H.R. 4925 (106th): Patient Access, Choice, and Equity Act of 2000

106th Congress, 1999–2000. Text as of Jul 24, 2000 (Introduced).

Status & Summary | PDF | Source: GPO

HR 4925 IH

106th CONGRESS

2d Session

H. R. 4925

To amend the Internal Revenue Code of 1986 to allow more equitable and direct tax relief for health insurance and medical care expenses, to give Americans more options for obtaining quality health care, and to expand insurance coverage to the uninsured.

IN THE HOUSE OF REPRESENTATIVES

July 24, 2000

Mr. COOKSEY, (for himself, Mr. ARMEY, Mr. EHRLICH, Mr. BRYANT, Mr. GOODE, Mr. CANNON, Mr. TRAFICANT, Mr. SHADEGG, Mr. ENGLISH, Mrs. MYRICK, Mr. FLETCHER, Mrs. FOWLER, Mr. DOOLITTLE, Mr. TAUZIN, Ms. GRANGER, Mr. JENKINS, Mr. JONES of North Carolina, Mrs. KELLY, Mr. LINDER, Mrs. CUBIN, and Mr. SESSIONS) 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 allow more equitable and direct tax relief for health insurance and medical care expenses, to give Americans more options for obtaining quality health care, and to expand insurance coverage to the uninsured.

    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 ‘Patient Access, Choice, and Equity Act of 2000’.

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 35 as section 36 and by inserting after section 34 the following new section:

‘SEC. 35. HEALTH INSURANCE COSTS.

    ‘(a) IN GENERAL- In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this subtitle the fixed-amount health credit determined under subsection (b) or, if the taxpayer elects in lieu thereof, the percentage health credit determined under subsection (c).

    ‘(b) FIXED AMOUNT HEALTH CREDIT- For purposes of subsection (a)--

      ‘(1) IN GENERAL- The fixed-amount health credit is an amount equal to the amount paid by the taxpayer during the taxable year for qualified health insurance for the taxpayer, his spouse, and dependents.

      ‘(2) LIMITATIONS-

        ‘(A) IN GENERAL- The amount allowed as a credit under paragraph (1) to the taxpayer for the taxable year shall not exceed the lesser of--

          ‘(i) the sum of the monthly limitations for coverage months during such taxable year for each individual referred to in paragraph (1), or

          ‘(ii) $3,000.

        ‘(B) MONTHLY LIMITATION-

          ‘(i) 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--

‘(aa) such individual is the spouse of the taxpayer,

‘(bb) the taxpayer and such spouse are married as of the first day of such month, and

‘(cc) 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.

          ‘(ii) SPECIAL RULE FOR MARRIED INDIVIDUALS- In the case of an individual--

            ‘(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 individual’s spouse at all times during the taxable year,

          the limitation imposed by clause (i)(III) shall be divided equally between the individual and the individual’s spouse unless they agree on a different division.

      ‘(3) DENIAL OF CREDIT IF CONTRIBUTION MADE TO MEDICAL SAVINGS ACCOUNT- No credit shall be allowed under this subsection with respect to any individual who makes a contribution to a medical savings account (as defined in section 220(d)).

    ‘(c) PERCENTAGE HEALTH CREDIT- For purposes of subsection (a)--

      ‘(1) IN GENERAL- The percentage health credit is an amount equal to the sum of--

        ‘(A) the applicable percentage of the sum of--

          ‘(i) 25 percent of the qualified medical expenses incurred by the taxpayer, his spouse, and dependents during any coverage month and paid by such taxpayer during the taxable year which does not exceed 5 percent of the adjusted gross income of such taxpayer for such year,

          ‘(ii) 40 percent of such expenses so incurred and paid which exceeds 5 percent but does not exceed 15 percent of such adjusted gross income, plus

          ‘(iii) 60 percent of such expenses so incurred and paid which exceeds 15 percent of such adjusted gross income, plus

        ‘(B) 25 percent of the qualified medical savings account contributions.

      ‘(2) LIMITATIONS-

        ‘(A) IN GENERAL- The credit allowed under paragraph (1) for a taxable year shall not exceed the sum of--

          ‘(i) the tax imposed by this chapter for the taxable year on the taxpayer, his spouse, and dependents with respect to

whom such credit is allowed, reduced by the credits allowable against such tax (other than the credits allowable under this subpart), plus

          ‘(ii) the tax imposed by sections 1401, 3101, 3111, 3201(a), 3211(a)(1), 3221(a) for the taxable year with respect to such taxpayer, spouse, and dependents.

