TITLE IX--REVENUE PROVISIONS

                  Subtitle A--Revenue Offset Provisions

SEC. 9001. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986, as 
amended by section 1513, is amended by adding at the end the following:

[[Page 124 STAT. 848]]

``SEC. 4980I. <<NOTE: 26 USC 4980I.>>  EXCISE TAX ON HIGH COST EMPLOYER-
            SPONSORED HEALTH COVERAGE.

    ``(a) Imposition of Tax.--If--
            ``(1) an employee is covered under any applicable employer-
        sponsored coverage of an employer at any time during a taxable 
        period, and
            ``(2) there is any excess benefit with respect to the 
        coverage,

there is hereby imposed a tax equal to 40 percent of the excess benefit.
    ``(b) Excess Benefit.--For purposes of this section--
            ``(1) <<NOTE: Definition.>>  In general.--The term `excess 
        benefit' means, with respect to any applicable employer-
        sponsored coverage made available by an employer to an employee 
        during any taxable period, the sum of the excess amounts 
        determined under paragraph (2) for months during the taxable 
        period.
            ``(2) Monthly excess amount.--The excess amount determined 
        under this paragraph for any month is the excess (if any) of--
                    ``(A) the aggregate cost of the applicable employer-
                sponsored coverage of the employee for the month, over
                    ``(B) an amount equal to \1/12\ of the annual 
                limitation under paragraph (3) for the calendar year in 
                which the month occurs.
            ``(3) Annual limitation.--For purposes of this subsection--
                    ``(A) In general.--The annual limitation under this 
                paragraph for any calendar year is the dollar limit 
                determined under subparagraph (C) for the calendar year.
                    ``(B) Applicable annual limitation.--The annual 
                limitation which applies for any month shall be 
                determined on the basis of the type of coverage (as 
                determined under subsection (f)(1)) provided to the 
                employee by the employer as of the beginning of the 
                month.
                    ``(C) Applicable dollar limit.--Except as provided 
                in subparagraph (D)--
                          ``(i) 2013.--In the case of 2013, the dollar 
                      limit under this subparagraph is--
                                    ``(I) in the case of an employee 
                                with self-only coverage, $8,500, and
                                    ``(II) in the case of an employee 
                                with coverage other than self-only 
                                coverage, $23,000.
                          ``(ii) Exception for certain individuals.--In 
                      the case of an individual who is a qualified 
                      retiree or who participates in a plan sponsored by 
                      an employer the majority of whose employees are 
                      engaged in a high-risk profession or employed to 
                      repair or install electrical or telecommunications 
                      lines--
                                    ``(I) the dollar amount in clause 
                                (i)(I) (determined after the application 
                                of subparagraph (D)) shall be increased 
                                by $1,350, and
                                    ``(II) the dollar amount in clause 
                                (i)(II) (determined after the 
                                application of subparagraph (D)) shall 
                                be increased by $3,000.
                          ``(iii) Subsequent years.--In the case of any 
                      calendar year after 2013, each of the dollar 
                      amounts under clauses (i) and (ii) shall be 
                      increased to the amount equal to such amount as in 
                      effect for the

[[Page 124 STAT. 849]]

                      calendar year preceding such year, increased by an 
                      amount equal to the product of--
                                    ``(I) such amount as so in effect, 
                                multiplied by
                                    ``(II) the cost-of-living adjustment 
                                determined under section 1(f)(3) for 
                                such year (determined by substituting 
                                the calendar year that is 2 years before 
                                such year for `1992' in subparagraph (B) 
                                thereof), increased by 1 percentage 
                                point.
                      If any amount determined under this clause is not 
                      a multiple of $50, such amount shall be rounded to 
                      the nearest multiple of $50.
                    ``(D) Transition rule for states with highest 
                coverage costs.--
                          ``(i) In general.--If an employee is a 
                      resident of a high cost State on the first day of 
                      any month beginning in 2013, 2014, or 2015, the 
                      annual limitation under this paragraph for such 
                      month with respect to such employee shall be an 
                      amount equal to the applicable percentage of the 
                      annual limitation (determined without regard to 
                      this subparagraph or subparagraph (C)(ii)).
                          ``(ii) Applicable percentage.--The applicable 
                      percentage is 120 percent for 2013, 110 percent 
                      for 2014, and 105 percent for 2015.
                          ``(iii) <<NOTE: Definition.>>  High cost 
                      state.--The term `high cost State' means each of 
                      the 17 States which the Secretary of Health and 
                      Human Services, in consultation with the 
                      Secretary, estimates had the highest average cost 
                      during 2012 for employer-sponsored coverage under 
                      health plans. The Secretary's estimate shall be 
                      made on the basis of aggregate premiums paid in 
                      the State for such health plans, determined using 
                      the most recent data available as of August 31, 
                      2012.

    ``(c) Liability To Pay Tax.--
            ``(1) In general.--Each coverage provider shall pay the tax 
        imposed by subsection (a) on its applicable share of the excess 
        benefit with respect to an employee for any taxable period.
            ``(2) <<NOTE: Definitions.>>  Coverage provider.--For 
        purposes of this subsection, the term `coverage provider' means 
        each of the following:
                    ``(A) Health insurance coverage.--If the applicable 
                employer-sponsored coverage consists of coverage under a 
                group health plan which provides health insurance 
                coverage, the health insurance issuer.
                    ``(B) HSA and msa contributions.--If the applicable 
                employer-sponsored coverage consists of coverage under 
                an arrangement under which the employer makes 
                contributions described in subsection (b) or (d) of 
                section 106, the employer.
                    ``(C) Other coverage.--In the case of any other 
                applicable employer-sponsored coverage, the person that 
                administers the plan benefits.
            ``(3) Applicable share.--For purposes of this subsection, a 
        coverage provider's applicable share of an excess benefit for 
        any taxable period is the amount which bears the same ratio to 
        the amount of such excess benefit as--

[[Page 124 STAT. 850]]

                    ``(A) the cost of the applicable employer-sponsored 
                coverage provided by the provider to the employee during 
                such period, bears to
                    ``(B) the aggregate cost of all applicable employer-
                sponsored coverage provided to the employee by all 
                coverage providers during such period.
            ``(4) Responsibility to calculate tax and applicable 
        shares.--
                    ``(A) In general.--Each employer shall--
                          ``(i) calculate for each taxable period the 
                      amount of the excess benefit subject to the tax 
                      imposed by subsection (a) and the applicable share 
                      of such excess benefit for each coverage provider, 
                      and
                          ``(ii) <<NOTE: Notification.>>  notify, at 
                      such time and in such manner as the Secretary may 
                      prescribe, the Secretary and each coverage 
                      provider of the amount so determined for the 
                      provider.
                    ``(B) Special rule for multiemployer plans.--In the 
                case of applicable employer-sponsored coverage made 
                available to employees through a multiemployer plan (as 
                defined in section 414(f)), the plan sponsor shall make 
                the calculations, and provide the notice, required under 
                subparagraph (A).

