[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2964 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2964

     To amend the Internal Revenue Code of 1986 to provide new tax 
     incentives to make health insurance more affordable for small 
                  businesses, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 27, 2000

  Ms. Collins (for herself and Ms. Landrieu) 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 new tax 
     incentives to make health insurance more affordable for small 
                  businesses, 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 ``Access to Affordable Health Care 
Act''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress makes the following findings:
            (1) More than 44,000,000 Americans, 11,000,000 of whom are 
        children, currently lack health insurance.
            (2) According to the Health Insurance Association of 
        America (HIAA), almost 7 out of 10 Americans live in a family 
        whose head of household works full-time.
            (3) The great majority of the uninsured are members of 
        families with at least 1 full-time worker.
            (4) Nearly half of the uninsured workers are in firms with 
        fewer than 25 employees.
            (5) Small employers generally face higher costs for health 
        insurance than do larger firms, which makes small firms less 
        likely to offer coverage.
            (6) According to the Congressional Budget Office, only 42 
        percent of small-firm establishments with fewer than 50 
        employees offer health insurance to their employees.
            (7) The smaller the firm size, the less likely it is to 
        offer coverage. According to the Employee Benefit Research 
        Institute (EBRI), in 1998, among private sector workers in 
        firms with fewer than 10 employees, 27.4 percent received 
        health insurance from their employers in their own name, 
        compared with 66.5 percent of workers in firms with 1,000 or 
        more employees.
    (b) Purpose.--The purpose of this Act is to provide new tax 
incentives to make health insurance more affordable for small 
businesses, thus encouraging those businesses that do not currently 
offer health insurance to do so and discouraging businesses that 
currently do offer heatlh insurance from dropping coverage because of 
rising costs.

SEC. 3. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

    (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:

``SEC. 45D. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
employer, the employee health insurance expenses credit determined 
under this section is an amount equal to the applicable percentage of 
the amount paid by the taxpayer during the taxable year for qualified 
employee health insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is equal to--
            ``(1) 50 percent in the case of an employer with less than 
        10 employees, and
            ``(2) 30 percent in the case of an employer with more than 
        9 but less than 26 employees.
    ``(c) Per Employee Dollar Limitation.--The amount of qualified 
employee health insurance expenses taken into account under subsection 
(a) with respect to any qualified employee for any taxable year shall 
not exceed--
            ``(1) $2,000 in the case of self-only coverage, and
            ``(2) $4,000 in the case of family coverage (as so 
        defined).
    ``(d) Special Rules and Definitions.--For purposes of this 
section--
            ``(1) Determination of employment.--
                    ``(A) In general.--An employer shall be considered 
                an employer described in paragraph (1) or (2) of 
                subsection (b) if such employer employed an average of 
                the number of employees described in such paragraph 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.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage to the extent 
                such amount is attributable to coverage provided to any 
                employee while such employee is a qualified employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
employer if the total amount of wages paid or incurred by such employer 
to such employee at an annual rate during the taxable year is not less 
than $5,000.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee'--
                            ``(i) shall not include an employee within 
                        the meaning of section 401(c)(1), but
                            ``(ii) shall include a leased employee 
                        within the meaning of section 414(n).
                    ``(C) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
    ``(e) Certain rules made applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Denial of Double Benefit.--No deduction or credit under any 
other provision of this chapter shall be allowed with respect to 
qualified employee health insurance expenses taken into account under 
subsection (a).''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (11), 
by striking the period at the end of paragraph (12) and inserting ``, 
plus'', and by adding at the end the following:
            ``(13) the employee health insurance expenses credit 
        determined under section 45D.''.
    (c) No Carrybacks.--Subsection (d) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits) is amended by adding at the end the following:
            ``(9) No carryback of section 45d credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45D may be carried 
        back to a taxable year ending before January 1, 2001.''.
    (d) Clerical Amendment.--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:

                              ``Sec. 45D. Employee health insurance 
                                        expenses.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2000.