        ‘(B) DOLLAR LIMITATION- The amount allowed as a credit under paragraph (1)(A) for a taxable year shall not exceed $12,500 ($6,250 in the case of a married individual filing a separate return).

        ‘(C) COORDINATION WITH SPECIAL REFUND OF SOCIAL SECURITY TAXES- The taxes referred to in subparagraph (A)(ii) shall not include any amount to which the taxpayer, his spouse, or dependents is entitled to a special refund under section 6413(c).

        ‘(D) SPECIAL RULE- Any amounts paid pursuant to an agreement under section 3121(l) (relating to agreements entered into by American employers with respect to foreign affiliates) which are equivalent to the taxes imposed by sections 3101, 3111, 3201(a), and 3221(a) shall be treated as taxes referred to in subparagraph (A)(ii).

      ‘(3) QUALIFIED MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS- The term ‘qualified medical savings account contributions’ means a payment to a medical savings account if a deduction would (but for section 220(k)) be allowed under section 220 to the taxpayer for such payment for the taxable year to the medical savings account of an individual.

      ‘(4) SPECIAL RULE IN THE CASE OF CHILD OF DIVORCED PARENTS, ETC- For purposes of this subsection, any child to whom section 152(e) applies shall be treated as a dependent of both parents.

    ‘(d) DEFINITIONS- For purposes of this section--

      ‘(1) QUALIFIED INDIVIDUAL- The term ‘qualified individual’ means an individual who is a citizen or national of the United States or is a lawful permanent resident of the United States (as defined in section 7701(b)(6)).

      ‘(2) QUALIFIED HEALTH INSURANCE- The term ‘qualified health insurance’ means insurance--

        ‘(A) which is--

          ‘(i) health insurance coverage, as defined by section 9832(b)(1), or

          ‘(ii) insurance which constitutes medical care under a group health plan (as defined by section 5000(b)(1)), other than insurance a substantial portion of which consists of excepted benefits (as defined by section 9832(c)), and

        ‘(B) under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed--

          ‘(i) $4,000 for self-only coverage, and

          ‘(ii) $6,000 for family coverage.

      ‘(3) QUALIFIED MEDICAL EXPENSES-

        ‘(A) IN GENERAL- The term ‘qualified medical expenses’ means, with respect to a qualified individual, amounts paid by such individual for medical care for such individual, the spouse of such individual, and any dependent (as defined in section 152) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise.

        ‘(B) REDUCTION FOR AMOUNTS DISTRIBUTED FROM MSA’S- Such term shall not include any distribution from a medical savings account which is not includible in gross income by reason of section 220(f)(1).

        ‘(C) APPLICABLE RULES- For purposes of subparagraph (A), rules similar to the rules of subsections (b) and (c) of section 213 shall apply.

      ‘(4) MEDICAL CARE- 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.

      ‘(5) COVERAGE MONTH-

        ‘(A) IN GENERAL- The term ‘coverage month’ means, with respect to an individual, any month if as of the first day of such month such individual is covered by qualified health insurance.

        ‘(B) MEDICARE, MEDICAID, AND STATE CHILDRENS’ HEALTH INSURANCE PROGRAM- 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,

          ‘(ii) is a participant in the program under title XIX of such Act, or

          ‘(iii) is a participant in the program under title XXI of such Act.

        ‘(C) 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 month--

          ‘(i) such individual is enrolled in a program to receive benefits under chapter 55 of title 10, United States Code,

          ‘(ii) any benefit is provided to such individual under chapter 17 of title 38, United States Code, or

          ‘(iii) any benefit is provided to such individual under any medical care program under the Indian Health Care Improvement Act.

        ‘(D) 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.

    ‘(e) SPECIAL RULES- For purposes of this section--

      ‘(1) NONRESIDENT ALIENS- If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.

      ‘(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) NO OTHER CREDIT ALLOWED WITH RESPECT TO DEPENDENT IF FIXED CREDIT ALLOWED- If a credit is allowed to a taxpayer for a taxable year under subsection (b) with respect to a dependent, no credit with respect to such dependent shall be allowed under this section for such taxable year to any other taxpayer.

