TRADE ACT OF 2002

(Continued)
 

SEC. 201. CREDIT FOR HEALTH INSURANCE COSTS OF INDIVIDUALS RECEIVING A TRADE READJUSTMENT ALLOWANCE OR A BENEFIT FROM THE PENSION BENEFIT GUARANTY CORPORATION.

(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 inserting after section 34 the following new section:

‘‘SEC. 35. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

‘‘(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by subtitle A an amount equal to 65 percent of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under qualified health insurance for eligible coverage months beginning in the taxable year.

‘‘(b) ELIGIBLE COVERAGE MONTH.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘eligible coverage month’ means any month if—

‘‘(A) as of the first day of such month, the taxpayer—

‘‘(i) is an eligible individual,

‘‘(ii) is covered by qualified health insurance, the premium for which is paid by the taxpayer,

‘‘(iii) does not have other specified coverage, and

‘‘(iv) is not imprisoned under Federal, State, or local authority, and ‘‘(B) such month begins more than 90 days after the date of the enactment of the Trade Act of 2002.

‘‘(2) JOINT RETURNS.—In the case of a joint return, the requirements of paragraph (1)(A) shall be treated as met with respect to any month if at least 1 spouse satisfies such requirements.

‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘eligible individual’ means—

‘‘(A) an eligible TAA recipient,

‘‘(B) an eligible alternative TAA recipient, and

‘‘(C) an eligible PBGC pension recipient.

‘‘(2) ELIGIBLE TAA RECIPIENT.—The term ‘eligible TAA recipient’ means, with respect to any month,any individual who is receiving for any day of such month a trade readjustment allowance under chapter 2 of title II of the Trade Act of 1974 or who would be eligible to receive such allowance if section 231 of such Act were applied without regard to subsection (a)(3)(B) of such section. An individual shall continue to be treated as an eligible TAA recipient during the first month that such individual would otherwise cease to be an eligible TAA recipient by reason of the preceding sentence.

‘‘(3) ELIGIBLE ALTERNATIVE TAA RECIPIENT.— The term ‘eligible alternative TAA recipient’ means, with respect to any month, any individual who—

‘‘(A) is a worker described in section 246(a)(3)(B) of the Trade Act of 1974 who is participating in the program established under section 246(a)(1) of such Act, and

‘‘(B) is receiving a benefit for such month under section 246(a)(2) of such Act. An individual shall continue to be treated as an eligible alternative TAA recipient during the first month that such individual would otherwise cease to be an eligible alternative TAA recipient by reason of the preceding sentence.

‘‘(4) ELIGIBLE PBGC PENSION RECIPIENT.—The term ‘eligible PBGC pension recipient’ means, with respect to any month, any individual who—

‘‘(A) has attained age 55 as of the first day of such month, and

‘‘(B) is receiving a benefit for such month any portion of which is paid by the Pension Benefit Guaranty Corporation under title IV of the Employee Retirement Income Security Act of 1974.

‘‘(d) QUALIFYING FAMILY MEMBER.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘qualifying family member’ means—

‘‘(A) the taxpayer’s spouse, and

‘‘(B) any dependent of the taxpayer with respect to whom the taxpayer is entitled to a deduction under section 151(c). Such term does not include any individual who has other specified coverage.

‘‘(2) SPECIAL DEPENDENCY TEST IN CASE OF DIVORCED PARENTS, ETC.—If paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, in the case of any taxable year beginning in such calendar year, such child shall be treated as described in paragraph (1)(B) with respect to the custodial parent (within the meaning of section 152(e)(1)) and not with respect to the noncustodial parent.

‘‘(e) QUALIFIED HEALTH INSURANCE.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘qualified health insurance’ means any of the following:

‘‘(A) Coverage under a COBRA continuation provision (as defined in section 9832(d)(1)).

‘‘(B) State-based continuation coverage provided by the State under a State law that requires such coverage.

‘‘(C) Coverage offered through a qualified State high risk pool (as defined in section 2744(c)(2) of the Public Health Service Act).

‘‘(D) Coverage under a health insurance program offered for State employees.

‘‘(E) Coverage under a State-based health insurance program that is comparable to the health insurance program offered for State employees.

‘‘(F) Coverage through an arrangement entered into by a State and—

‘‘(i) a group health plan (including such a plan which is a multiemployer plan as defined in section 3(37) of the Employee Retirement Income Security Act of 1974),

‘‘(ii) an issuer of health insurance coverage,

‘‘(iii) an administrator, or

‘‘(iv) an employer.

‘‘(G) Coverage offered through a State arrangement with a private sector health care coverage purchasing pool.

‘‘(H) Coverage under a State-operated health plan that does not receive any Federal financial participation.

