Internal Revenue Code:Sec. 35. Health insurance costs of eligible individuals.
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart C - Refundable Credits
Statute
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 any 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) Medical and health savings accounts.--Amounts
distributed from an Archer MSA (as defined in section 220(d)) or
from a health savings account (as defined in section 223(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.
Amendments to Section
AMENDMENTS
2004 - Pub. L. 108-311, Sec. 401(a)(2). Subsection (g)(3)
was replaced with new (g)(3).
2002 - Pub.L. 107-210, Section 201. 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. <<NOTE: 26 USC 35.>> HEALTH INSURANCE COSTS OF ELIGIBLE
INDIVIDUALS."
Effective Date.-- the amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
Miscelleanous
MISCELLEANOUS
