[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4886 Introduced in House (IH)]







108th CONGRESS
  2d Session
                                H. R. 4886

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 21, 2004

Mr. Hayworth (for himself, Mr. Peterson of Minnesota, and Mr. Lewis of 
  Kentucky) introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


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

    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 Credits Act of 2004''.

SEC. 2. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

    (a) Allowance of Credit.--
            (1) 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 36 as section 37 and by inserting after section 35 the 
        following new section:

``SEC. 36. HEALTH INSURANCE COSTS FOR UNINSURED INDIVIDUALS.

    ``(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 by the taxpayer 
during such taxable year for qualified health insurance for the 
taxpayer and the taxpayer's spouse and dependents.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) to the taxpayer for the taxable year shall not 
        exceed the lesser of--
                    ``(A) the sum of the monthly limitations for 
                coverage months during such taxable year for the 
                individuals referred to in subsection (a) for whom the 
                taxpayer paid during the taxable year any amount for 
                coverage under qualified health insurance, or
                    ``(B) 90 percent of the sum of the amounts paid by 
                the taxpayer for qualified health insurance for each 
                such individual for coverage months of the individual 
                during the taxable year.
            ``(2) Monthly limitation.--
                    ``(A) In general.--The monthly limitation for an 
                individual for each coverage month of such individual 
                during the taxable year is the amount equal to \1/12\ 
                of--
                            ``(i) $1,000 if such individual is the 
                        taxpayer,
                            ``(ii) $1,000 if--
                                    ``(I) such individual is the spouse 
                                of the taxpayer,
                                    ``(II) the taxpayer and such spouse 
                                are married as of the first day of such 
                                month, and
                                    ``(III) the taxpayer files a joint 
                                return for the taxable year, and
                            ``(iii) $500 if such individual is an 
                        individual for whom a deduction under section 
                        151(c) is allowable to the taxpayer for such 
                        taxable year.
                    ``(B) Limitation to 2 dependents.--Not more than 2 
                individuals may be taken into account by the taxpayer 
                under subparagraph (A)(iii).
                    ``(C) Special rule for married individuals.--In the 
                case of a taxpayer--
                            ``(i) who is married (within the meaning of 
                        section 7703) as of the close of the taxable 
                        year but does not file a joint return for such 
                        year, and
                            ``(ii) who does not live apart from such 
                        taxpayer's spouse at all times during the 
                        taxable year,
                the dollar limitation imposed under subparagraph 
                (A)(iii) shall be divided equally between the taxpayer 
                and the taxpayer's spouse unless they agree on a 
                different division.
            ``(3) Income phaseout of credit percentage.--
                    ``(A) Phaseout for single coverage.--
                            ``(i) Unmarried individuals (other than 
                        surviving spouses and heads of households).--In 
                        the case of an individual (other than a 
                        surviving spouse, the head of a household, or a 
                        married individual) with self-only coverage, if 
                        such individual has modified adjusted gross 
                        income in excess of $15,000 for a taxable year, 
                        the 90 percent under paragraph (1)(B) shall be 
                        reduced (but not below zero) by--
                                    ``(I) 2 percentage points for each 
                                $250 of such income in excess of 
                                $15,000 but not in excess of $20,000, 
                                and
                                    ``(II) 1.25 percentage points for 
                                each $250 of such income in excess of 
                                $20,000.
                            ``(ii) Other individuals.--If a taxpayer 
                        (other than an individual described in clause 
                        (i)) with self-only coverage has modified 
                        adjusted gross income in excess of $25,000 for 
                        a taxable year, the 90 percent under paragraph 
                        (1)(B) shall be reduced (but not below zero) by 
                        1.5 percentage points for each $250 of such 
                        excess.
                    ``(B) Amount of reduction for family coverage.--If 
                a taxpayer with family coverage has modified adjusted 
                gross income in excess of $25,000 for a taxable year, 
                the 90 percent under paragraph (1)(B) shall be reduced 
(but not below zero) by 0.643 percentage points for each $250 of such 
excess. Any percentage resulting from a reduction under this 
subparagraph shall be rounded to the nearest one-tenth of a percent.
                    ``(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.
    ``(c) Coverage Month.--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.--The term `coverage month' 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. A subsidized health plan shall not include a 
                plan substantially all of the coverage of which is of 
                excepted benefits described in section 9832(c).
                    ``(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.--The term `coverage month' 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, medicaid, and schip.--The term `coverage 
        month' shall not include any month with respect to an 
        individual if, as of the first day of such month, such 
        individual--
                    ``(A) is entitled to any benefits under part A of 
                title XVIII of the Social Security Act or is enrolled 
                under part B of such title, or
                    ``(B) is enrolled in the program under title XIX or 
                XXI of such Act (other than under section 1928 of such 
                Act).
            ``(5) Certain other coverage.--The term `coverage month' 
        shall not include any month during a taxable year with respect 
        to an individual if, at any time during such year, any benefit 
        is provided to such individual under--
                    ``(A) chapter 89 of title 5, United States Code,
                    ``(B) chapter 55 of title 10, United States Code,
                    ``(C) chapter 17 of title 38, United States Code, 
                or
                    ``(D) any medical care program under the Indian 
                Health Care Improvement Act.
            ``(6) Prisoners.--The term `coverage month' 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.
            ``(7) Insufficient presence in united states.--The term 
        `coverage month' shall not include any month during a taxable 
        year with respect to an individual if such individual is 
        present in the United States on fewer than 183 days during such 
        year (determined in accordance with section 7701(b)(7)).
    ``(d) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means health insurance coverage (as defined in section 
        9832(b)(1)) which--
                    ``(A) is coverage described in paragraph (2), and
                    ``(B) meets the requirements of paragraph (3).
            ``(2) Eligible coverage.--Coverage described in this 
        paragraph is the following:
                    ``(A) Coverage under individual health insurance.
                    ``(B) Coverage under a group health plan (as 
                defined in section 5000 without regard to subsection 
                (d)).
                    ``(C) Coverage through a private sector health care 
                coverage purchasing pool.
                    ``(D) Coverage under a State high risk pool 
                described in subparagraph (C) of section 35(e)(1).
                    ``(E) Continuation coverage described in 
                subparagraph (A) or (B) of section 35(a)(1).
                    ``(F) Coverage under an eligible State buyin 
                program.
            ``(3) Requirements.--The requirements of this paragraph are 
        as follows:
                    ``(A) Cost limits.--Under the coverage, the sum of 
                the annual deductible and the other annual out-of-
                pocket expenses required to be paid (other than 
                premiums) for covered benefits does not exceed--
                            ``(i) $5,000 for self-only coverage, and
                            ``(ii) twice the dollar amount in clause 
                        (i) for family coverage, or
                    ``(B) Maximum benefits.--Under the coverage, the 
                annual and lifetime maximum benefits are not less than 
                $700,000.
            ``(4) Eligible state buyin program.--For purposes of 
        paragraph (2)(F)--
                    ``(A) In general.--The term `eligible State buyin 
                program' means a State program under which an 
                individual not otherwise eligible for assistance under 
                the State medicaid program under title XIX of the 
                Social Security Act or the State children's health 
                insurance program under title XXI of such Act is able 
                to buy health insurance coverage through a purchasing 
                arrangement entered into between the State and a 
                private sector health care purchasing group or health 
                plan for purposes of providing health insurance 
                coverage to recipients of assistance under such program 
                or for purposes of providing such coverage to State 
                employees.
                    ``(B) Requirements.--Subparagraph (A) shall only 
                apply to a State program if--
                            ``(i) the program uses private sector 
                        health care purchasing groups or health plans, 
                        and
                            ``(ii) the State maintains separate risk 
                        pools for participants under the State program.
    ``(e) Archer MSA Contributions; HSA Contributions.--If a deduction 
would be allowed under section 220 to the taxpayer for a payment for 
the taxable year to the Archer MSA of an individual or under section 
223 to the taxpayer for a payment for the taxable year to the Health 
Savings Account of such individual, subsection (a) shall not apply to 
the taxpayer for any month during such taxable year for which the 
taxpayer, spouse, or dependent is an eligible individual for purposes 
of either such section.
    ``(f) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2004, each dollar amount referred to in 
        subsections (b)(2)(A) and (d)(3) shall be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, except that `2003' 
                shall be substituted for `1996' in subclause (II) 
                thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $10, such amount shall be rounded to 
        the next lowest multiple of $10.
    ``(g) 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 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.
            ``(3) 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.
            ``(4) Coordination with advance payment.--Rules similar to 
        the rules of section 35(g)(1) shall apply to any credit to 
        which this section applies.
            ``(5) Coordination with section 35.--If a taxpayer is 
        eligible for the credit allowed under this section and section 
        35 for any taxable year, the taxpayer shall elect which credit 
        is to be allowed.
    ``(h) 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.
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (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 6050T the following:

``SEC. 6050U. 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), and
                    ``(D) 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 36(d)).
    ``(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, and
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments.
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 (xii) through (xviii) as clauses 
                (xiii) through (xix), respectively, and by inserting 
                after clause (xi) the following:
                            ``(xii) section 6050U (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 
                subparagraph (AA), by striking the period at the end of 
                the subparagraph (BB) and inserting ``, or'', and by 
                adding at the end the following:
                    ``(CC) section 6050U(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 6050T 
        the following:

                              ``Sec. 6050U. 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 36 
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 36 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. 36. Health insurance costs for 
                                        uninsured individuals.
                              ``Sec. 37. Overpayments of tax.''.
            (4) The table of sections for subchapter B of chapter 75 of 
        such Code 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, 2003, without regard to whether 
        final regulations to carry out such amendments have been 
        promulgated by such date.
            (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. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF 
              ELIGIBLE INDIVIDUALS.

    ``(a) General Rule.--Not later than January 1, 2005, the Secretary 
shall establish a program for making payments on behalf of certified 
individuals to providers of qualified health insurance (as defined in 
section 36(d)) for such individuals.
    ``(b) Program Options.--The program under subsection (a) may--
            ``(1) provide that payments may be made on the basis of 
        modified adjusted gross income of certified individuals for the 
        preceding taxable year, and
            ``(2) provide that, in lieu of payments to providers, the 
        following amounts may be offset:
                    ``(A) Amounts required to be deposited by the 
                provider as estimated income tax under section 6654 or 
                6655.
                    ``(B) Amounts required to be deducted and withheld 
                under section 3401 (relating to wage withholding).
                    ``(C) Taxes imposed under section 3111(a) or 50 
                percent of taxes imposed under section 1401(a) 
                (relating to FICA employer taxes).
                    ``(D) Amounts required to be deducted under section 
                3102 with respect to taxes imposed under section 
                3101(a) or 50 percent of taxes imposed under section 
                1401(a) (relating to FICA employee taxes).
    ``(c) Certified Individual.--For purposes of this section, the term 
`certified individual' means any individual for whom a qualified health 
insurance credit eligibility certificate is in effect.
    ``(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 
provider of qualified health insurance which--
            ``(1) certifies that the individual will be eligible to 
        receive the credit provided by section 36 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.''.
    (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. 7529. 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 July 1, 2005, without regard to whether final regulations to 
carry out such amendments have been promulgated by such date.
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