‘‘(I) Coverage under a group health plan that is available through the employment of the eligible individual’s spouse.

‘‘(J) In the case of any eligible individual and such individual’s qualifying family members, coverage under individual health insurance if the eligible individual was covered under individual health insurance during the entire 30-day period that ends on the date that such individual became separated from the employment which qualified such individual for—

‘‘(i) in the case of an eligible TAA recipient, the allowance described in subsection (c)(2),

‘‘(ii) in the case of an eligible alternative TAA recipient, the benefit described in subsection (c)(3)(B), or

‘‘(iii) in the case of any eligible PBGC pension recipient, the benefit described in subsection (c)(4)(B). For purposes of this subparagraph, the term ‘individual health insurance’ means any insurance which constitutes medical care offered to individuals other than in connection with a group health plan and does not include Federal- or State-based health insurance coverage.

‘‘(2) REQUIREMENTS FOR STATE-BASED COVERAGE.—

‘‘(A) IN GENERAL.—The term ‘qualified health insurance’ does not include any coverage described in subparagraphs (B) through (H) of paragraph (1) unless the State involved has elected to have such coverage treated as qualified health insurance under this section and such coverage meets the following requirements:

‘‘(i) GUARANTEED ISSUE.—Each qualifying individual is guaranteed enrollment if the individual pays the premium for enrollment or provides a qualified health insurance costs credit eligibility certificate described in section 7527 and pays the remainder of such premium.

‘‘(ii) NO IMPOSITION OF PREEXISTING CONDITION EXCLUSION.—No pre-existing condition limitations are imposed with respect to any qualifying individual.

‘‘(iii) NONDISCRIMINATORY PREMIUM.—The total premium (as determined without regard to any subsidies) with respect to a qualifying individual may not be greater than the total premium (as so determined) for a similarly situated individual who is not a qualifying individual.

‘‘(iv) SAME BENEFITS.—Benefits under the coverage are the same as (or substantially similar to) the benefits provided to similarly situated individuals who are not qualifying individuals.

‘‘(B) QUALIFYING INDIVIDUAL.—For purposes of this paragraph, the term ‘qualifying individual’ means—

‘‘(i) an eligible individual for whom, as of the date on which the individual seeks to enroll in the coverage described in subparagraphs (B) through (H) of paragraph (1), the aggregate of the periods of creditable coverage (as defined in section 9801(c)) is 3 months or longer and who, with respect to 1any month, meets the requirements of clauses (iii) and (iv) of subsection (b)(1)(A); and

‘‘(ii) the qualifying family members of such eligible individual.

‘‘(3) EXCEPTION.—The term ‘qualified health insurance’ shall not include—

‘‘(A) a flexible spending or similar arrangement, and

‘‘(B) any insurance if substantially all of its coverage is of excepted benefits described in section 9832(c).

‘‘(f) OTHER SPECIFIED COVERAGE.—For purposes of this section, an individual has other specified coverage for any month if, as of the first day of such month—

‘‘(1) SUBSIDIZED COVERAGE.—

‘‘(A) IN GENERAL.—Such individual is covered under any insurance which constitutes medical care (except insurance substantially all of the coverage of which is of excepted benefits described in section 9832(c)) under any health plan maintained by any employer (or former employer) of the taxpayer or the taxpayer’s spouse and at least 50 percent of the cost of such coverage (determined under section 4980B) is paid or incurred by the employer.

‘‘(B) ELIGIBLE ALTERNATIVE TAA RECIPIENTS.—In the case of an eligible alternative TAA recipient, such individual is either—

‘‘(i) eligible for coverage under any qualified health insurance (other than insurance described in subparagraph (A), (B), or (F) of subsection (e)(1)) under which at least 50 percent of the cost of coverage (determined under section 4980B(f)(4)) is paid or incurred by an employer (or former employer) of the taxpayer or the taxpayer’s spouse, or

‘‘(ii) covered under any such qualified health insurance under which any portion of the cost of coverage (as so determined) is paid or incurred by an employer (or former employer) of the taxpayer or the taxpayer’s spouse.

‘‘(C) TREATMENT OF CAFETERIA PLANS.— For purposes of subparagraphs (A) and (B), the cost of coverage shall be treated as paid or incurred by an employer to the extent the coverage is in lieu of a right to receive cash or other qualified benefits under a cafeteria plan (as defined in section 125(d)).

‘‘(2) COVERAGE UNDER MEDICARE, MEDICAID, OR SCHIP.—Such individual—

‘‘(A) is entitled to benefits under part A of title XVIII of the Social Security Act or is enrolled under part B of such title, or

‘‘(B) is enrolled in the program under title XIX or XXI of such Act (other than under section 1928 of such Act).