    ``(d) Applicable Employer-Sponsored Coverage; Cost.--For purposes of 
this section--
            ``(1) Applicable employer-sponsored coverage.--
                    ``(A) <<NOTE: Definitions.>>  In general.--The term 
                `applicable employer-sponsored coverage' means, with 
                respect to any employee, coverage under any group health 
                plan made available to the employee by an employer which 
                is excludable from the employee's gross income under 
                section 106, or would be so excludable if it were 
                employer-provided coverage (within the meaning of such 
                section 106).
                    ``(B) Exceptions.--The term `applicable employer-
                sponsored coverage' shall not include--
                          ``(i) any coverage (whether through insurance 
                      or otherwise) described in section 9832(c)(1)(A) 
                      or for long-term care, or
                          ``(ii) any coverage described in section 
                      9832(c)(3) the payment for which is not excludable 
                      from gross income and for which a deduction under 
                      section 162(l) is not allowable.
                    ``(C) Coverage includes employee paid portion.--
                Coverage shall be treated as applicable employer-
                sponsored coverage without regard to whether the 
                employer or employee pays for the coverage.
                    ``(D) Self-employed individual.--In the case of an 
                individual who is an employee within the meaning of 
                section 401(c)(1), coverage under any group health plan 
                providing health insurance coverage shall be treated as 
                applicable employer-sponsored coverage if a deduction is 
                allowable under section 162(l) with respect to all or 
                any portion of the cost of the coverage.
                    ``(E) Governmental plans included.--Applicable 
                employer-sponsored coverage shall include coverage under 
                any group health plan established and maintained 
                primarily for its civilian employees by the Government 
                of

[[Page 124 STAT. 851]]

                the United States, by the government of any State or 
                political subdivision thereof, or by any agency or 
                instrumentality of any such government.
            ``(2) Determination of cost.--
                    ``(A) In general.--The cost of applicable employer-
                sponsored coverage shall be determined under rules 
                similar to the rules of section 4980B(f)(4), except that 
                in determining such cost, any portion of the cost of 
                such coverage which is attributable to the tax imposed 
                under this section shall not be taken into account and 
                the amount of such cost shall be calculated separately 
                for self-only coverage and other coverage. In the case 
                of applicable employer-sponsored coverage which provides 
                coverage to retired employees, the plan may elect to 
                treat a retired employee who has not attained the age of 
                65 and a retired employee who has attained the age of 65 
                as similarly situated beneficiaries.
                    ``(B) Health fsas.--In the case of applicable 
                employer-sponsored coverage consisting of coverage under 
                a flexible spending arrangement (as defined in section 
                106(c)(2)), the cost of the coverage shall be equal to 
                the sum of--
                          ``(i) the amount of employer contributions 
                      under any salary reduction election under the 
                      arrangement, plus
                          ``(ii) the amount determined under 
                      subparagraph (A) with respect to any reimbursement 
                      under the arrangement in excess of the 
                      contributions described in clause (i).
                    ``(C) Archer msas and hsas.--In the case of 
                applicable employer-sponsored coverage consisting of 
                coverage under an arrangement under which the employer 
                makes contributions described in subsection (b) or (d) 
                of section 106, the cost of the coverage shall be equal 
                to the amount of employer contributions under the 
                arrangement.
                    ``(D) Allocation on a monthly basis.--If cost is 
                determined on other than a monthly basis, the cost shall 
                be allocated to months in a taxable period on such basis 
                as the Secretary may prescribe.

    ``(e) Penalty for Failure To Properly Calculate Excess Benefit.--
            ``(1) In general.--If, for any taxable period, the tax 
        imposed by subsection (a) exceeds the tax determined under such 
        subsection with respect to the total excess benefit calculated 
        by the employer or plan sponsor under subsection (c)(4)--
                    ``(A) each coverage provider shall pay the tax on 
                its applicable share (determined in the same manner as 
                under subsection (c)(4)) of the excess, but no penalty 
                shall be imposed on the provider with respect to such 
                amount, and
                    ``(B) the employer or plan sponsor shall, in 
                addition to any tax imposed by subsection (a), pay a 
                penalty in an amount equal to such excess, plus interest 
                at the underpayment rate determined under section 6621 
                for the period beginning on the due date for the payment 
                of tax imposed by subsection (a) to which the excess 
                relates and ending on the date of payment of the 
                penalty.

[[Page 124 STAT. 852]]

            ``(2) Limitations on penalty.--
                    ``(A) Penalty not to apply where failure not 
                discovered exercising reasonable diligence.--No penalty 
                shall be imposed by paragraph (1)(B) on any failure to 
                properly calculate the excess benefit during any period 
                for which it is established to the satisfaction of the 
                Secretary that the employer or plan sponsor neither 
                knew, nor exercising reasonable diligence would have 
                known, that such failure existed.
                    ``(B) Penalty not to apply to failures corrected 
                within 30 days.--No penalty shall be imposed by 
                paragraph (1)(B) on any such failure if--
                          ``(i) such failure was due to reasonable cause 
                      and not to willful neglect, and
                          ``(ii) such failure is corrected during the 
                      30-day period beginning on the 1st date that the 
                      employer knew, or exercising reasonable diligence 
                      would have known, that such failure existed.
                    ``(C) Waiver by secretary.--In the case of any such 
                failure which is due to reasonable cause and not to 
                willful neglect, the Secretary may waive part or all of 
                the penalty imposed by paragraph (1), to the extent that 
                the payment of such penalty would be excessive or 
                otherwise inequitable relative to the failure involved.

    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Coverage determinations.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an employee shall be treated as having 
                self-only coverage with respect to any applicable 
                employer-sponsored coverage of an employer.
                    ``(B) Minimum essential coverage.--An employee shall 
                be treated as having coverage other than self-only 
                coverage only if the employee is enrolled in coverage 
                other than self-only coverage in a group health plan 
                which provides minimum essential coverage (as defined in 
                section 5000A(f)) to the employee and at least one other 
                beneficiary, and the benefits provided under such 
                minimum essential coverage do not vary based on whether 
                any individual covered under such coverage is the 
                employee or another beneficiary.
            ``(2) Qualified retiree.--The term `qualified retiree' means 
        any individual who--
                    ``(A) is receiving coverage by reason of being a 
                retiree,
                    ``(B) has attained age 55, and
                    ``(C) is not entitled to benefits or eligible for 
                enrollment under the Medicare program under title XVIII 
                of the Social Security Act.
            ``(3) Employees engaged in high-risk profession.--The term 
        `employees engaged in a high-risk profession' means law 
        enforcement officers (as such term is defined in section 1204 of 
        the Omnibus Crime Control and Safe Streets Act of 1968), 
        employees in fire protection activities (as such term is defined 
        in section 3(y) of the Fair Labor Standards Act of 1938), 
        individuals who provide out-of-hospital emergency medical care 
        (including emergency medical technicians, paramedics, and first-
        responders), and individuals engaged in the construction,

