Short title

This Act may be cited as the

Health Insurance Stability Act of 2008

Refundable tax credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment

(a)

In general

Subpart C of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36 the following new section:

36A.

Health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle the aggregate amount paid by the taxpayer for coverage of the taxpayer and the taxpayer’s qualifying family members under qualified COBRA continuation coverage for eligible coverage months beginning in the taxable year. (b)

Limitations

(1)

In general

The amount allowable as a credit under subsection (a) for the taxable year shall not exceed the sum of the monthly limitations for months during such taxable year that the taxpayer is an eligible individual. (2)

Monthly limitation

The monthly limitation for any month is the credit percentage of 1/12 of $1,000 ($2,000 in the case of a joint return). (3)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, each dollar amount contained in paragraph (2) shall be increased by an amount equal to— (A)such dollar amount, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.

(c)

Eligible coverage month

For purposes of this section— (1)

In general

The term eligible coverage month means, with respect to any individual, any month if, as of the first day of such month, the individual— (A)is covered by qualified health insurance, (B)does not have disqualifying coverage, and (C)is not imprisoned under Federal, State, or local authority. (2)

12 month of coverage during any 14 month period

A month shall not be treated as an eligible coverage month with respect to an individual if, during the 24-month period ending with the last day of such month, the individual was an eligible individual for 12 months in such period. (d)

Qualifying family member

For purposes of this section, the term qualifying family member means— (1)in the case of a joint return, the taxpayer’s spouse, and (2)any dependent of the taxpayer. (e)

Qualified COBRA continuation coverage

(1)

In general

For purposes of this section, the term qualified COBRA continuation coverage means any insurance which is continuation coverage under paragraph (2) of section 4980B(f) by reason of the qualifying event specified in paragraph (3)(B) of such section (relating to termination or reduction of hours of employment). (2)

Exception

Such term does not include— (A)a flexible spending or similar arrangement, and (B)insurance substantially all of the coverage of which is of excepted benefits described in section 9832(c). (f)

Disqualifying coverage

For purposes of this section, an individual has disqualifying coverage for any month if, as of the first day of such month— (1)

Employer-provided coverage

Such individual is covered under any insurance which constitutes medical care under any health plan maintained by any employer (or former employer) of the taxpayer or the taxpayer’s spouse if any portion of the cost of such coverage (as so determined) is paid or incurred by an employer (or former employer) of the taxpayer or the taxpayer's spouse other than— (A)coverage described in subsection (e)(1), and (B)insurance substantially all of the coverage of which is of excepted benefits described in section 9832(c)). (2)

Certain State-based and group coverage

Such individual has coverage described in any of subparagraphs (B) through (J) of section 35(e)(1). (3)

Coverage under medicare, medicaid, or schip

Such individual— (A)is entitled to 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). (4)

Certain other coverage

Such individual— (A)is enrolled in a health benefits plan under chapter 89 of title 5, United States Code, or (B)is entitled to receive benefits under chapter 55 of title 10, United States Code. (g)

Special rules

(1)

Coordination with advance payments of credit; recapture of excess advance payments

With respect to any taxable year— (A)the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a) shall be reduced (but not below zero) by the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in such taxable year, and (B)the tax imposed by section 1 for such taxable year shall be increased by the excess (if any) of— (i)the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in such taxable year, over (ii)the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a). (2)

Coordination with other deductions

Amounts taken into account under subsection (a) shall not be taken into account in determining— (A)any deduction allowed under section 162(l), 213, or 224, or (B)any credit allowed under section 35. (3)

Medical and health savings accounts

Amounts distributed from an Archer MSA (as defined in section 220(d)) or from a health savings account (as defined in section 223(d)) shall not be taken into account under subsection (a). (4)

Denial of credit to dependents and nonpermanent resident alien individuals

No credit shall be allowed under this section to any individual who is— (A)not a citizen or lawful permanent resident of the United States for the calendar year in which the taxable year begins, or (B)a dependent with respect to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. (5)

Married individuals

In the case of an individual who is married (within the meaning of section 7703), this section shall apply only if a joint return is filed for the taxable year under section 6013. (6)

Insurance which covers other individuals

For purposes of this section, rules similar to the rules of section 213(d)(6) shall apply with respect to any contract for qualified health insurance under which amounts are payable for coverage of an individual other than the taxpayer and qualifying family members. (7)

Treatment of payments

For purposes of this section— (A)

Payments by secretary

Payments made by the Secretary on behalf of any individual under section 7529 (relating to advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment) shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made. (B)

Payments by taxpayer

Payments made by the taxpayer for eligible coverage months shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made. (8)

Regulations

The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, section 6050W, and section 7529.

(b)

Conforming amendments

(1)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36A, after 36,. (2)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 inserting after the item relating to section 36 the following new item:

Sec. 36A. Health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

Advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment

(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:

7529.

Advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment

Not later than January 1, 2009, the Secretary shall establish a program for making payments to providers of qualified health insurance (as defined in section 36A(e)) on behalf of taxpayers eligible for the credit under section 36A.

(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 adding at the end the following new section:

6050W.

Returns relating to credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment

(a)

Requirement of reporting

Every person who is entitled to receive payments for any month of any calendar year under section 7529 (relating to advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment) with respect to any individual shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to each such individual. (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 each individual referred to in subsection (a), (B)the number of months such person provided COBRA continuation coverage by reason of termination of employment, (C)the number of months for which amounts were received with respect to such individual under section 7529 (relating to advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment), (D)the amount entitled to be received for each such month, and (E)such other information as the Secretary may prescribe. (c)

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 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, and (2)the information required to be shown on the return with respect to such individual.

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.

(2)

Assessable penalties

(A)Subparagraph (B) of section 6724(d)(1) of such Code (relating to definitions) is amended by striking or at the end of clause (xxi), by striking and at the end of clause (xxii) and inserting or, and by inserting after clause (xxii) the following new clause:

(xxiii)section 6050W (relating to returns relating to credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment), and

(B)Paragraph (2) of section 6724(d) of such Code is amended by striking the period at the end of subparagraph (CC) and inserting a comma, by striking the period at the end of subparagraph (DD) and inserting , or, and by adding after subparagraph (DD) the following new subparagraph:

(EE)section 6050W (relating to returns relating to credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment).

(c)

Clerical amendments

(1)The table of sections for chapter 77 of such Code is amended by adding at the end the following new item:

Sec. 7529. Advance payment of credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment.

(2)The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at the end the following new item:

Sec. 6050W. Returns relating to credit for health insurance costs of individuals with COBRA continuation coverage by reason of termination of employment.

(d)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.