‘‘(3) CERTAIN OTHER COVERAGE.—Such individual—

‘‘(A) is enrolled in a health benefits plan under chapter 89 of title 5, United States Code, or

‘‘(B) is entitled to receive benefits under chapter 55 of title 10, United States Code.

‘‘(g) SPECIAL RULES.—

‘‘(1) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT.—With respect to any taxable year, the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a) shall be reduced (but not below zero) by the aggregate amount paid on behalf of such taxpayer under section 7527 for months beginning in such taxable year.

‘‘(2) COORDINATION WITH OTHER DEDUCTIONS.—Amounts taken into account under subsection (a) shall not be taken into account in determining any deduction allowed under section 162(l) or 213.

‘‘(3) MSA DISTRIBUTIONS.—Amounts distributed from an Archer MSA (as defined in section 220(d)) shall not be taken into account under subsection (a).

‘‘(4) 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.

‘‘(5) BOTH SPOUSES ELIGIBLE INDIVIDUALS.— The spouse of the taxpayer shall not be treated as a qualifying family member for purposes of subsection (a), if—

‘‘(A) the taxpayer is married at the close of the taxable year,

‘‘(B) the taxpayer and the taxpayer’s spouse are both eligible individuals during the taxable year, and

‘‘(C) the taxpayer files a separate return for the taxable year.

‘‘(6) MARITAL STATUS; CERTAIN MARRIED INDIVIDUALS LIVING APART.—Rules similar to the rules of paragraphs (3) and (4) of section 21(e) shall apply for purposes of this section.

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

‘‘(8) TREATMENT OF PAYMENTS.—For purposes of this section—

‘‘(A) PAYMENTS BY SECRETARY.—Payments made by the Secretary on behalf of any individual under section 7527 (relating to advance payment of credit for health insurance costs of eligible individuals) shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.

‘‘(B) PAYMENTS BY TAXPAYER.—Payments made by the taxpayer for eligible coverage months shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.

‘‘(9) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, section 6050T, and section 7527.’’.

(b) PROMOTION OF STATE HIGH RISK POOLS.—Title 5 XXVII of the Public Health Service Act is amended by inserting after section 2744 the following new section:

‘‘SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

‘‘(a) SEED GRANTS TO STATES.—The Secretary shall  provide from the funds appropriated under subsection (c)(1) a grant of up to $1,000,000 to each State that has not created a qualified high risk pool as of the date of the enactment of this section for the State’s costs of creation and initial operation of such a pool.

‘‘(b) MATCHING FUNDS FOR OPERATION OF POOLS.—

‘‘(1) IN GENERAL.—In the case of a State that has established a qualified high risk pool that—

‘‘(A) restricts premiums charged under the pool to no more than 150 percent of the premium for applicable standard risk rates;

‘‘(B) offers a choice of two or more coverage options through the pool; and

‘‘(C) has in effect a mechanism reasonably designed to ensure continued funding of losses incurred by the State after the end of fiscal year 2004 in connection with operation of the pool; the Secretary shall provide, from the funds appropriated under subsection (c)(2) and allotted to the State under paragraph (2), a grant of up to 50 percent of the losses incurred by the State in connection with the operation of the pool.

‘‘(2) ALLOTMENT.—The amounts appropriated under subsection (c)(2) for a fiscal year shall be made available to the States in accordance with a formula that is based upon the number of uninsured individuals in the States.

‘‘(c) FUNDING.—Out of any money in the Treasury of the United States not otherwise appropriated, there are authorized and appropriated—

‘‘(1) $20,000,000 for fiscal year 2003 to carry out subsection (a); and

‘‘(2) $40,000,000 for each of fiscal years 2003 and 2004 to carry out subsection (b). Funds appropriated under this subsection for a fiscal year shall remain available for obligation through the end of the following fiscal year. Nothing in this section shall be construed as providing a State with an entitlement to a grant under this section.

‘‘(d) QUALIFIED HIGH RISK POOL AND STATE DEFINED.—For purposes of this section, the term ‘qualified high risk pool’ has the meaning given such term in section 2744(c)(2) and the term ‘State’ means any of the 50 States and the District of Columbia.’’.

(c) CONFORMING AMENDMENTS.— (1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period ‘‘, or from section 35 of such Code’’.

(2) The table of sections for subpart C of part IV of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following new items:

‘‘Sec. 35. Health insurance costs of eligible individuals.

‘‘Sec. 36. Overpayments of tax.’’.

(d) EFFECTIVE DATE.—

(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) STATE HIGH RISK POOLS.—The amendment made by subsection (b) shall take effect on the date of the enactment of this Act.

SEC. 202. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

(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 CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

‘‘(a) GENERAL RULE.—Not later than August 1, 2003, the Secretary shall establish a program for making payments on behalf of certified individuals to providers of qualified health insurance (as defined in section 35(e)) for such individuals.