      ‘(4) IDENTIFICATION NUMBER REQUIREMENT- No credit shall be allowed under this section with respect to an eligible individual who does not include on the return of tax for the taxable year--

        ‘(A) such individual’s taxpayer identification number,

        ‘(B) if the individual is married (within the meaning of section 7703), the taxpayer identification number of such individual’s spouse, and

        ‘(C) the name, age, and taxpayer identification number of each dependent with respect to whom a credit is claimed under this section.

      ‘(5) COORDINATION WITH ADVANCE PAYMENT- Rules similar to the rules of section 32(g) shall apply to any credit to which this section applies.

      ‘(6) TREATMENT OF AMOUNTS PAID BY EMPLOYER- Amounts paid by an employer for coverage under an accident or health plan which constitutes medical care for a taxpayer, his spouse and dependents, which would (but for section 106(d)) be excludable from gross income shall be treated as paid by the taxpayer.

      ‘(7) COST-OF-LIVING ADJUSTMENT-

        ‘(A) IN GENERAL- In the case of any taxable year beginning in a calendar year after 2002, each dollar amount contained in subsections (b)(2)(A)(ii), (b)(2)(B), (c)(2)(B), and (d)(2)(B) shall be increased by the medical care cost adjustment of such amount for such calendar year. If any increase determined under the preceding sentence is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

        ‘(B) MEDICAL CARE COST ADJUSTMENT- For purposes of subparagraph (A), the medical care cost adjustment for any calendar year is the percentage (if any) by which--

          ‘(i) the medical care component of the Consumer Price Index (as defined in section 1(f)(5)) for August of the preceding calendar year, exceeds

          ‘(ii) such component for August of 2001.

    ‘(f) RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIMED CREDIT IN PRIOR YEAR-

      ‘(1) TAXPAYERS MAKING PRIOR FRAUDULENT OR RECKLESS CLAIMS-

        ‘(A) IN GENERAL- No credit shall be allowed under this section for any taxable year in the disallowance period.

        ‘(B) DISALLOWANCE PERIOD- For purposes of subparagraph (A), the disallowance period is the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud or reckless or intentional disregard of rules and regulations.

      ‘(2) TAXPAYERS MAKING IMPROPER PRIOR CLAIMS- In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit.

    ‘(g) DENIAL OF DOUBLE BENEFIT- No credit shall be allowed under this section for any expense for which a deduction or credit is allowed under any other provision of this chapter.’.

    (b) CLERICAL AMENDMENT- 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 item relating to section 35 and inserting the following new items:

‘Sec. 35. Health insurance costs.

‘Sec. 36. Overpayments of tax.’.

    (c) APPROPRIATIONS FOR REFUND- Section 1324(b)(2) of title 31, United States Code, is amended by inserting before the period ‘, or of sections 35 and 36 of such Code’.

    (d) REPORT ON SUITABLE INDEX FOR INFLATION ADJUSTMENT- If the Bureau of Labor Statistics of the Department of Commerce begins publishing a component of the consumer price index which tracks health insurance other than Medicare, the Secretary of the Treasury shall submit a report to the Congress on the suitability of changing the index referred to in section 35(e)(7)(B) of the Internal Revenue Code of 1986 (other than for purposes of subsection (c)(2)(B) of such section), as added by this section, to such component.

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

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. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS OF QUALIFIED HEALTH INSURANCE.

    ‘(a) GENERAL RULE-

      ‘(1) PAYMENTS BY SECRETARY- In the case of an eligible individual, the Secretary shall make payments--

        ‘(A) in the case of an employee covered by qualified health insurance of, or contributed to by, the employer (other than insurance which constitutes a self-insured group health plan), to the employer if the employer elects the application of this section,

        ‘(B) in the case of an employee covered by qualified health insurance of, or contributed to by, the employer which constitutes a self-insured group health plan, to the employer, and

        ‘(C) in any other case, to the health insurance issuer of qualified health insurance of such individual.

      ‘(2) AMOUNT OF PAYMENTS- Payments under paragraph (1) shall be made in an amount equal to the qualified health insurance credit advance amount of such individual.

      ‘(3) PAYMENTS TO BE TREATED AS PAYMENTS OF WITHHOLDING AND FICA TAXES-

        ‘(A) PAYMENTS MADE FROM CERTAIN TAXES OWED- With respect to any payment under paragraph (1), rules similar to the rules of sections 3507(d) (1) and (4) shall apply. In the case of payments to a health insurance issuer with respect to an individual who is not an employee of such issuer, rules under the preceding sentence shall be applied to any amounts for which such issuer is liable under section 3401, 3102, and 3111.

