Text: H.R.4925 — 106th Congress (1999-2000)

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Introduced in House (07/24/2000)


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[Congressional Bills 106th Congress]
[From the U.S. Government Printing Office]
[H.R. 4925 Introduced in House (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.
                                 <all>