‘‘(b) LIMITATION ON ADVANCE PAYMENTS DURING ANY TAXABLE YEAR.—The Secretary may make payments under subsection (a) only to the extent that the total amount of such payments made on behalf of any individual during the taxable year does not exceed 65 percent of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under qualified health insurance for eligible coverage months beginning in the taxable year.

‘‘(c) CERTIFIED INDIVIDUAL.—For purposes of this section, the term ‘certified individual’ means any individual for whom a qualified health insurance costs credit eligibility certificate is in effect.

‘‘(d) QUALIFIED HEALTH INSURANCE COSTS CREDIT ELIGIBILITY CERTIFICATE.—For purposes of this section, the term ‘qualified health insurance costs credit eligibility certificate’ means any written statement that an individual is an eligible individual (as defined in section 35(c)) if such statement provides such information as the Secretary may require for purposes of this section and—

‘‘(1) in the case of an eligible TAA recipient (as defined in section 35(c)(2)) or an eligible alternative TAA recipient (as defined in section 35(c)(3)), is certified by the Secretary of Labor (or by any other person or entity designated by the Secretary), or

‘‘(2) in the case of an eligible PBGC pension recipient (as defined in section 35(c)(4)), is certified by the Pension Benefit Guaranty Corporation (or by any other person or entity designated by the Secretary).’’.

(b) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF CARRYING OUT A PROGRAM FOR ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.—

(1) IN GENERAL.—Subsection (l) of section 6103 of such Code (relating to disclosure of returns and return information for purposes other than tax administration) is amended by adding at the end the following new paragraph:

‘‘(18) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF CARRYING OUT A PROGRAM FOR ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.—The Secretary may disclose to providers of health insurance for any certified individual (as defined in section 7527(c)) return information with respect to such certified individual only to the extent necessary to carry out the program established by section 7527 (relating to advance payment of credit for health insurance costs of eligible individuals).’’.

(2) PROCEDURES AND RECORDKEEPING RELATED TO DISCLOSURES.—Subsection (p) of such section is amended—

(A) in paragraph (3)(A) by striking ‘‘or (17)’’ and inserting ‘‘(17), or (18)’’, and (B) in paragraph (4) by inserting ‘‘or (17)’’ after ‘‘any other person described in subsection (l)(16)’’ each place it appears.

(3) UNAUTHORIZED INSPECTION OF RETURNS OR RETURN INFORMATION.—Section 7213A(a)(1)(B) of such Code is amended by striking ‘‘section 6103(n)’’ and inserting ‘‘subsection (l)(18) or (n) of section 6103’’.

(c) 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 new section:

‘‘SEC. 6050T. RETURNS RELATING TO CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

‘‘(a) REQUIREMENT OF REPORTING.—Every person who is entitled to receive payments for any month of any calendar year under section 7527 (relating to advance payment of credit for health insurance costs of eligible individuals) with respect to any certified individual (as defined in section 7527(c)) shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to each such individual.

‘‘(b) FORM AND MANNER OF RETURNS.—A return is described in this subsection if such return—

‘‘(1) is in such form as the Secretary may prescribe, and

‘‘(2) contains—

‘‘(A) the name, address, and TIN of each individual referred to in subsection (a),

‘‘(B) the number of months for which amounts were entitled to be received with respect to such individual under section 7527 (relating to advance payment of credit for health insurance costs of eligible individuals),

‘‘(C) the amount entitled to be received for each such month, and

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

‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing—

‘‘(1) the name and address of the person required to make such return and the phone number of the information contact for such person, and

‘‘(2) the information required to be shown on the return with respect to such individual. The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.’’.

(2) ASSESSABLE PENALTIES.—

(A) Subparagraph (B) of section 6724(d)(1) of such Code (relating to definitions) is amended by 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 credit for health insurance costs of eligible individuals),’’.

(B) Paragraph (2) of section 6724(d) of such Code is amended by striking ‘‘or’’ at the end of subparagraph (Z), by striking the period at the end of subparagraph (AA) and inserting ‘‘, or’’, and by adding after subparagraph (AA) the following new subparagraph:

‘‘(BB) section 6050T (relating to returns relating to credit for health insurance costs of eligible individuals).’’.

(d) CLERICAL AMENDMENTS.—

(1) ADVANCE PAYMENT.—The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

‘‘Sec. 7527. Advance payment of credit for health insurance costs of eligible individuals.’’.

(2) INFORMATION REPORTING.—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 credit for health insurance costs of eligible individuals.’’.

(e) EFFECTIVE DATE.—The amendments made by this section shall take effect on the date of the enactment of this Act.