[[Page 124 STAT. 853]]

        mining, agriculture (not including food processing), forestry, 
        and fishing industries. Such term includes an employee who is 
        retired from a high-risk profession described in the preceding 
        sentence, if such employee satisfied the requirements of such 
        sentence for a period of not less than 20 years during the 
        employee's employment.
            ``(4) Group health plan.--The term `group health plan' has 
        the meaning given such term by section 5000(b)(1).
            ``(5) Health insurance coverage; health insurance issuer.--
                    ``(A) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1) (applied without regard to 
                subparagraph (B) thereof, except as provided by the 
                Secretary in regulations).
                    ``(B) Health insurance issuer.--The term `health 
                insurance issuer' has the meaning given such term by 
                section 9832(b)(2).
            ``(6) Person that administers the plan benefits.--The term 
        `person that administers the plan benefits' shall include the 
        plan sponsor if the plan sponsor administers benefits under the 
        plan.
            ``(7) Plan sponsor.--The term `plan sponsor' has the meaning 
        given such term in section 3(16)(B) of the Employee Retirement 
        Income Security Act of 1974.
            ``(8) Taxable period.--The term `taxable period' means the 
        calendar year or such shorter period as the Secretary may 
        prescribe. The Secretary may have different taxable periods for 
        employers of varying sizes.
            ``(9) Aggregation rules.--All employers treated as a single 
        employer under subsection (b), (c), (m), or (o) of section 414 
        shall be treated as a single employer.
            ``(10) Denial of deduction.--For denial of a deduction for 
        the tax imposed by this section, see section 275(a)(6).

    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 of 
such Code, as amended by section 1513, is amended by adding at the end 
the following new item:

``Sec. 4980I. Excise tax on high cost employer-sponsored health 
           coverage.''.

    (c) <<NOTE: 26 USC 4980I note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2012.

SEC. 9002. INCLUSION OF COST OF EMPLOYER-SPONSORED HEALTH COVERAGE ON W-
            2.

    (a) In General.--Section 6051(a) of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 6051.>>  (relating to receipts for employees) is 
amended by striking ``and'' at the end of paragraph (12), by striking 
the period at the end of paragraph (13) and inserting ``, and'', and by 
adding after paragraph (13) the following new paragraph:
            ``(14) the aggregate cost (determined under rules similar to 
        the rules of section 4980B(f)(4)) of applicable employer-
        sponsored coverage (as defined in section 4980I(d)(1)), except 
        that this paragraph shall not apply to--
                    ``(A) coverage to which paragraphs (11) and (12) 
                apply, or

[[Page 124 STAT. 854]]

                    ``(B) the amount of any salary reduction 
                contributions to a flexible spending arrangement (within 
                the meaning of section 125).''.

    (b) <<NOTE: 26 USC 6051 note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2010.

SEC. 9003. DISTRIBUTIONS FOR MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED 
            DRUG OR INSULIN.

    (a) HSAs.--Subparagraph (A) of section 223(d)(2) of the Internal 
Revenue Code of 1986 <<NOTE: 26 USC 223.>>  is amended by adding at the 
end the following: ``Such term shall include an amount paid for medicine 
or a drug only if such medicine or drug is a prescribed drug (determined 
without regard to whether such drug is available without a prescription) 
or is insulin.''.

    (b) Archer MSAs.--Subparagraph (A) of section 220(d)(2) of the 
Internal Revenue Code of 1986 <<NOTE: 26 USC 220.>>  is amended by 
adding at the end the following: ``Such term shall include an amount 
paid for medicine or a drug only if such medicine or drug is a 
prescribed drug (determined without regard to whether such drug is 
available without a prescription) or is insulin.''.

    (c) Health Flexible Spending Arrangements and Health Reimbursement 
Arrangements.--Section 106 of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 106.>>  is amended by adding at the end the 
following new subsection:

    ``(f) Reimbursements for Medicine Restricted to Prescribed Drugs and 
Insulin.--For purposes of this section and section 105, reimbursement 
for expenses incurred for a medicine or a drug shall be treated as a 
reimbursement for medical expenses only if such medicine or drug is a 
prescribed drug (determined without regard to whether such drug is 
available without a prescription) or is insulin.''.
    (d) Effective Dates.--
            (1) <<NOTE: 26 USC 220 note.>>  Distributions from savings 
        accounts.--The amendments made by subsections (a) and (b) shall 
        apply to amounts paid with respect to taxable years beginning 
        after December 31, 2010.
            (2) <<NOTE: 26 USC 106 note.>>  Reimbursements.--The 
        amendment made by subsection (c) shall apply to expenses 
        incurred with respect to taxable years beginning after December 
        31, 2010.

SEC. 9004. INCREASE IN ADDITIONAL TAX ON DISTRIBUTIONS FROM HSAS AND 
            ARCHER MSAS NOT USED FOR QUALIFIED MEDICAL EXPENSES.

    (a) HSAs.--Section 223(f)(4)(A) of the Internal Revenue Code of 1986 
is amended by striking ``10 percent'' and inserting ``20 percent''.
    (b) Archer MSAs.--Section 220(f)(4)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``15 percent'' and inserting ``20 
percent''.
    (c) <<NOTE: 26 USC 220 note.>>  Effective Date.--The amendments made 
by this section shall apply to distributions made after December 31, 
2010.

SEC. 9005. LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS UNDER 
            CAFETERIA PLANS.

    (a) In General.--Section 125 of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 125.>>  is amended--
            (1) by redesignating subsections (i) and (j) as subsections 
        (j) and (k), respectively, and

[[Page 124 STAT. 855]]

            (2) by inserting after subsection (h) the following new 
        subsection:

    ``(i) Limitation on Health Flexible Spending Arrangements.--For 
purposes of this section, if a benefit is provided under a cafeteria 
plan through employer contributions to a health flexible spending 
arrangement, such benefit shall not be treated as a qualified benefit 
unless the cafeteria plan provides that an employee may not elect for 
any taxable year to have salary reduction contributions in excess of 
$2,500 made to such arrangement.''.
    (b) <<NOTE: 26 USC 125 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2010.

SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.

    (a) In General.--Section 6041 of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 6041.>>  is amended by adding at the end the 
following new subsections:

    ``(h) Application to Corporations.--Notwithstanding any regulation 
prescribed by the Secretary before the date of the enactment of this 
subsection, for purposes of this section the term `person' includes any 
corporation that is not an organization exempt from tax under section 
501(a).
    ``(i) Regulations.--The Secretary may prescribe such regulations and 
other guidance as may be appropriate or necessary to carry out the 
purposes of this section, including rules to prevent duplicative 
reporting of transactions.''.
    (b) Payments for Property and Other Gross Proceeds.--Subsection (a) 
of section 6041 of the Internal Revenue Code of 1986 is amended--
            (1) by inserting ``amounts in consideration for property,'' 
        after ``wages,'',
            (2) by inserting ``gross proceeds,'' after ``emoluments, or 
        other'', and
            (3) by inserting ``gross proceeds,'' after ``setting forth 
        the amount of such''.

    (c) Effective Date.--The amendments made by this section shall apply 
to payments made after December 31, 2011.

SEC. 9007. ADDITIONAL REQUIREMENTS FOR CHARITABLE HOSPITALS.

