[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 397 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                 S. 397

   To amend the Internal Revenue Code of 1986 to allow individuals a 
refundable credit against income tax for the purchase of private health 
                   insurance, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 25, 2007

  Mr. Martinez (for himself, Mr. Coburn, Mr. Coleman, Mr. Cornyn, Mr. 
Inhofe, and Mr. Sessions) 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 individuals a 
refundable credit against income tax for the purchase of private health 
                   insurance, 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 ``Tax Equity and Affordability Act of 
2007''.

SEC. 2. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable 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.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to the amount paid during the taxable year for qualified health 
insurance for the taxpayer and the taxpayer's spouse or dependent.
    ``(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 sum of the monthly limitations for coverage months 
        during such taxable year for the individual referred to in 
        subsection (a) for whom the taxpayer paid during the taxable 
        year any amount for coverage under qualified health insurance.
            ``(2) Partial phaseout of credit amount.--
                    ``(A) 37.5 percent reduction based on adjusted 
                gross income.--37.5 percent of the amount determined 
                under paragraph (1) for any taxable year shall be 
                reduced by the amount determined under subparagraph 
                (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph shall be the amount which bears 
                the same ratio to 37.5 percent of such amount 
                determined under paragraph (1) as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's adjusted gross 
                                income for such taxable year, over
                                    ``(II) the applicable dollar 
                                amount, bears to
                            ``(ii) $15,000 ($30,000 in the case of a 
                        joint return).
                The rule of section 219(g)(2)(C) shall apply to any 
                reduction under this subparagraph.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) adjusted gross income shall be 
                        determined in the same manner as under section 
                        408A(c)(3)(C)(i), and
                            ``(ii) the applicable dollar amount is--
                                    ``(I) in the case of a taxpayer 
                                filing a joint return, $30,000, and
                                    ``(II) in the case of any other 
                                taxpayer, $15,000.
                    ``(D) No reduction during period of unemployment.--
                In the case of any coverage month (not to exceed 12 
                consecutive coverage months) during which the taxpayer 
                is unemployed, this paragraph shall not apply to the 
                amount otherwise determined under paragraph (1). In the 
                case of a self-employed individual, rules similar to 
                the rules under section 72(t)(2)(D)(iii) shall apply 
                for purposes of the preceding sentence.
            ``(3) 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\th 
                of the qualified health insurance amount.
                    ``(B) Qualified health insurance amount.--For 
                purposes of this paragraph, the qualified health 
                insurance amount is--
                            ``(i) $2,000 if such individual is the 
                        taxpayer, and
                            ``(ii) $2,000 if such individual is--
                                    ``(I) the spouse of the taxpayer, 
                                the taxpayer and such spouse are 
                                married as of the first day of such 
                                month, and the taxpayer files a joint 
                                return for the taxable year, or
                                    ``(II) an individual for whom a 
                                deduction under section 151(c) is 
                                allowable to the taxpayer for such 
                                taxable year.
                    ``(C) Limitation to spouse or dependent.--Not more 
                than 1 individual may be taken into account by the 
                taxpayer under subparagraph (B)(ii).
            ``(4) Coverage month.--For purposes of this subsection--
                    ``(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 for such month is paid by the 
                        taxpayer.
                    ``(B) Employer-subsidized coverage.--
                            ``(i) In general.--Such term 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.
                            ``(ii) 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.
                    ``(C) Cafeteria plan and flexible spending account 
                beneficiaries.--Such term 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--
                            ``(i) a benefit chosen under a cafeteria 
                        plan (as defined in section 125(d)), or
                            ``(ii) a benefit provided under a flexible 
                        spending or similar arrangement.
                    ``(D) Medicare and medicaid.--Such term shall not 
                include any month with respect to an individual if, as 
                of the first day of such month, such individual--
                            ``(i) is entitled to any benefits under 
                        title XVIII of the Social Security Act, or
                            ``(ii) is a participant in the program 
                        under title XIX or XXI of such Act.
                    ``(E) Certain other coverage.--Such term 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--
                            ``(i) chapter 89 of title 5, United States 
                        Code,
                            ``(ii) chapter 55 of title 10, United 
                        States Code,
                            ``(iii) chapter 17 of title 38, United 
                        States Code, or
                            ``(iv) any medical care program under the 
                        Indian Health Care Improvement Act.
                    ``(F) Prisoners.--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.
                    ``(G) Insufficient presence in united states.--Such 
                term 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)).
    ``(c) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means insurance which constitutes medical care as defined in 
        section 213(d) without regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance 
                contracts.
            ``(2) Exclusion of certain other contracts.--Such term 
        shall not include insurance if a substantial portion of its 
        benefits are excepted benefits (as defined in section 9832(c)).
    ``(d) Archer MSA and Health Savings Account Contributions.--
            ``(1) In general.--If a deduction would (but for paragraph 
        (2)) be allowed under section 220 or 223 to the taxpayer for a 
        payment for the taxable year to the Archer MSA or health 
        savings account of an individual, subsection (a) shall be 
        applied by treating such payment as a payment for qualified 
        health insurance for such individual.
            ``(2) Denial of double benefit.--No deduction shall be 
        allowed under section 220 or 223 for that portion of the 
        payments otherwise allowable as a deduction under section 220 
        or 223 for the taxable year which is equal to the amount of 
        credit allowed for such taxable year by reason of this 
        subsection.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(2) 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.
            ``(3) Denial of double benefit.--No credit shall be allowed 
        under subsection (a) if the credit under section 35 is allowed 
        and no credit shall be allowed under 35 if a credit is allowed 
        under this section.
            ``(4) Coordination with deduction for health insurance 
        costs.--In the case of a taxpayer who is eligible to deduct any 
        amount under section 162(l) or 213 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.
            ``(5) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.
            ``(6) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2008, each dollar 
        amount contained in subsection (b)(2)(B) 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 2007' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50.''.
    (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 6050V the following new 
        section:

``SEC. 6050W. 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, and
                    ``(C) 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(c)) other than--
            ``(1) insurance under a subsidized group health plan 
        maintained by an employer, or
            ``(2) to the extent provided in regulations prescribed by 
        the Secretary, any other insurance covering an individual if no 
        credit is allowable under section 36 with respect to such 
        coverage.
    ``(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 (xv) through (xx) as clauses 
                (xvi) through (xxi), respectively, and by inserting 
                after clause (xi) the following new clause:
                            ``(xv) section 6050W (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking the period at the end of 
                subparagraph (CC) and inserting ``, or'' and by adding 
                at the end the following new subparagraph:
                    ``(DD) section 6050W(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 6050V 
        the following new item:

``Sec. 6050W. Returns relating to payments for qualified health 
                            insurance.''.
    (c) Conforming Amendments.--
            (1) 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''.
            (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 striking the last item and inserting the 
        following new items:

``Sec. 36. Health insurance costs.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 3. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS 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 new section:

``SEC. 7529. 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 provider of such individual's 
qualified health insurance equal to such individual's qualified health 
insurance credit advance amount with respect to such provider.
    ``(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 36(c)), and
            ``(2) for whom a qualified health insurance credit 
        eligibility certificate is in effect.
    ``(c) 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 
the Secretary 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.
    ``(d) Qualified Health Insurance Credit Advance Amount.--For 
purposes of this section, the term `qualified health insurance credit 
advance amount' means, with respect to any provider of qualified health 
insurance, the Secretary's estimate of the amount of credit allowable 
under section 36 to the individual for the taxable year which is 
attributable to the insurance provided to the individual by such 
provider.
    ``(e) 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 new item:

``Sec. 7529. Advance payment of health insurance credit for purchasers 
                            of qualified health insurance.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 4. LIMITATION ON EMPLOYER-PROVIDED HEALTH CARE COVERAGE.

    (a) In General.--Section 106 of the Internal Revenue Code of 1986 
(relating to contributions by employer to accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(e) Limitation on Employer-Provided Health Care Coverage.--
            ``(1) In general.--The amount of any exclusion under 
        subsection (a) for any taxable year with respect to--
                    ``(A) any employer-provided coverage under an 
                accident or health plan which constitutes medical care, 
                and
                    ``(B) any employer contribution to an Archer MSA or 
                a health savings account which is treated by subsection 
                (b) or (d) as employer-provided coverage for medical 
                expenses under an accident or health plan,
        shall not exceed $5,000 per employee for self-only coverage and 
        $11,500 for family coverage.
            ``(2) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2008, each dollar 
        amount contained in paragraph (1) 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 2007' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $50.
            ``(3) Medical care defined.--For purposes of paragraph (1), 
        the term `medical care' has the meaning given to such term in 
        section 213(d) determined without regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2007.
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