"(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(1) 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—

year,

"(A) the taxpayer is married at the close of the taxable

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

year.

"(C) the taxpayer files a separate return for the taxable

"(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 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

42 USC 300gg-45.

26 USC 35 note.

"(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 26 USC 7527. COSTS OF ELIGIBLE INDIVIDUALS.

"(a) GENERAL RULE.-Not later than August 1, 2003, the Sec- Deadline. retary 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 (1) of section 6103 of such 26 USC 6103. 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 (1)(16)" each place it appears.

(3) UNAUTHORIZED INSPECTION OF RETURNS OR RETURN INFORMATION.-Section 7213A(a)(1)(B) of such Code is amended

26 USC 6050T.

Deadline.

26 USC 6724.

by striking "section 6103(n)" and inserting "subsection (1)(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),