    (a) Requirements To Qualify as Section 501(c)(3) Charitable Hospital 
Organization.--Section 501 of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 501.>>  (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (r) as subsection (s) and by inserting after subsection (q) 
the following new subsection:

    ``(r) Additional Requirements for Certain Hospitals.--
            ``(1) <<NOTE: Applicability.>>  In general.--A hospital 
        organization to which this subsection applies shall not be 
        treated as described in subsection (c)(3) unless the 
        organization--
                    ``(A) meets the community health needs assessment 
                requirements described in paragraph (3),
                    ``(B) meets the financial assistance policy 
                requirements described in paragraph (4),
                    ``(C) meets the requirements on charges described in 
                paragraph (5), and
                    ``(D) meets the billing and collection requirement 
                described in paragraph (6).
            ``(2) Hospital organizations to which subsection applies.--

[[Page 124 STAT. 856]]

                    ``(A) In general.--This subsection shall apply to--
                          ``(i) an organization which operates a 
                      facility which is required by a State to be 
                      licensed, registered, or similarly recognized as a 
                      hospital, and
                          ``(ii) any other organization which the 
                      Secretary determines has the provision of hospital 
                      care as its principal function or purpose 
                      constituting the basis for its exemption under 
                      subsection (c)(3) (determined without regard to 
                      this subsection).
                    ``(B) Organizations with more than 1 hospital 
                facility.--If a hospital organization operates more than 
                1 hospital facility--
                          ``(i) the organization shall meet the 
                      requirements of this subsection separately with 
                      respect to each such facility, and
                          ``(ii) the organization shall not be treated 
                      as described in subsection (c)(3) with respect to 
                      any such facility for which such requirements are 
                      not separately met.
            ``(3) Community health needs assessments.--
                    ``(A) In general.--An organization meets the 
                requirements of this paragraph with respect to any 
                taxable year only if the organization--
                          ``(i) has conducted a community health needs 
                      assessment which meets the requirements of 
                      subparagraph (B) in such taxable year or in either 
                      of the 2 taxable years immediately preceding such 
                      taxable year, and
                          ``(ii) has adopted an implementation strategy 
                      to meet the community health needs identified 
                      through such assessment.
                    ``(B) Community health needs assessment.--A 
                community health needs assessment meets the requirements 
                of this paragraph if such community health needs 
                assessment--
                          ``(i) takes into account input from persons 
                      who represent the broad interests of the community 
                      served by the hospital facility, including those 
                      with special knowledge of or expertise in public 
                      health, and
                          ``(ii) <<NOTE: Public information.>>  is made 
                      widely available to the public.
            ``(4) Financial assistance policy.--An organization meets 
        the requirements of this paragraph if the organization 
        establishes the following policies:
                    ``(A) Financial assistance policy.--A written 
                financial assistance policy which includes--
                          ``(i) eligibility criteria for financial 
                      assistance, and whether such assistance includes 
                      free or discounted care,
                          ``(ii) the basis for calculating amounts 
                      charged to patients,
                          ``(iii) the method for applying for financial 
                      assistance,
                          ``(iv) in the case of an organization which 
                      does not have a separate billing and collections 
                      policy, the actions the organization may take in 
                      the event of non-payment, including collections 
                      action and reporting to credit agencies, and

[[Page 124 STAT. 857]]

                          ``(v) measures to widely publicize the policy 
                      within the community to be served by the 
                      organization.
                    ``(B) Policy relating to emergency medical care.--A 
                written policy requiring the organization to provide, 
                without discrimination, care for emergency medical 
                conditions (within the meaning of section 1867 of the 
                Social Security Act (42 U.S.C. 1395dd)) to individuals 
                regardless of their eligibility under the financial 
                assistance policy described in subparagraph (A).
            ``(5) Limitation on charges.--An organization meets the 
        requirements of this paragraph if the organization--
                    ``(A) limits amounts charged for emergency or other 
                medically necessary care provided to individuals 
                eligible for assistance under the financial assistance 
                policy described in paragraph (4)(A) to not more than 
                the lowest amounts charged to individuals who have 
                insurance covering such care, and
                    ``(B) prohibits the use of gross charges.
            ``(6) Billing and collection requirements.--An organization 
        meets the requirement of this paragraph only if the organization 
        does not engage in extraordinary collection actions before the 
        organization has made reasonable efforts to determine whether 
        the individual is eligible for assistance under the financial 
        assistance policy described in paragraph (4)(A).
            ``(7) <<NOTE: Regulations. Guidelines.>>  Regulatory 
        authority.--The Secretary shall issue such regulations and 
        guidance as may be necessary to carry out the provisions of this 
        subsection, including guidance relating to what constitutes 
        reasonable efforts to determine the eligibility of a patient 
        under a financial assistance policy for purposes of paragraph 
        (6).''.

    (b) Excise Tax for Failures To Meet Hospital Exemption 
Requirements.--
            (1) In general.--Subchapter D of chapter 42 of the Internal 
        Revenue Code of 1986 (relating to failure by certain charitable 
        organizations to meet certain qualification requirements) is 
        amended by adding at the end the following new section:

``SEC. 4959. <<NOTE: 26 USC 4959.>>  TAXES ON FAILURES BY HOSPITAL 
            ORGANIZATIONS.

    ``If a hospital organization to which section 501(r) applies fails 
to meet the requirement of section 501(r)(3) for any taxable year, there 
is imposed on the organization a tax equal to $50,000.''.
            (2) Conforming amendment.--The table of sections for 
        subchapter D of chapter 42 of such Code is amended by adding at 
        the end the following new item:

``Sec. 4959. Taxes on failures by hospital organizations.''.

    (c) <<NOTE: 26 USC 501 note.>>  Mandatory Review of Tax Exemption 
for Hospitals.--The Secretary <<NOTE: Deadline.>>  of the Treasury or 
the Secretary's delegate shall review at least once every 3 years the 
community benefit activities of each hospital organization to which 
section 501(r) of the Internal Revenue Code of 1986 (as added by this 
section) applies.

    (d) Additional Reporting Requirements.--
            (1) Community health needs assessments and audited financial 
        statements.--Section 6033(b) of the Internal Revenue Code of 
        1986 <<NOTE: 26 USC 6033.>>  (relating to certain organizations 
        described in section 501(c)(3)) is amended by striking ``and'' 
        at the end

[[Page 124 STAT. 858]]

        of paragraph (14), by redesignating paragraph (15) as paragraph 
        (16), and by inserting after paragraph (14) the following new 
        paragraph:
            ``(15) in the case of an organization to which the 
        requirements of section 501(r) apply for the taxable year--
                    ``(A) a description of how the organization is 
                addressing the needs identified in each community health 
                needs assessment conducted under section 501(r)(3) and a 
                description of any such needs that are not being 
                addressed together with the reasons why such needs are 
                not being addressed, and
                    ``(B) the audited financial statements of such 
                organization (or, in the case of an organization the 
                financial statements of which are included in a 
                consolidated financial statement with other 
                organizations, such consolidated financial 
                statement).''.
            (2) Taxes.--Section 6033(b)(10) of such Code is amended by 
        striking ``and'' at the end of subparagraph (B), by inserting 
        ``and'' at the end of subparagraph (C), and by adding at the end 
        the following new subparagraph:
                    ``(D) section 4959 (relating to taxes on failures by 
                hospital organizations),''.

