Section 1401

SEC. 1401. REFUNDABLE TAX CREDIT PROVIDING PREMIUM ASSISTANCE FOR COVERAGE UNDER A QUALIFIED HEALTH PLAN.

[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 inserting after section 36A the following new section:

"SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED HEALTH PLAN.

"[a] IN GENERAL.—In the case of an applicable taxpayer, there shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year.

"[b] PREMIUM ASSISTANCE CREDIT AMOUNT.—For purposes of this section—

"[1] IN GENERAL.—The term "premium assistance credit amount" means, with respect to any taxable year, the sum of the premium assistance amounts determined under paragraph [2] with respect to all coverage months of the taxpayer occurring during the taxable year.

"[2] PREMIUM ASSISTANCE AMOUNT.—The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—

"[A] the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer's spouse, or any dependent [as defined in section 152] of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act, or

"[B] the excess [if any] of—

"[i] the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over

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"[ii] an amount equal to 1/12 of the product of the applicable percentage and the taxpayer's household income for the taxable year.

"[3] OTHER TERMS AND RULES RELATING TO PREMIUM ASSISTANCE AMOUNTS.—For purposes of paragraph [2]—

"[A] APPLICABLE PERCENTAGE.—

"[i] IN GENERAL.—Except as provided in clause [ii], the applicable percentage with respect to any taxpayer for any taxable year is equal to 2.8 percent, increased by the number of percentage points [not greater than 7] which bears the same ratio to 7 percentage points as—

"[I] the taxpayer's household income for the taxable year in excess of 100 percent of the poverty line for a family of the size involved, bears to

"[II] an amount equal to 200 percent of the poverty line for a family of the size involved.

"[ii] SPECIAL RULE FOR TAXPAYERS UNDER 133 PERCENT OF POVERTY LINE.—If a taxpayer's household income for the taxable year is in excess of 100 percent, but not more than 133 percent, of the poverty line for a family of the size involved, the taxpayer's applicable percentage shall be 2 percent.

"[iii] INDEXING.—In the case of taxable years beginning in any calendar year after 2014, the Secretary shall adjust the initial and final applicable percentages under clause [i], and the 2 percent under clause [ii], for the calendar year to reflect the excess of the rate of premium growth between the preceding calendar year and 2013 over the rate of income growth for such period.

"[B] APPLICABLE SECOND LOWEST COST SILVER PLAN.— The applicable second lowest cost silver plan with respect to any applicable taxpayer is the second lowest cost silver plan of the individual market in the rating area in which the taxpayer resides which—

"[i] is offered through the same Exchange through which the qualified health plans taken into account under paragraph [2][A] were offered, and

"[ii] provides— "[I] self-only coverage in the case of an applicable taxpayer—

"[aa] whose tax for the taxable year is determined under section 1[c] [relating to unmarried individuals other than surviving spouses and heads of households] and who is not allowed a deduction under section 151 for the taxable year with respect to a dependent, or

"[bb] who is not described in item [aa] but who purchases only self-only coverage, and "[II] family coverage in the case of any other applicable taxpayer. If a taxpayer files a joint return and no credit is allowed under this section with respect to 1 of the spouses by reason of subsection [e], the taxpayer shall be treated as described in clause [ii][I] unless a deduction is allowed

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under section 151 for the taxable year with respect to a dependent other than either spouse and subsection [e] does not apply to the dependent.

"[C] ADJUSTED MONTHLY PREMIUM.—The adjusted monthly premium for an applicable second lowest cost silver plan is the monthly premium which would have been charged [for the rating area with respect to which the premiums under paragraph [2][A] were determined] for the plan if each individual covered under a qualified health plan taken into account under paragraph [2][A] were covered by such silver plan and the premium was adjusted only for the age of each such individual in the manner allowed under section 2701 of the Public Health Service Act. In the case of a State participating in the wellness discount demonstration project under section 2705[d] of the Public Health Service Act, the adjusted monthly premium shall be determined without regard to any premium discount or rebate under such project.

