[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2320 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2320

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 29, 2000

Mr. Jeffords (for himself, Mr. Breaux, Mr. Frist, Mrs. Lincoln, and Ms. 
Snowe) 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 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.
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