        ‘(B) DIFFERENCE PAYABLE IN CASH- In the case of any employer or health insurance issuer, if for any month the aggregate payment to such employer or issuer by reason of the preceding sentence is less than the aggregate qualified health insurance credit advance amount, the Secretary shall pay the difference directly to such employer or issuer (as the case may be). For purposes of this subparagraph, the Secretary may require the employer and the health insurance issuer to provide such additional information as the Secretary determines appropriate.

      ‘(4) TRANSFER TO TRUST FUNDS- The Secretary shall transfer from the general fund to the Old-Age, Survivors, and Disability Insurance Trust Fund and to the Hospital Insurance Trust Fund amounts equivalent to the amount of the reduction in taxes imposed by chapter 21 by reason of paragraph (3). Any such transfer shall be made at the same time the reduced taxes would have been deposited in either such Trust Fund.

    ‘(b) ELIGIBLE INDIVIDUAL- For purposes of this section, the term ‘eligible individual’ means any individual--

      ‘(1) who purchases qualified health insurance, and

      ‘(2) for whom a qualified health insurance credit eligibility certificate is in effect.

    ‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGIBILITY CERTIFICATE-

      ‘(1) IN GENERAL- For purposes of this section, a qualified health insurance credit eligibility certificate is a statement furnished by an individual to the employer or the health insurance issuer which--

        ‘(A) certifies that the individual will be eligible to receive the credit provided by section 35(b) for the taxable year,

        ‘(B) estimates the amount of such credit for such taxable year,

        ‘(C) contains the name, address, and TIN of each individual who is obtaining coverage under such certificate,

        ‘(D) certifies that no individual described in subparagraph (C) has another health insurance credit eligibility certificate in effect, and

        ‘(E) provides such other information as the Secretary may require for purposes of this section.

      ‘(2) CERTIFICATE IN EFFECT- A qualified health insurance credit eligibility certificate shall take effect on the first day of a coverage month (as defined in section 35(d)) and shall remain in effect with respect to the individual until the earlier of revocation by the individual, another such certificate takes effect under this section with respect to the individual, or cancellation of the qualified health insurance by the issuer or the employer.

    ‘(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 employer or issuer of qualified health insurance, the Secretary’s estimate of the amount of credit allowable under section 35(b) to the individual for the taxable year which is attributable to the insurance provided to the individual by such employer or issuer.

    ‘(e) 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 employer or health insurance issuer (as the case may be)--

      ‘(1) provides to the Secretary the qualified health insurance credit eligibility certificate of such individual, and

      ‘(2) agrees to provide the return relating to such individual under section 6050T (or with respect to such employer or issuer, an agreement relating to such individual is in effect under section 6050T(e)).

    ‘(f) QUALIFIED HEALTH INSURANCE- For purposes of this section, the term ‘qualified health insurance’ has the meaning given to such term by section 35(d).

    ‘(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 such Code is amended by adding at the end the following new item:

‘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. INFORMATION REPORTING.

    (a) 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 new section:

‘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--

      ‘(1) from any person for coverage of such person or any other person under qualified health insurance, or

      ‘(2) under section 7527 with respect to a qualified health insurance credit eligibility certificate,

    shall make the return described in subsection (b) (at such time as the Secretary may by regulations prescribe) with respect to each person from whom any such payment is 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 person from whom payments described in subsection (a) were received, and the aggregate amounts of such payments,

        ‘(B) the name, address, and TIN of each individual who was provided by such person with coverage under qualified health insurance by reason of such payments and the period of such coverage,

        ‘(C) the coverage months (as defined in section 35(d)) of each individual described in subparagraph (A) and (B),

        ‘(D) the amounts advanced to such person from the Secretary under section 7527 as premium payments for such insurance, and

        ‘(E) such other information as the Secretary may reasonably prescribe.

    ‘(c) QUALIFIED HEALTH INSURANCE- For purposes of this section, the term ‘qualified health insurance’ means qualified health insurance (as defined in section 35(d)) other than, to the extent provided in regulations prescribed by the Secretary, any other insurance covering an individual if no credit is allowable under section 35 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 subsections (b)(2)(B), (C), (D), and (E) 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- A person required to make a return under subsection (a) (but for this subsection) shall not be required to make such return if, under such regulations as the Secretary shall prescribe, such person has entered into an agreement with another person to make the return required by subsection (a).’.