SEC. 4. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF 
              INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED 
              HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 222 
as section 223 and by inserting after section 221 the following new 
section:

``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount paid during the taxable year for insurance which constitutes 
medical care for the taxpayer and the taxpayer's spouse and dependents.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage shall be determined in accordance with the 
following table:

``For taxable years beginning
                                                         The applicable
  in calendar year--
                                                        percentage is--
    2001, 2002, 2003.......................................        25  
    2004 and 2005..........................................        50  
    2006 and thereafter....................................      100.  
    ``(c) Limitation Based on Other Coverage.--
            ``(1) Coverage under certain subsidized employer plans.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any taxpayer for any calendar month for which the 
                taxpayer participates in any health plan maintained by 
                any employer of the taxpayer or of the spouse of the 
                taxpayer if 50 percent or more of the cost of coverage 
                under such plan (determined under section 4980B and 
                without regard to payments made with respect to any 
                coverage described in subsection (e)) is paid or 
                incurred by the employer.
                    ``(B) Employer contributions to cafeteria plans, 
                flexible spending arrangements, and medical savings 
                accounts.--Employer contributions to a cafeteria plan, 
                a flexible spending or similar arrangement, or a 
                medical savings account which are excluded from gross 
                income under section 106 shall be treated for purposes 
                of subparagraph (A) as paid by the employer.
                    ``(C) Aggregation of plans of employer.--A health 
                plan which is not otherwise described in subparagraph 
                (A) shall be treated as described in such subparagraph 
                if such plan would be so described if all health plans 
                of persons treated as a single employer under 
                subsections (b), (c), (m), or (o) of section 414 were 
                treated as one health plan.
                    ``(D) Separate application to health insurance and 
                long-term care insurance.--Subparagraphs (A) and (C) 
                shall be applied separately with respect to--
                            ``(i) plans which include primarily 
                        coverage for qualified long-term care services 
                        or are qualified long-term care insurance 
                        contracts, and
                            ``(ii) plans which do not include such 
                        coverage and are not such contracts.
            ``(2) Coverage under certain federal programs.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any amount paid for any coverage for an individual 
                for any calendar month if, as of the first day of such 
                month, the individual is covered under any medical care 
                program described in--
                            ``(i) title XVIII, XIX, or XXI of the 
                        Social Security Act,
                            ``(ii) chapter 55 of title 10, United 
                        States Code,
                            ``(iii) chapter 17 of title 38, United 
                        States Code,
                            ``(iv) chapter 89 of title 5, United States 
                        Code, or
                            ``(v) the Indian Health Care Improvement 
                        Act.
                    ``(B) Exceptions.--
                            ``(i) Qualified long-term care.--
                        Subparagraph (A) shall not apply to amounts 
                        paid for coverage under a qualified long-term 
                        care insurance contract.
                            ``(ii) Continuation coverage of fehbp.--
                        Subparagraph (A)(iv) shall not apply to 
                        coverage which is comparable to continuation 
                        coverage under section 4980B.
    ``(d) Long-Term Care Deduction Limited to Qualified Long-Term Care 
Insurance Contracts.--In the case of a qualified long-term care 
insurance contract, only eligible long-term care premiums (as defined 
in section 213(d)(10)) may be taken into account under subsection (a).
    ``(e) Deduction Not Available for Payment of Ancillary Coverage 
Premiums.--Any amount paid as a premium for insurance which provides 
for--
            ``(1) coverage for accidents, disability, dental care, 
        vision care, or a specified illness, or
            ``(2) making payments of a fixed amount per day (or other 
        period) by reason of being hospitalized.
shall not be taken into account under subsection (a).
    ``(f) Special Rules.--
            ``(1) Coordination with deduction for health insurance 
        costs 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.
            ``(2) 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.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including regulations 
requiring employers to report to their employees and the Secretary such 
information as the Secretary determines to be appropriate.''.
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of the Internal Revenue Code 
of 1986 is amended by inserting after paragraph (17) the following new 
item:
            ``(18) Health and long-term care insurance costs.--The 
        deduction allowed by section 222.''.
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the last item and inserting the following new 
items:

                              ``Sec. 222. Health and long-term care 
                                        insurance costs.
                              ``Sec. 223. Cross reference.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 5. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to 100 percent of the amount paid during the 
        taxable year for insurance which constitutes medical care for 
        the taxpayer and the taxpayer's spouse and dependents.''.
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of the Internal Revenue Code of 1986 
is amended to read as follows: ``Paragraph (1) shall not apply to any 
taxpayer for any calendar month for which the taxpayer participates in 
any subsidized health plan maintained by any employer (other than an 
employer described in section 401(c)(4)) of the taxpayer or the spouse 
of the taxpayer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.
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