[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 674 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 674
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
April 2 (legislative day, March 30), 2001
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 43,000,000 Americans currently lack health
insurance.
(2) The great majority of the uninsured are members of
families with at least 1 full-time worker.
(3) Nearly half of the uninsured workers are in firms with
fewer than 25 employees.
(4) Small employers generally face higher costs for health
insurance than do larger firms, which makes small firms less
likely to offer coverage.
(5) According to the Congressional Budget Office, only 42
percent of small-firm establishments with fewer than 50
employees offer health insurance to their employees.
(6) 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. 45E. 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 (12),
by striking the period at the end of paragraph (13) and inserting ``,
plus'', and by adding at the end the following:
``(14) the employee health insurance expenses credit
determined under section 45E.''.
(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:
``(10) No carryback of section 45e 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 45E may be carried
back to a taxable year ending before January 1, 2002.''.
(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. 45E. 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, 2001.
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--
2002, 2003, 2004....................................... 25
2005 and 2006.......................................... 50
2007 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.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
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, 2001.
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