"[D] ADDITIONAL BENEFITS.—If—

"[i] a qualified health plan under section 1302[b][5] of the Patient Protection and Affordable Care Act offers benefits in addition to the essential health benefits required to be provided by the plan, or

"[ii] a State requires a qualified health plan under section 1311[d][3][B] of such Act to cover benefits in addition to the essential health benefits required to be provided by the plan, the portion of the premium for the plan properly allocable [under rules prescribed by the Secretary of Health and Human Services] to such additional benefits shall not be taken into account in determining either the monthly premium or the adjusted monthly premium under paragraph [2].

"[E] SPECIAL RULE FOR PEDIATRIC DENTAL COVERAGE.— For purposes of determining the amount of any monthly premium, if an individual enrolls in both a qualified health plan and a plan described in section 1311[d][2][B][ii][I] of the Patient Protection and Affordable Care Act for any plan year, the portion of the premium for the plan described in such section that [under regulations prescribed by the Secretary] is properly allocable to pediatric dental benefits which are included in the essential health benefits required to be provided by a qualified health plan under section 1302[b][1][J] of such Act shall be treated as a premium payable for a qualified health plan.

"[c] DEFINITION AND RULES RELATING TO APPLICABLE TAXPAYERS, COVERAGE MONTHS, AND QUALIFIED HEALTH PLAN.—For purposes of this section—

"[1] APPLICABLE TAXPAYER.—

"[A] IN GENERAL.—The term "applicable taxpayer" means, with respect to any taxable year, a taxpayer whose household income for the taxable year exceeds 100 percent but does not exceed 400 percent of an amount equal to the poverty line for a family of the size involved.

"[B] SPECIAL RULE FOR CERTAIN INDIVIDUALS LAWFULLY PRESENT IN THE UNITED STATES.—If—

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"[i] a taxpayer has a household income which is not greater than 100 percent of an amount equal to the poverty line for a family of the size involved, and

"[ii] the taxpayer is an alien lawfully present in the United States, but is not eligible for the medicaid program under title XIX of the Social Security Act by reason of such alien status, the taxpayer shall, for purposes of the credit under this section, be treated as an applicable taxpayer with a household income which is equal to 100 percent of the poverty line for a family of the size involved.

"[C] MARRIED COUPLES MUST FILE JOINT RETURN.— If the taxpayer is married [within the meaning of section 7703] at the close of the taxable year, the taxpayer shall be treated as an applicable taxpayer only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.

"[D] 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.

"[2] COVERAGE MONTH.—For purposes of this subsection—

"[A] IN GENERAL.—The term "coverage month" means, with respect to an applicable taxpayer, any month if—

"[i] as of the first day of such month the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection [b][2][A] that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and

"[ii] the premium for coverage under such plan for such month is paid by the taxpayer [or through advance payment of the credit under subsection [a] under section 1412 of the Patient Protection and Affordable Care Act].

"[B] EXCEPTION FOR MINIMUM ESSENTIAL COVERAGE.—

"[i] IN GENERAL.—The term "coverage month" shall not include any month with respect to an individual if for such month the individual is eligible for minimum essential coverage other than eligibility for coverage described in section 5000A[f][1][C] [relating to coverage in the individual market].

"[ii] MINIMUM ESSENTIAL COVERAGE.—The term "minimum essential coverage" has the meaning given such term by section 5000A[f].

"[C] SPECIAL RULE FOR EMPLOYER-SPONSORED MINIMUM ESSENTIAL COVERAGE.—For purposes of subparagraph [B]—

"[i] COVERAGE MUST BE AFFORDABLE.—Except as provided in clause [iii], an employee shall not be treated as eligible for minimum essential coverage if such coverage—

"[I] consists of an eligible employer-sponsored plan [as defined in section 5000A[f][2]], and "[II] the employee's required contribution [within the meaning of section 5000A[e][1][B]] with

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respect to the plan exceeds 9.8 percent of the applicable taxpayer's household income. This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee.

"[ii] COVERAGE MUST PROVIDE MINIMUM VALUE.— Except as provided in clause [iii], an employee shall not be treated as eligible for minimum essential coverage if such coverage consists of an eligible employer-sponsored plan [as defined in section 5000A[f][2]] and the plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.