    (e) <<NOTE: 26 USC 501 note.>>  Reports.--
            (1) Report on levels of charity care.--The Secretary of the 
        Treasury, in consultation with the Secretary of Health and Human 
        Services, shall submit to the Committees on Ways and Means, 
        Education and Labor, and Energy and Commerce of the House of 
        Representatives and to the Committees on Finance and Health, 
        Education, Labor, and Pensions of the Senate an annual report on 
        the following:
                    (A) Information with respect to private tax-exempt, 
                taxable, and government-owned hospitals regarding--
                          (i) levels of charity care provided,
                          (ii) bad debt expenses,
                          (iii) unreimbursed costs for services provided 
                      with respect to means-tested government programs, 
                      and
                          (iv) unreimbursed costs for services provided 
                      with respect to non-means tested government 
                      programs.
                    (B) Information with respect to private tax-exempt 
                hospitals regarding costs incurred for community benefit 
                activities.
            (2) Report on trends.--
                    (A) Study.--The Secretary of the Treasury, in 
                consultation with the Secretary of Health and Human 
                Services, shall conduct a study on trends in the 
                information required to be reported under paragraph (1).
                    (B) Report.--Not later than 5 years after the date 
                of the enactment of this Act, the Secretary of the 
                Treasury, in consultation with the Secretary of Health 
                and Human Services, shall submit a report on the study 
                conducted under subparagraph (A) to the Committees on 
                Ways and Means, Education and Labor, and Energy and 
                Commerce of the House of Representatives and to the 
                Committees on Finance and Health, Education, Labor, and 
                Pensions of the Senate.

    (f) <<NOTE: Applicability. 26 USC 501 note.>>  Effective Dates.--

[[Page 124 STAT. 859]]

            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to taxable 
        years beginning after the date of the enactment of this Act.
            (2) Community health needs assessment.--The requirements of 
        section 501(r)(3) of the Internal Revenue Code of 1986, as added 
        by subsection (a), shall apply to taxable years beginning after 
        the date which is 2 years after the date of the enactment of 
        this Act.
            (3) Excise tax.--The amendments made by subsection (b) shall 
        apply to failures occurring after the date of the enactment of 
        this Act.

SEC. 9008. <<NOTE: 26 USC 4001 note prec.>>  IMPOSITION OF ANNUAL FEE ON 
            BRANDED PRESCRIPTION PHARMACEUTICAL MANUFACTURERS AND 
            IMPORTERS.

    (a) <<NOTE: Deadlines.>>  Imposition of Fee.--
            (1) In general.--Each covered entity engaged in the business 
        of manufacturing or importing branded prescription drugs shall 
        pay to the Secretary of the Treasury not later than the annual 
        payment date of each calendar year beginning after 2009 a fee in 
        an amount determined under subsection (b).
            (2) <<NOTE: Definition.>>  Annual payment date.--For 
        purposes of this section, the term ``annual payment date'' means 
        with respect to any calendar year the date determined by the 
        Secretary, but in no event later than September 30 of such 
        calendar year.

    (b) Determination of Fee Amount.--
            (1) In general.--With respect to each covered entity, the 
        fee under this section for any calendar year shall be equal to 
        an amount that bears the same ratio to $2,300,000,000 as--
                    (A) the covered entity's branded prescription drug 
                sales taken into account during the preceding calendar 
                year, bear to
                    (B) the aggregate branded prescription drug sales of 
                all covered entities taken into account during such 
                preceding calendar year.
            (2) Sales taken into account.--For purposes of paragraph 
        (1), the branded prescription drug sales taken into account 
        during any calendar year with respect to any covered entity 
        shall be determined in accordance with the following table:

 
   With respect to a covered entity's
  aggregate branded prescription drug      The percentage of such sales
  sales during the calendar year that         taken into account is:
                  are:
 
  Not more than $5,000,000.............  0 percent
  More than $5,000,000 but not more      10 percent
   than $125,000,000.
  More than $125,000,000 but not more    40 percent
   than $225,000,000.
  More than $225,000,000 but not more    75 percent
   than $400,000,000.
  More than $400,000,000...............  100 percent.
 


[[Page 124 STAT. 860]]

            (3) Secretarial determination.--The Secretary of the 
        Treasury shall calculate the amount of each covered entity's fee 
        for any calendar year under paragraph (1). In calculating such 
        amount, the Secretary of the Treasury shall determine such 
        covered entity's branded prescription drug sales on the basis of 
        reports submitted under subsection (g) and through the use of 
        any other source of information available to the Secretary of 
        the Treasury.

    (c) Transfer of Fees to Medicare Part B Trust Fund.--There is hereby 
appropriated to the Federal Supplementary Medical Insurance Trust Fund 
established under section 1841 of the Social Security Act an amount 
equal to the fees received by the Secretary of the Treasury under 
subsection (a).
    (d) Covered Entity.--
            (1) In general.--For purposes <<NOTE: Definition.>>  of this 
        section, the term ``covered entity'' means any manufacturer or 
        importer with gross receipts from branded prescription drug 
        sales.
            (2) Controlled groups.--
                    (A) In general.--For purposes of this subsection, 
                all persons treated as a single employer under 
                subsection (a) or (b) of section 52 of the Internal 
                Revenue Code of 1986 or subsection (m) or (o) of section 
                414 of such Code shall be treated as a single covered 
                entity.
                    (B) <<NOTE: Applicability.>>  Inclusion of foreign 
                corporations.--For purposes of subparagraph (A), in 
                applying subsections (a) and (b) of section 52 of such 
                Code to this section, section 1563 of such Code shall be 
                applied without regard to subsection (b)(2)(C) thereof.

    (e) <<NOTE: Definitions.>>  Branded Prescription Drug Sales.--For 
purposes of this section--
            (1) In general.--The term ``branded prescription drug 
        sales'' means sales of branded prescription drugs to any 
        specified government program or pursuant to coverage under any 
        such program.
            (2) Branded prescription drugs.--
                    (A) In general.--The term ``branded prescription 
                drug'' means--
                          (i) any prescription drug the application for 
                      which was submitted under section 505(b) of the 
                      Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                      355(b)), or
                          (ii) any biological product the license for 
                      which was submitted under section 351(a) of the 
                      Public Health Service Act (42 U.S.C. 262(a)).
                    (B) Prescription drug.--For purposes of subparagraph 
                (A)(i), the term ``prescription drug'' means any drug 
                which is subject to section 503(b) of the Federal Food, 
                Drug, and Cosmetic Act (21 U.S.C. 353(b)).
            (3) Exclusion of orphan drug sales.--The term ``branded 
        prescription drug sales'' shall not include sales of any drug or 
        biological product with respect to which a credit was allowed 
        for any taxable year under section 45C of the Internal Revenue 
        Code of 1986. The preceding sentence shall not apply with 
        respect to any such drug or biological product after the date on 
        which such drug or biological product is approved by the Food 
        and Drug Administration for marketing for any indication other 
        than the treatment of the rare disease or condition with respect 
        to which such credit was allowed.