    (b) ASSESSABLE PENALTIES-

      (1) 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 new clause:

          ‘(xi) section 6050T (relating to returns relating to payments for qualified health insurance),’.

      (2) 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 new subparagraph:

        ‘(BB) section 6050T(d) (relating to returns relating to payments for qualified health insurance).’.

    (c) 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 new item:

‘Sec. 6050T. Returns relating to payments for qualified health insurance.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 5. CREDIT FOR CERTAIN EMPLOYMENT TAXES WITH RESPECT TO FORMERLY EXCLUDABLE HEALTH INSURANCE COSTS.

    (a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of such Code (relating to business related credits) is amended by adding at the end the following:

‘SEC. 45D. CREDIT FOR CERTAIN EMPLOYMENT TAXES WITH RESPECT TO FORMERLY EXCLUDABLE HEALTH INSURANCE COSTS.

    ‘(a) GENERAL RULE- For purposes of section 38, in the case of an employer, the former health exclusion credit determined under this section for the taxable year is the aggregate of the creditable employee amounts.

    ‘(b) CREDITABLE EMPLOYEE AMOUNT- For purposes of subsection (a)--

      ‘(1) IN GENERAL- The term ‘creditable employee amount’ means, with respect to each covered employee, the employer tax on the formerly excludable health costs of the covered employee’s wages or compensation (as the case may be).

      ‘(2) EMPLOYER TAX ON THE FORMERLY EXCLUDABLE HEALTH COSTS- The term ‘employer tax on the formerly excludable health costs’ means the amount equal to the excess of--

        ‘(A) the tax imposed under section 3111 or 3221(a) on wages or compensation (as the case may be) of the employee for the calendar year ending in or with the end of the taxable year of the employer, over

        ‘(B) such tax for such calendar year which would be imposed on--

          ‘(i) wages or compensation (as the case may be) of such employee, if such wages or compensation were reduced by

          ‘(ii) the total amount of the employer-provided coverage under an accident or health plan which would have been excludable from the gross income of such employee under section 106 but for section 106(d).

      ‘(3) COVERED EMPLOYEE- The term ‘covered employee’ means an individual who--

        ‘(A) was employed by the employer on January 1, 2001,

        ‘(B) was covered at all times during calendar year 2001 by such employer’s employer-provided coverage under an accident or health plan which is excludable from the gross income of such individual under section 106, and

        ‘(C) for the period--

          ‘(i) beginning on January 1, 2002, and

          ‘(ii) ending on the day before the first day such person is not covered by such employer’s employer-provided coverage for an accident or health plan which would have been excludable from the gross income of such individual under section 106 but for section 106(d).

      ‘(4) WAGES AND COMPENSATION- The terms ‘wages’ and ‘compensation’ shall have the meaning given to such terms by sections 3121(a) and 3231(e), respectively.

    ‘(c) SPECIAL RULES-

      ‘(1) SPECIAL RULE CONCERNING SELF-EMPLOYED- The term ‘employer’ shall not include an individual who is an employee within the meaning of section 401(c)(1).

      ‘(2) CERTAIN RULES MADE APPLICABLE- For purposes of this section, rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply.

    ‘(d) NOTICE OF VALUE OF HEALTH INSURANCE COVERAGE- No credit shall be allowed under subsection (a) to an employer unless such employer notifies (in the manner the Secretary shall provide) each individual who is an employee of the employer during calendar year 2001 of the aggregate value of the applicable premiums (as defined by section 4980B(f)(4)) provided to the employee during such calendar year.

    ‘(e) TERMINATION- This section shall not apply to taxable years beginning after December 31, 2003.’.

    (b) CURRENT YEAR BUSINESS CREDIT CALCULATION- Section 38(b) of such Code (relating to current year business credit) is amended by striking ‘plus’ at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting ‘, plus’, and by adding at the end the following:

      ‘(13) the former health exclusion credit determined under section 45D(a).’.

    (c) LIMITATION ON CARRYBACK- Subsection (d) of section 39 of such Code (relating to carryback and carryforward of unused credits) is amended by adding at the end the following:

      ‘(9) NO CARRYBACK OF FORMER HEALTH EXCLUSION CREDIT BEFORE EFFECTIVE DATE- No amount of unused business credit available under section 45D may be carried back to a taxable year beginning on or before the date of the enactment of this paragraph.’.