"[iii] EMPLOYEE OR FAMILY MUST NOT BE COVERED UNDER EMPLOYER PLAN.—Clauses [i] and [ii] shall not apply if the employee [or any individual described in the last sentence of clause [i]] is covered under the eligible employer-sponsored plan or the grandfathered health plan.

"[iv] INDEXING.—In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.8 percent under clause [i][II] in the same manner as the percentages are adjusted under subsection [b][3][A][ii].

"[3] DEFINITIONS AND OTHER RULES.—

"[A] QUALIFIED HEALTH PLAN.—The term "qualified health plan" has the meaning given such term by section 1301[a] of the Patient Protection and Affordable Care Act, except that such term shall not include a qualified health plan which is a catastrophic plan described in section 1302[e] of such Act.

"[B] GRANDFATHERED HEALTH PLAN.—The term "grandfathered health plan" has the meaning given such term by section 1251 of the Patient Protection and Affordable Care Act.

"[d] TERMS RELATING TO INCOME AND FAMILIES.—For purposes of this section—

"[1] FAMILY SIZE.—The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 [relating to allowance of deduction for personal exemptions] for the taxable year.

"[2] HOUSEHOLD INCOME.—

"[A] HOUSEHOLD INCOME.—The term "household income" means, with respect to any taxpayer, an amount equal to the sum of—

"[i] the modified gross income of the taxpayer, plus

"[ii] the aggregate modified gross incomes of all other individuals who—

"[I] were taken into account in determining the taxpayer's family size under paragraph [1], and

"[II] were required to file a return of tax imposed by section 1 for the taxable year.

"[B] MODIFIED GROSS INCOME.—The term "modified gross income" means gross income—

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"[i] decreased by the amount of any deduction allowable under paragraph [1], [3], [4], or [10] of section 62[a],

"[ii] increased by the amount of interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, and

"[iii] determined without regard to sections 911, 931, and 933.

"[3] POVERTY LINE.—

"[A] IN GENERAL.—The term "poverty line" has the meaning given that term in section 2110[c][5] of the Social Security Act [42U.S.C.1397jj[c][5]].

"[B] POVERTY LINE USED.—In the case of any qualified health plan offered through an Exchange for coverage during a taxable year beginning in a calendar year, the poverty line used shall be the most recently published poverty line as of the 1st day of the regular enrollment period for coverage during such calendar year.

"[e] RULES FOR INDIVIDUALS NOT LAWFULLY PRESENT.—

"[1] IN GENERAL.—If 1 or more individuals for whom a taxpayer is allowed a deduction under section 151 [relating to allowance of deduction for personal exemptions] for the taxable year [including the taxpayer or his spouse] are individuals who are not lawfully present—

"[A] the aggregate amount of premiums otherwise taken into account under clauses [i] and [ii] of subsection [b][2][A] shall be reduced by the portion [if any] of such premiums which is attributable to such individuals, and

"[B] for purposes of applying this section, the determination as to what percentage a taxpayer's household income bears to the poverty level for a family of the size involved shall be made under one of the following methods:

"[i] A method under which—

"[I] the taxpayer's family size is determined by not taking such individuals into account, and

"[II] the taxpayer's household income is equal to the product of the taxpayer's household income [determined without regard to this subsection] and a fraction—

"[aa] the numerator of which is the poverty line for the taxpayer's family size determined after application of subclause [I], and

"[bb] the denominator of which is the poverty line for the taxpayer's family size determined without regard to subclause [I].

"[ii] A comparable method reaching the same result as the method under clause [i].

"[2] LAWFULLY PRESENT.—For purposes of this section, an individual shall be treated as lawfully present only if the individual is, and is reasonably expected to be for the entire period of enrollment for which the credit under this section is being claimed, a citizen or national of the United States or an alien lawfully present in the United States.

"[3] SECRETARIAL AUTHORITY.—The Secretary of Health and Human Services, in consultation with the Secretary, shall prescribe rules setting forth the methods by which calculations of family size and household income are made for purposes

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of this subsection. Such rules shall be designed to ensure that the least burden is placed on individuals enrolling in qualified health plans through an Exchange and taxpayers eligible for the credit allowable under this section.

