[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1502 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1502

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 4, 2001

Mr. Jeffords (for himself, Mrs. Lincoln, Mr. Chafee, Mr. Bayh, 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 for COBRA continuation coverage, 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 ``COBRA Plus Act of 2001''.

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:

``SEC. 35. HEALTH INSURANCE COSTS.

    ``(a) Allowance of Credit.--In the case of an eligible 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.
    ``(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 an 
                amount equal to the lesser of--
                            ``(i) 50 percent of the amount paid for 
                        qualified health insurance for such month, or
                            ``(ii) an amount equal to \1/12\ of--
                                    ``(I) in the case of self-only 
                                coverage, $1,320, and
                                    ``(II) in the case of family 
                                coverage, $3,480.
            ``(2) 9-month limitation.--For purposes of paragraph (1), 
        the total number of coverage months taken into account with 
        respect to each qualifying event of the individual shall not 
        exceed 9.
            ``(3) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after 2002, each of the dollar amounts 
                referred to in paragraph (1)(B) 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, 
                        by substituting `2001' for `1992'.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $50, such amount 
                shall be rounded to the nearest multiple of $50.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Coverage month.--
                    ``(A) In general.--The term `coverage month' means, 
                with respect to an individual, any month if--
                            ``(i) as of the first day of such month 
                        such individual is covered by qualified health 
                        insurance, and
                            ``(ii) the premium for coverage under such 
                        insurance, or any portion of the premium, for 
                        such month is paid by the taxpayer.
                    ``(B) Exclusion of months in which individual is 
                eligible for coverage under certain health programs.--
                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--
                            ``(i) for any benefits under title XVIII of 
                        the Social Security Act,
                            ``(ii) to participate in the program under 
                        title XIX or XXI of such Act,
                            ``(iii) for benefits under chapter 17 of 
                        title 38, United States Code,
                            ``(iv) for benefits under chapter 55 of 
                        title 10, United States Code,
                            ``(v) to participate in the program under 
                        chapter 89 of title 5, United States Code, or 
                        any similar program for State or local 
                        government employees, or
                            ``(vi) for benefits under any medical care 
                        program under the Indian Health Care 
                        Improvement Act or any other provision of law.
                    ``(C) Exclusion of months in which individual is 
                imprisoned.--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.
            ``(2) Eligible individual.--The term `eligible individual' 
        means an individual who is--
                    ``(A) a covered employee (as defined in section 
                4980B(f)) of the plan sponsor of the qualified health 
                insurance, and
                    ``(B) eligible for continuation coverage by reason 
                of a qualifying event.
            ``(3) Qualified health insurance.--The term `qualified 
        health insurance' means health insurance coverage under--
                    ``(A) a COBRA continuation provision (as defined in 
                section 9832(d)(1)), or
                    ``(B) section 8905a of title 5, United States Code.
            ``(4) Qualifying event.--The term `qualifying event' means 
        an event described in section 4980B(f)(3)(B).
    ``(d) 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) Coordination with advance payment.--Rules similar to 
        the rules of section 32(g) shall apply to any credit to which 
        this section applies.
    ``(e) 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.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.
    ``(g) Termination.--This section shall not apply to any amount paid 
after December 31, 2003.''.
    (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 6050S the following:

``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(c)).
    ``(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:
                            ``(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:
                    ``(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:

                              ``Sec. 6050T. 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 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:
            ``(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:

                              ``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:

                              ``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, 2001.
            (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:

``SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS 
              OF QUALIFIED HEALTH INSURANCE.

    ``(a) General Rule.--In the case of an eligible individual, the 
Secretary shall make payments to the plan sponsor of the group health 
plan providing, or the qualified 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 
sponsor or 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) Definitions.--For purposes of this section--
            ``(1) Qualified health insurance issuer.--The term 
        `qualified health insurance issuer' means a health insurance 
        issuer described in section 9832(b)(2) (determined without 
        regard to the last sentence thereof) offering coverage in 
        connection with a group health plan.
            ``(2) Group health plan.--The term `group health plan' has 
        the meaning given such term by section 5000(b)(1) (determined 
        without regard to subsection (d) thereof).
    ``(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 
plan sponsor of a group health plan or 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 plan sponsor of a group 
health plan providing, or 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 
sponsor or 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 plan sponsor of the group health plan or 
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 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following:

                              ``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, 2002.

SEC. 4. STUDY.

    Not later than January 1, 2003, the Comptroller General of the 
United States shall--
            (1) conduct a study on the effectiveness of the amendments 
        made by this Act in increasing enrollment by eligible 
        individuals (as defined in section 35(c)(2), as added by 
        section 2) in group health plans under COBRA continuation 
        coverage; and
            (2) submit a report on the study conducted under paragraph 
        (1) to the Committee on Ways and Means of the House of 
        Representatives and the Committee on Finance of the Senate.
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