[[Page 124 STAT. 861]]

            (4) Specified government program.--The term ``specified 
        government program'' means--
                    (A) the Medicare Part D program under part D of 
                title XVIII of the Social Security Act,
                    (B) the Medicare Part B program under part B of 
                title XVIII of the Social Security Act,
                    (C) the Medicaid program under title XIX of the 
                Social Security Act,
                    (D) any program under which branded prescription 
                drugs are procured by the Department of Veterans 
                Affairs,
                    (E) any program under which branded prescription 
                drugs are procured by the Department of Defense, or
                    (F) the TRICARE retail pharmacy program under 
                section 1074g of title 10, United States Code.

    (f) Tax Treatment of Fees.--The fees imposed by this section--
            (1) <<NOTE: Applicability.>>  for purposes of subtitle F of 
        the Internal Revenue Code of 1986, shall be treated as excise 
        taxes with respect to which only civil actions for refund under 
        procedures of such subtitle shall apply, and
            (2) for purposes of section 275 of such Code, shall be 
        considered to be a tax described in section 275(a)(6).

    (g) Reporting Requirement.--Not later than the date determined by 
the Secretary of the Treasury following the end of any calendar year, 
the Secretary of Health and Human Services, the Secretary of Veterans 
Affairs, and the Secretary of Defense shall report to the Secretary of 
the Treasury, in such manner as the Secretary of the Treasury 
prescribes, the total branded prescription drug sales for each covered 
entity with respect to each specified government program under such 
Secretary's jurisdiction using the following methodology:
            (1) Medicare part d program.--The Secretary of Health and 
        Human Services shall report, for each covered entity and for 
        each branded prescription drug of the covered entity covered by 
        the Medicare Part D program, the product of--
                    (A) the per-unit ingredient cost, as reported to the 
                Secretary of Health and Human Services by prescription 
                drug plans and Medicare Advantage prescription drug 
                plans, minus any per-unit rebate, discount, or other 
                price concession provided by the covered entity, as 
                reported to the Secretary of Health and Human Services 
                by the prescription drug plans and Medicare Advantage 
                prescription drug plans, and
                    (B) the number of units of the branded prescription 
                drug paid for under the Medicare Part D program.
            (2) Medicare part b program.--The Secretary of Health and 
        Human Services shall report, for each covered entity and for 
        each branded prescription drug of the covered entity covered by 
        the Medicare Part B program under section 1862(a) of the Social 
        Security Act, the product of--
                    (A) the per-unit average sales price (as defined in 
                section 1847A(c) of the Social Security Act) or the per-
                unit Part B payment rate for a separately paid branded 
                prescription drug without a reported average sales 
                price, and
                    (B) the number of units of the branded prescription 
                drug paid for under the Medicare Part B program.

[[Page 124 STAT. 862]]

        The Centers <<NOTE: Process.>>  for Medicare and Medicaid 
        Services shall establish a process for determining the units and 
        the allocated price for purposes of this section for those 
        branded prescription drugs that are not separately payable or 
        for which National Drug Codes are not reported.
            (3) Medicaid program.--The Secretary of Health and Human 
        Services shall report, for each covered entity and for each 
        branded prescription drug of the covered entity covered under 
        the Medicaid program, the product of--
                    (A) the per-unit ingredient cost paid to pharmacies 
                by States for the branded prescription drug dispensed to 
                Medicaid beneficiaries, minus any per-unit rebate paid 
                by the covered entity under section 1927 of the Social 
                Security Act and any State supplemental rebate, and
                    (B) the number of units of the branded prescription 
                drug paid for under the Medicaid program.
            (4) Department of veterans affairs programs.--The Secretary 
        of Veterans Affairs shall report, for each covered entity and 
        for each branded prescription drug of the covered entity the 
        total amount paid for each such branded prescription drug 
        procured by the Department of Veterans Affairs for its 
        beneficiaries.
            (5) Department of defense programs and tricare.--The 
        Secretary of Defense shall report, for each covered entity and 
        for each branded prescription drug of the covered entity, the 
        sum of--
                    (A) the total amount paid for each such branded 
                prescription drug procured by the Department of Defense 
                for its beneficiaries, and
                    (B) for each such branded prescription drug 
                dispensed under the TRICARE retail pharmacy program, the 
                product of--
                          (i) the per-unit ingredient cost, minus any 
                      per-unit rebate paid by the covered entity, and
                          (ii) the number of units of the branded 
                      prescription drug dispensed under such program.

    (h) Secretary.--For purposes of this section, the term ``Secretary'' 
includes the Secretary's delegate.
    (i) <<NOTE: Publication.>>  Guidance.--The Secretary of the Treasury 
shall publish guidance necessary to carry out the purposes of this 
section.

    (j) Application of Section.--This section shall apply to any branded 
prescription drug sales after December 31, 2008.
    (k) Conforming Amendment.--Section 1841(a) of the Social Security 
Act <<NOTE: 42 USC 1395t.>>  is amended by inserting ``or section 
9008(c) of the Patient Protection and Affordable Care Act of 2009'' 
after ``this part''.

SEC. 9009. <<NOTE: 26 USC 4001 note prec. Definitions.>>  IMPOSITION OF 
            ANNUAL FEE ON MEDICAL DEVICE MANUFACTURERS AND IMPORTERS.

    (a) <<NOTE: Deadlines.>>  Imposition of Fee.--
            (1) In general.--Each covered entity engaged in the business 
        of manufacturing or importing medical devices shall pay to the 
        Secretary not later than the annual payment date of each 
        calendar year beginning after 2009 a fee in an amount determined 
        under subsection (b).
            (2) Annual payment date.--For purposes of this section, the 
        term ``annual payment date'' means with respect to any

[[Page 124 STAT. 863]]

        calendar year the date determined by the Secretary, but in no 
        event later than September 30 of such calendar year.

    (b) Determination of Fee Amount.--
            (1) In general.--With respect to each covered entity, the 
        fee under this section for any calendar year shall be equal to 
        an amount that bears the same ratio to $2,000,000,000 as--
                    (A) the covered entity's gross receipts from medical 
                device sales taken into account during the preceding 
                calendar year, bear to
                    (B) the aggregate gross receipts of all covered 
                entities from medical device sales taken into account 
                during such preceding calendar year.
            (2) Gross receipts from sales taken into account.--For 
        purposes of paragraph (1), the gross receipts from medical 
        device sales taken into account during any calendar year with 
        respect to any covered entity shall be determined in accordance 
        with the following table:

 
   With respect to a covered entity's
 aggregate gross receipts from medical       The percentage of gross
 device sales during the calendar year   receipts taken into account is:
               that are:
 
  Not more than $5,000,000.............  0 percent
  More than $5,000,000 but not more      50 percent
   than $25,000,000.
  More than $25,000,000................  100 percent.
 

            (3) Secretarial determination.--The Secretary shall 
        calculate the amount of each covered entity's fee for any 
        calendar year under paragraph (1). In calculating such amount, 
        the Secretary shall determine such covered entity's gross 
        receipts from medical device sales on the basis of reports 
        submitted by the covered entity under subsection (f) and through 
        the use of any other source of information available to the 
        Secretary.