    (d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45C the following:

‘Sec. 45D. Credit for certain employment taxes with respect to formerly excludable health insurance costs.’.

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 6. ADDITIONAL PROVISIONS.

    (a) TERMINATION OF EXCLUSION FROM GROSS INCOME FOR EMPLOYER-PROVIDED HEALTH CARE COVERAGE- 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:

    ‘(d) INCLUSION OF INSURANCE CONSTITUTING MEDICAL CARE (OTHER THAN LONG-TERM CARE INSURANCE)-

      ‘(1) IN GENERAL- Subsection (a) shall not apply to--

        ‘(A) any employer-provided coverage under an accident or health plan which constitutes medical care, and

        ‘(B) any employer contribution to a medical savings account which is treated by subsection (b) as employer-provided coverage for medical expenses under an accident or health plan.

      ‘(2) EXCEPTION FOR INDIVIDUALS ENTITLED TO MEDICARE- Paragraph (1) shall not apply to any employee who, as of the time such employer-provided coverage was provided, is entitled to any benefits under title XVIII of the Social Security Act.

      ‘(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.

      ‘(4) SPECIAL RULE FOR VALUATION OF INCLUSION OF EMPLOYER-PROVIDED HEALTH COVERAGE- The amount included in gross income by reason of paragraph (1) shall be the cost to the employer of the employer-provided coverage under an accident or health plan with respect to the employee for the calendar year. Such cost shall be the applicable premium (as defined by section 4980B(f)(4)).’.

    (b) DISALLOWANCE OF DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS- Section 162(l) of such Code is amended by adding at the end the following new paragraph:

      ‘(6) TERMINATION OF DEDUCTION FOR HEALTH INSURANCE- In the case of taxable years beginning after December 31, 2001, this subsection shall only apply to amounts paid for qualified long-term care insurance contracts.’.

    (c) MEDICAL CARE DEDUCTION LIMITED TO QUALIFIED LONG-TERM CARE AND INDIVIDUALS ENTITLED TO MEDICARE- Section 213 of such Code (relating to medical, dental, etc., expenses) is amended by adding at the end the following new subsection:

    ‘(f) TERMINATION-

      ‘(1) IN GENERAL- Except as provided in paragraphs (2) and (3), subsection (a) shall not apply to any taxable year beginning after December 31, 2001.

      ‘(2) EXCEPTION FOR INDIVIDUALS ENTITLED TO MEDICARE- Paragraph (1) shall not apply to expenses paid for medical care provided for any individual who, as of the time such medical care was provided, is entitled to any benefits under title XVIII of the Social Security Act.

      ‘(3) EXCEPTION FOR QUALIFIED LONG-TERM CARE- Paragraph (1) shall not apply to expenses paid for medical care described in paragraph (1)(C) of subsection (d) and so much of paragraph (1)(D) of such subsection as relates to qualified long-term care insurance contracts.’.

    (d) MEDICAL SAVINGS ACCOUNTS-

      (1) TERMINATION OF DEDUCTION- Section 220 of such Code (relating to medical savings accounts) is amended by adding at the end the following:

    ‘(k) TERMINATION- No deduction shall be allowed for a contribution to a medical savings account made after December 31, 2001.’.

      (2) BOTH EMPLOYERS AND EMPLOYEES MAY CONTRIBUTE TO MEDICAL SAVINGS ACCOUNTS- Paragraph (5) of section 220(b) of such Code is amended to read as follows:

      ‘(5) COORDINATION WITH EXCLUSION FOR EMPLOYER CONTRIBUTIONS- The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by the amount which would (but for section 106(b), without regard to subsection (d) thereof) be includible in the taxpayer’s gross income for such taxable year.’.

      (3) PENALTY FOR EXCESS CONTRIBUTIONS-

        (A) Paragraph (1) of section 4973(d) of such Code is amended to read as follows:

      ‘(1) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 220(f)(5)) for which a credit is not allowed under section 35(c)(1)(B), and’.

        (B) Clause (i) of section 4973(d)(2)(B) of such Code is amended to read as follows:

          ‘(i) the maximum amount allowable as a deduction under section 220(b)(1) (determined without regard to section 220(k)) for the taxable year, over’.

    (f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.