"[f] RECONCILIATION OF CREDIT AND ADVANCE CREDIT.—

"[1] IN GENERAL.—The amount of the credit allowed under this section for any taxable year shall be reduced [but not below zero] by the amount of any advance payment of such credit under section 1412 of the Patient Protection and Affordable Care Act.

"[2] EXCESS ADVANCE PAYMENTS.—

"[A] IN GENERAL.—If the advance payments to a taxpayer under section 1412 of the Patient Protection and Affordable Care Act for a taxable year exceed the credit allowed by this section [determined without regard to paragraph [1]], the tax imposed by this chapter for the taxable year shall be increased by the amount of such excess.

"[B] LIMITATION ON INCREASE WHERE INCOME LESS THAN 400 PERCENT OF POVERTY LINE.—

"[i] IN GENERAL.—In the case of an applicable taxpayer whose household income is less than 400 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph [A] shall in no event exceed $400 [$250 in the case of a taxpayer whose tax is determined under section 1[c] for the taxable year].

"[ii] INDEXING OF AMOUNT.—In the case of any calendar year beginning after 2014, each of the dollar amounts under clause [i] shall be increased by an amount equal to—

"[I] such dollar amount, multiplied by

"[II] the cost-of-living adjustment determined under section 1[f][3] for the calendar year, determined by substituting "calendar year 2013" for "calendar year 1992" in subparagraph [B] thereof.

If the amount of any increase under clause [i] is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

"[g] REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section, including regulations which provide for—

"[1] the coordination of the credit allowed under this section with the program for advance payment of the credit under section 1412 of the Patient Protection and Affordable Care Act, and

"[2] the application of subsection [f] where the filing status of the taxpayer for a taxable year is different from such status used for determining the advance payment of the credit.".

[b] DISALLOWANCE OF DEDUCTION.—Section 280C of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

"[g] CREDIT FOR HEALTH INSURANCE PREMIUMS.—No deduction shall be allowed for the portion of the premiums paid by the taxpayer for coverage of 1 or more individuals under a qualified health plan which is equal to the amount of the credit determined for the taxable year under section 36B[a] with respect to such premiums.".

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[c] STUDY ON AFFORDABLE COVERAGE.—

[1] STUDY AND REPORT.—

[A] IN GENERAL.—Not later than 5 years after the date of the enactment of this Act, the Comptroller General shall conduct a study on the affordability of health insurance coverage, including—

[i] the impact of the tax credit for qualified health insurance coverage of individuals under section 36B of the Internal Revenue Code of 1986 and the tax credit for employee health insurance expenses of small employers under section 45R of such Code on maintaining and expanding the health insurance coverage of individuals;

[ii] the availability of affordable health benefits plans, including a study of whether the percentage of household income used for purposes of section 36B[c][2][C] of the Internal Revenue Code of 1986 [as added by this section] is the appropriate level for determining whether employer-provided coverage is affordable for an employee and whether such level may be lowered without significantly increasing the costs to the Federal Government and reducing employer-provided coverage; and

[iii] the ability of individuals to maintain essential health benefits coverage [as defined in section 5000A[f] of the Internal Revenue Code of 1986].

[B] REPORT.—The Comptroller General shall submit to the appropriate committees of Congress a report on the study conducted under subparagraph [A], together with legislative recommendations relating to the matters studied under such subparagraph.

[2] APPROPRIATE COMMITTEES OF CONGRESS.—In this subsection, the term "appropriate committees of Congress" means the Committee on Ways and Means, the Committee on Education and Labor, and the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance and the Committee on Health, Education, Labor and Pensions of the Senate.

[d] CONFORMING AMENDMENTS.—

[1] Paragraph [2] of section 1324[b] of title 31, United States Code, is amended by inserting "36B," after "36A,".

[2] The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 36A the following new item:

"Sec. 36B. Refundable credit for coverage under a qualified health plan.".

[e] EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years ending after December 31, 2013.