    (c) Covered Entity.--
            (1) In general.--For purposes of this section, the term 
        ``covered entity'' means any manufacturer or importer with gross 
        receipts from medical device sales.
            (2) Controlled groups.--
                    (A) In general.--For purposes of this subsection, 
                all persons treated as a single employer under 
                subsection (a) or (b) of section 52 of the Internal 
                Revenue Code of 1986 or subsection (m) or (o) of section 
                414 of such Code shall be treated as a single covered 
                entity.
                    (B) <<NOTE: Applicability.>>  Inclusion of foreign 
                corporations.--For purposes of subparagraph (A), in 
                applying subsections (a) and (b) of section 52 of such 
                Code to this section, section 1563 of such Code shall be 
                applied without regard to subsection (b)(2)(C) thereof.

    (d) Medical Device Sales.--For purposes of this section--
            (1) In general.--The term ``medical device sales'' means 
        sales for use in the United States of any medical device, other 
        than the sales of a medical device that--
                    (A) has been classified in class II under section 
                513 of the Federal Food, Drug, and Cosmetic Act (21 
                U.S.C.

[[Page 124 STAT. 864]]

                360c) and is primarily sold to consumers at retail for 
                not more than $100 per unit, or
                    (B) has been classified in class I under such 
                section.
            (2) United states.--For purposes of paragraph (1), the term 
        ``United States'' means the several States, the District of 
        Columbia, the Commonwealth of Puerto Rico, and the possessions 
        of the United States.
            (3) Medical device.--For purposes of paragraph (1), the term 
        ``medical device'' means any device (as defined in section 
        201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
        321(h))) intended for humans.

    (e) Tax Treatment of Fees.--The fees imposed by this section--
            (1) for purposes of subtitle F of the Internal Revenue Code 
        of 1986, shall be treated as excise taxes with respect to which 
        only civil actions for refund under procedures of such subtitle 
        shall apply, and
            (2) for purposes of section 275 of such Code, shall be 
        considered to be a tax described in section 275(a)(6).

    (f) Reporting Requirement.--
            (1) In general.--Not later than the date determined by the 
        Secretary following the end of any calendar year, each covered 
        entity shall report to the Secretary, in such manner as the 
        Secretary prescribes, the gross receipts from medical device 
        sales of such covered entity during such calendar year.
            (2) Penalty for failure to report.--
                    (A) In general.--In the case of any failure to make 
                a report containing the information required by 
                paragraph (1) on the date prescribed therefor 
                (determined with regard to any extension of time for 
                filing), unless it is shown that such failure is due to 
                reasonable cause, there shall be paid by the covered 
                entity failing to file such report, an amount equal to--
                          (i) $10,000, plus
                          (ii) the lesser of--
                                    (I) an amount equal to $1,000, 
                                multiplied by the number of days during 
                                which such failure continues, or
                                    (II) the amount of the fee imposed 
                                by this section for which such report 
                                was required.
                    (B) Treatment of penalty.--The penalty imposed under 
                subparagraph (A)--
                          (i) shall be treated as a penalty for purposes 
                      of subtitle F of the Internal Revenue Code of 
                      1986,
                          (ii) <<NOTE: Notice.>>  shall be paid on 
                      notice and demand by the Secretary and in the same 
                      manner as tax under such Code, and
                          (iii) <<NOTE: Applicability.>>  with respect 
                      to which only civil actions for refund under 
                      procedures of such subtitle F shall apply.

    (g) Secretary.--For purposes of this section, the term ``Secretary'' 
means the Secretary of the Treasury or the Secretary's delegate.
    (h) <<NOTE: Publication.>>  Guidance.--The Secretary shall publish 
guidance necessary to carry out the purposes of this section, including 
identification of medical devices described in subsection (d)(1)(A) and 
with respect to the treatment of gross receipts from sales of medical 
devices

[[Page 124 STAT. 865]]

to another covered entity or to another entity by reason of the 
application of subsection (c)(2).

    (i) Application of Section.--This section shall apply to any medical 
device sales after December 31, 2008.

SEC. 9010. <<NOTE: 26 USC 4001 note prec.>>  IMPOSITION OF ANNUAL FEE ON 
            HEALTH INSURANCE PROVIDERS.

    (a) <<NOTE: Deadline.>>  Imposition of Fee.--
            (1) In general.--Each covered entity engaged in the business 
        of providing health insurance shall pay to the Secretary not 
        later than the annual payment date of each calendar year 
        beginning after 2009 a fee in an amount determined under 
        subsection (b).
            (2) <<NOTE: Definition.>>  Annual payment date.--For 
        purposes of this section, the term ``annual payment date'' means 
        with respect to any calendar year the date determined by the 
        Secretary, but in no event later than September 30 of such 
        calendar year.

    (b) Determination of Fee Amount.--
            (1) In general.--With respect to each covered entity, the 
        fee under this section for any calendar year shall be equal to 
        an amount that bears the same ratio to $6,700,000,000 as--
                    (A) the sum of--
                          (i) the covered entity's net premiums written 
                      with respect to health insurance for any United 
                      States health risk that are taken into account 
                      during the preceding calendar year, plus
                          (ii) 200 percent of the covered entity's third 
                      party administration agreement fees that are taken 
                      into account during the preceding calendar year, 
                      bears to
                    (B) the sum of--
                          (i) the aggregate net premiums written with 
                      respect to such health insurance of all covered 
                      entities that are taken into account during such 
                      preceding calendar year, plus
                          (ii) 200 percent of the aggregate third party 
                      administration agreement fees of all covered 
                      entities that are taken into account during such 
                      preceding calendar year.
            (2) Amounts taken into account.--For purposes of paragraph 
        (1)--
                    (A) Net premiums written.--The net premiums written 
                with respect to health insurance for any United States 
                health risk that are taken into account during any 
                calendar year with respect to any covered entity shall 
                be determined in accordance with the following table:

 
 With respect to a covered entity's net   The percentage of net premiums
  premiums written during the calendar     written that are taken into
             year that are:                        account is:
 
  Not more than $25,000,000............  0 percent
  More than $25,000,000 but not more     50 percent
   than $50,000,000.
  More than $50,000,000................  100 percent.
 


[[Page 124 STAT. 866]]

                    (B) Third party administration agreement fees.--The 
                third party administration agreement fees that are taken 
                into account during any calendar year with respect to 
                any covered entity shall be determined in accordance 
                with the following table:

 
   With respect to a covered entity's     The percentage of third party
  third party administration agreement    administration agreement fees
fees during the calendar year that are:  that are taken into account is:
 
  Not more than $5,000,000.............  0 percent
  More than $5,000,000 but not more      50 percent
   than $10,000,000.
  More than $10,000,000................  100 percent.
 

            (3) Secretarial determination.--The Secretary shall 
        calculate the amount of each covered entity's fee for any 
        calendar year under paragraph (1). In calculating such amount, 
        the Secretary shall determine such covered entity's net premiums 
        written with respect to any United States health risk and third 
        party administration agreement fees on the basis of reports 
        submitted by the covered entity under subsection (g) and through 
        the use of any other source of information available to the 
        Secretary.

