AMENDMENT NO. __                                                                                Calendar No. __

Purpose:     To amend the Internal Revenue Code of 1986 to allow a credit related to out-of-pocket prescription drug costs incurred by employers for medicare-eligible employees and retirees.

IN THE SENATE OF THE UNITED STATES—108th Cong., 1st Sess.

S. 1

To amend title XVIII of the Social Security Act to make improvements in the medicare program, to provide prescription drug coverage under the medicare program, and for other purposes.

Referred to the Committee on _____________

and ordered to be printed

Ordered to lie on the table and to be printed

AMENDMENT intended to be proposed by __________________

Viz:

On page 676, after line 22, add the following:

SEC. __. CREDIT FOR EMPLOYER PRESCRIPTION DRUG COSTS FOR MEDICARE-ELIGIBLE EMPLOYEES AND RETIREES.

(a) IN GENERAL.—Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to other credits) is amended by adding at the end the following new section:

‘‘SEC. 30B. CREDIT FOR EMPLOYER PRESCRIPTION DRUG COSTS FOR MEDICARE-ELIGIBLE EMPLOYEES AND RETIREES.

‘‘(a) IN GENERAL.—In the case of a sponsor of a qualified retiree prescription drug plan, there shall be allowed as a credit against the taxes imposed by this subtitle for any taxable year an amount equal to the employer prescription drug tax credit for such taxable year.

“(b) EMPLOYER PRESCRIPTION DRUG TAX CREDIT -- For purposes of subsection (a), the employer prescription drug tax credit for any taxable year is an amount equal to the product of

(1)               the difference between the average per capita payments made by Medicare under section 1860(D) of the Social Security Act for the calendar year in which the taxable year begins with respect to—

(A)    Part D participants without employment-based retiree health coverage; and

(B)   qualifying covered individuals; and

(2)               the monthly average number of qualifying covered individuals covered by the qualified retiree prescription drug plan of the sponsor in the taxable year.

The amount of the difference in average per capita Medicare Part D payments for qualifying covered individuals and for Part D participants without employment-based retiree health coverage under paragraph (1) above shall be determined by the Secretary of Health and Human Services by January 31 following each calendar year end.

‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The credit allowed under subsection (a) for any taxable year shall not exceed the excess of— 

‘‘(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

‘‘(2) the sum of the credits allowable under subparts A, B, D, E, F and G (other than the credit allowable by this section).

‘‘(d) CARRYBACK AND CARRYOVER OF UNUSED CREDITS.—

(1)        To the extent the credit allowed under subsection (a) for any taxable year exceeds the limitation under subsection (c) for such taxable year, such excess (to the extent attributable to the current taxable year) shall be –

(A)                         a credit carryback to each of the 20 taxable years preceding the unused credit year, and

(B)                         a credit carryforward to each of the taxable years following the unused credit year, 

and, subject to the limitation imposed by paragraph (3), shall be taken into account under this section.

            (2)        The entire amount of any unused credit shall be carried to the earliest of the taxable years to which such credit may be carried.  To the extent that such unused credit may not be taken into account for a prior taxable year because of the limitations of paragraph (3), the remaining amount of the unused credit may be carried to each subsequent taxable year.

            (3)        The amount of the unused credit which may be taken into account under paragraph (1) for any taxable year shall not exceed –

(A) in the case of a credit carryback, the amount by which the limitation under subsection (c) for such taxable year exceeds the sum of (i) the amount determined under subsection (b) for such taxable year, plus (ii) the amounts which (by reason of this paragraph) are carried to such taxable year and are attributable to taxable years preceding the unused credit year.

(B) in the case of a credit carryforward, the amount by which the limitation under subsection (c) for such taxable year exceeds the sum of the amounts which (by reason of this paragraph) are carried to such taxable year and are attributable to taxable years preceding the unused credit year.

            ‘‘(e) CREDIT REFUNDABLE FOR GOVERNMENTAL AND OTHER TAX-EXEMPT SPONSORS.—

‘‘(1) IN GENERAL.—In the case of a sponsor of a qualified retiree prescription drug program which is exempt from tax under this subtitle (by reason of sections 115, 501 or otherwise), the credit which would be allowed by this section (without regard to subsection (c)) for any taxable year shall for purposes of this title be treated as a credit allowed to the taxpayer (other than for employers who are taxable entities and can utilize the tax credit described in (b) above) under subpart C.

(2) LIMITATION -- The refundable credit allowed under this subsection for any taxable year shall not exceed the lesser of --

(A)  the credit allowed under subsection (a) for the taxable year [in excess of the limitation under subsection (c) for such taxable year] –  or

(B)  the amount of wage withholding taxes which have been deducted and withheld pursuant to section 3402 by the sponsor during the calendar year in which the taxable year begins.

 ‘‘(f) DEFINITIONS -- For purposes of this section —

‘‘(1) QUALIFIED RETIREE PRESCRIPTION DRUG PLAN —The term ‘qualified retiree prescription drug plan’ means employment-based retiree health coverage if, with respect to a qualifying covered individual who is covered under the plan, the requirements of clauses (i) and (ii) of section 1860D–20(e)(4)(A) of the Social Security Act are met.  This employment-based retiree health coverage also includes coverage supplemental to the benefit provided under Part D to a qualifying covered individual enrolled under that Part.

‘‘(2) QUALIFYING COVERED INDIVIDUAL.—The term ‘qualifying covered individual’ means an individual who is eligible for benefits under Part D of the Social Security Act and is covered under a qualified retiree prescription drug plan.

‘‘(3) EMPLOYMENT-BASED RETIREE HEATLH COVERAGE.—The determination of whether coverage is employment-based retiree health coverage shall be made in the same manner as under section 1860D–20(e)(4)(B).

"(4) SPONSOR. -- 

 ‘‘(A) IN GENERAL.—The term ‘sponsor’ means a plan sponsor, as defined in section 3(16)(B) of the Employee Retirement Income Security Act of 1974 including, without limitation, the government of the United States, the government of any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing.

‘‘(B) ALLOCATION OF CREDIT WHERE SPONSOR IS NOT SINGLE EMPLOYER.—In a qualified retiree prescription drug plan which has a sponsor other than a single employer, the credit amount determined under subsection (a) with respect to such plan for any taxable year shall be allocated to each employer which contributes to such plan in an amount which bears the same ratio to such credit amount as the employer’s contribution to such plan for such taxable year bears to the aggregate amount of employer contributions to such plan for such taxable year. The Secretary may by regulation or otherwise provide for simplified or alternative means for determining and allocating the tax credit with regard to such plans.

‘‘(5) DENIAL OF DOUBLE BENEFIT. – Any deduction or credit under any other provision of this chapter that would otherwise be allowed with respect to costs paid by a sponsor under a qualified prescription drug plan shall be reduced by the amount of the employer prescription drug credit allowable to such sponsor under this section. 

"(f) CONFORMING AMENDMENTS.—

(1)                          Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by replacing “or from section 35 of such Code.” with “or from sections 30B or 35 of such Code.”

(2)                          The table of sections for subpart B 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 30A the following new item:

‘‘Sec. 30B. Credit for employer prescription drug costs for medicare-eligible

employees and retirees.’’.

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2005.