpayer's spouse and dependents.

`(b) LIMITATIONS-

`(1) MAXIMUM DOLLAR AMOUNT-

`(A) 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.

`(B) MONTHLY LIMITATION- The monthly limitation for each coverage month during the taxable year is the amount equal to 1/12 of--

`(i) in the case of self-only coverage, $1,000, and

`(ii) in the case of family coverage, $2,000.

`(2) PHASEOUT OF CREDIT-

`(A) IN GENERAL- The amount which would (but for this paragraph) be taken into account under subsection (a) shall be reduced (but not below zero) by the amount determined under subparagraph (B).

`(B) AMOUNT OF REDUCTION- The amount determined under this subparagraph is the amount which bears the same ratio to the amount which would be so taken into account as--

`(i) the excess of--

`(I) the taxpayer's modified adjusted gross income for such taxable year, over

`(II) $35,000 ($55,000 in the case of family coverage), bears to

`(ii) $10,000.

`(C) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income' means adjusted gross income determined--

`(i) without regard to this section and sections 911, 931, and 933, and

`(ii) after application of sections 86, 135, 137, 219, 221, and 469.

`(3) 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) COVERAGE MONTH DEFINED- 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) EMPLOYER-SUBSIDIZED COVERAGE-

`(A) IN GENERAL- Such term shall not include any month for which such individual is eligible to participate 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.

`(B) 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.

`(3) 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--

`(A) a benefit chosen under a cafeteria plan (as defined in section 125(d)), or

`(B) a benefit provided under a flexible spending or similar arrangement.

`(4) MEDICARE AND MEDICAID- Such term shall not include any month during a taxable year with respect to an individual if, as of the first day of such month, such individual--

`(A) is eligible for any benefits under title XVIII of the Social Security Act, or

`(B) is eligible to participate in the program under title XIX or XXI of such Act.

`(5) CERTAIN OTHER COVERAGE- Such term shall not include any month during a taxable year with respect to an individual if, as of the first day of such month, such individual is eligible--

`(A) for benefits under chapter 17 of title 38, United States Code,

`(B) for benefits under chapter 55 of title 10, United States Code,

`(C) to participate in the program under chapter 89 of title 5, United States Code, or

`(D) for benefits under any medical care program under the Indian Health Care Improvement Act or any other provision of law.

`(6) 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.

`(d) QUALIFIED HEALTH INSURANCE- For purposes of this section, the term `qualified health insurance' means health insurance coverage (as defined in section 9832(b)(1)(A)), including coverage under a high deductible health plan (as defined in section 220(c)(2)) or a COBRA continuation provision (as defined in section 9832(d)(1)).

`(e) MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS-

`(1) IN GENERAL- If a deduction would (but for paragraph (2)) be allowed under section 220 to the taxpayer for a payment for the taxable year to the medical 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 for that portion of the payments otherwise allowable as a deduction under section 220 for the taxable year which is equal to the amount of credit allowed for such taxable year by reason of this subsection.

`(f) SPECIAL RULES-

`(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) COORDINATION WITH ADVANCE PAYMENT- Rules similar to the rules of section 32(g) shall apply to any credit to which this section applies.

`(g) 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.

`(h) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations under which--

`(1) an awareness campaign is established to educate the public, insurance issuers, and agents or others who market health insurance about the requirements and procedures under this section, including--

`(A) criteria for insurance products and group health coverage which constitute qualified health insurance under this section, and

`(B) guidelines for marketing schemes and practices which are appropriate and acceptable in connection with the credit under this section, and

`(2) periodic reviews or audits of health insurance policies and group health plans (and related promotional marketing materials) which are marketed to eligible taxpayers under this section are conducted for the purpose of determining--

`(A) whether such policies and plans constitute qualified health insurance under this section, and

`(B) whether offenses described in section 7276 occur.'.

(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 6050S the following new section:

`SEC. 6050T. 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

`(2) contains--

`(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),

`(D) the qualified health insurance credit advance amount (as defined in section 7527(e)) received by such person with respect to the individual described in subparagraph (A), and

`(E) 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 35(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 35 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 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,

`(3) the information required under subsection (b)(2)(B) with respect to such payments, and

`(4) the qualified health insurance credit advance amount (as defined in section 7527(e)) received by such person with respect to the individual described in paragraph (2).

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 (xi) through (xvii) as clauses (xii) through (xviii), respectively, and by inserting after clause (x) the following new clause:

`(xi) section 6050T (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:

`(BB) section 6050T(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 6050S the following new item:

`Sec. 6050T. Returns relating to payments for qualified health insurance.'.

(c) CRIMINAL PENALTY FOR FRAUD- Subchapter B of chapter 75 of such Code (relating to other offenses) is amended by adding at the end the following new section:

`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 group health coverage in connection with the credit for health insurance costs under section 35 shall on conviction thereof be fined not more than $10,000, or imprisoned not more than 1 year, or both.'.

(d) CONFORMING AMENDMENTS-

(1) Section 162(l) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

`(6) ELECTION TO HAVE SUBSECTION APPLY- No deduction shall be allowed under paragraph (1) for a taxable year unless the taxpayer elects to have this subsection apply for such year.'.

(2) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `, or from section 35 of such Code'.

(3) 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 striking the last item and inserting the following new items:

`Sec. 35. Health insurance costs.

`Sec. 36. Overpayments of tax.'.

(4) The table of sections for subchapter B of chapter 75 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 7276. Penalties for offenses relating to health insurance tax credit.'.

(e) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2000.

(2) PENALTIES- The amendments made by subsections (c) and (d)(4) shall take effect on the date of the enactment of this Act.

SEC. 3. 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 new section:

`SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT TO ISSUERS OF QUALIFIED HEALTH INSURANCE.

`(a) GENERAL RULE- In the case of an eligible individual, the Secretary shall make payments to the health insurance issuer of such individual's qualified health insurance equal to such individual's qualified health insurance credit advance amount with respect to such issuer.

`(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 35(c)), and

`(2) for whom a qualified health insurance credit eligibility certificate is in effect.

`(c) HEALTH INSURANCE ISSUER- For purposes of this section, the term `health insurance issuer' has the meaning given such term by section 9832(b)(2).

`(d) 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 a qualified health insurance issuer which--

`(1) certifies that the individual will be eligible to receive the credit provided by section 35 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.

`(e) QUALIFIED HEALTH INSURANCE CREDIT ADVANCE AMOUNT- For purposes of this section, the term `qualified health insurance credit advance amount' means, with respect to any qualified health insurance issuer of qualified health insurance, an estimate of the amount of credit allowable under section 35 to the individual for the taxable year which is attributable to the insurance provided to the individual by such issuer.

`(f) REQUIRED DOCUMENTATION FOR RECEIPT OF PAYMENTS OF ADVANCE AMOUNT- No payment of a qualified health insurance credit advance amount with respect to any eligible individual may be made under subsection (a) unless the health insurance issuer provides to the Secretary--

`(1) the qualified health insurance credit eligibility certificate of such individual, and

`(2) the return relating to such individual under section 6050T.

`(g) 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. 7527. Advance payment of health insurance credit for purchasers of qualified health insurance.'.

(c) EFFECTIVE DATE- The amendments made by this section shall take effect on January 1, 2001.

END