[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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