    (c) Covered Entity.--
            (1) <<NOTE: Definition.>>  In general.--For purposes of this 
        section, the term ``covered entity'' means any entity which 
        provides health insurance for any United States health risk.
            (2) Exclusion.--Such term does not include--
                    (A) any employer to the extent that such employer 
                self-insures its employees' health risks, or
                    (B) any governmental entity (except to the extent 
                such an entity provides health insurance coverage 
                through the community health insurance option under 
                section 1323).
            (3) Controlled groups.--
                    (A) In general.--For purposes of this subsection, 
                all persons treated as a single employer under 
                subsection (a) or (b) of section 52 of the Internal 
                Revenue Code of 1986 or subsection (m) or (o) of section 
                414 of such Code shall be treated as a single covered 
                entity (or employer for purposes of paragraph (2)).
                    (B) <<NOTE: Applicability.>>  Inclusion of foreign 
                corporations.--For purposes of subparagraph (A), in 
                applying subsections (a) and (b) of section 52 of such 
                Code to this section, section 1563 of such Code shall be 
                applied without regard to subsection (b)(2)(C) thereof.

    (d) <<NOTE: Definition.>>  United States Health Risk.--For purposes 
of this section, the term ``United States health risk'' means the health 
risk of any individual who is--
            (1) a United States citizen,
            (2) a resident of the United States (within the meaning of 
        section 7701(b)(1)(A) of the Internal Revenue Code of 1986), or
            (3) located in the United States, with respect to the period 
        such individual is so located.

[[Page 124 STAT. 867]]

    (e) <<NOTE: Definition.>>  Third Party Administration Agreement 
Fees.--For purposes of this section, the term ``third party 
administration agreement fees'' means, with respect to any covered 
entity, amounts received from an employer which are in excess of 
payments made by such covered entity for health benefits under an 
arrangement under which such employer self-insures the United States 
health risk of its employees.

    (f) Tax Treatment of Fees.--The fees imposed by this section--
            (1) <<NOTE: Applicability.>>  for purposes of subtitle F of 
        the Internal Revenue Code of 1986, shall be treated as excise 
        taxes with respect to which only civil actions for refund under 
        procedures of such subtitle shall apply, and
            (2) for purposes of section 275 of such Code shall be 
        considered to be a tax described in section 275(a)(6).

    (g) Reporting Requirement.--
            (1) In general.--Not later than the date determined by the 
        Secretary following the end of any calendar year, each covered 
        entity shall report to the Secretary, in such manner as the 
        Secretary prescribes, the covered entity's net premiums written 
        with respect to health insurance for any United States health 
        risk and third party administration agreement fees for such 
        calendar year.
            (2) Penalty for failure to report.--
                    (A) In general.--In the case of any failure to make 
                a report containing the information required by 
                paragraph (1) on the date prescribed therefor 
                (determined with regard to any extension of time for 
                filing), unless it is shown that such failure is due to 
                reasonable cause, there shall be paid by the covered 
                entity failing to file such report, an amount equal to--
                          (i) $10,000, plus
                          (ii) the lesser of--
                                    (I) an amount equal to $1,000, 
                                multiplied by the number of days during 
                                which such failure continues, or
                                    (II) the amount of the fee imposed 
                                by this section for which such report 
                                was required.
                    (B) Treatment of penalty.--The penalty imposed under 
                subparagraph (A)--
                          (i) shall be treated as a penalty for purposes 
                      of subtitle F of the Internal Revenue Code of 
                      1986,
                          (ii) <<NOTE: Notice.>>  shall be paid on 
                      notice and demand by the Secretary and in the same 
                      manner as tax under such Code, and
                          (iii) with respect to which only civil actions 
                      for refund under procedures of such subtitle F 
                      shall apply.

    (h) Additional Definitions.--For purposes of this section--
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
            (2) United states.--The term ``United States'' means the 
        several States, the District of Columbia, the Commonwealth of 
        Puerto Rico, and the possessions of the United States.
            (3) Health insurance.--The term ``health insurance'' shall 
        not include insurance for long-term care or disability.

    (i) <<NOTE: Publication.>>  Guidance.--The Secretary shall publish 
guidance necessary to carry out the purposes of this section.

[[Page 124 STAT. 868]]

    (j) Application of Section.--This section shall apply to any net 
premiums written after December 31, 2008, with respect to health 
insurance for any United States health risk, and any third party 
administration agreement fees received after such date.

SEC. 9011. STUDY AND REPORT OF EFFECT ON VETERANS HEALTH CARE.

    (a) In General.--The Secretary of Veterans Affairs shall conduct a 
study on the effect (if any) of the provisions of sections 9008, 9009, 
and 9010 on--
            (1) the cost of medical care provided to veterans, and
            (2) veterans' access to medical devices and branded 
        prescription drugs.

    (b) Report.--The Secretary of Veterans Affairs shall report the 
results of the study under subsection (a) to the Committee on Ways and 
Means of the House of Representatives and to the Committee on Finance of 
the Senate not later than December 31, 2012.

SEC. 9012. ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO MEDICARE 
            PART D SUBSIDY.

    (a) In General.--Section 139A of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 139A.>>  is amended by striking the second sentence.

    (b) <<NOTE: 26 USC 139A note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2010.

SEC. 9013. MODIFICATION OF ITEMIZED DEDUCTION FOR MEDICAL EXPENSES.

    (a) In General.--Subsection (a) of section 213 of the Internal 
Revenue Code of 1986 <<NOTE: 26 USC 213.>>  is amended by striking ``7.5 
percent'' and inserting ``10 percent''.

    (b) Temporary Waiver of Increase for Certain Seniors.--Section 213 
of the Internal Revenue Code of 1986 is amended by adding at the end the 
following new subsection:
    ``(f) <<NOTE: Time period. Applicability.>>  Special Rule for 2013, 
2014, 2015, and 2016.--In the case of any taxable year beginning after 
December 31, 2012, and ending before January 1, 2017, subsection (a) 
shall be applied with respect to a taxpayer by substituting `7.5 
percent' for `10 percent' if such taxpayer or such taxpayer's spouse has 
attained age 65 before the close of such taxable year.''.

    (c) Conforming Amendment.--Section 56(b)(1)(B) of the Internal 
Revenue Code of 1986 <<NOTE: 26 USC 56.>>  is amended by striking ``by 
substituting `10 percent' for `7.5 percent' '' and inserting ``without 
regard to subsection (f) of such section''.

    (d) <<NOTE: 26 USC 56 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2012.

SEC. 9014. LIMITATION ON EXCESSIVE REMUNERATION PAID BY CERTAIN HEALTH 
            INSURANCE PROVIDERS.

    (a) In General.--Section 162(m) of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 162.>>  is amended by adding at the end the 
following new subparagraph:
            ``(6) <<NOTE: Definitions.>>  Special rule for application 
        to certain health insurance providers.--
                    ``(A) In general.--No deduction shall be allowed 
                under this chapter--

[[Page 124 STAT. 869]]

                          ``(i) in the case of applicable individual 
                      remuneration which is for any disqualified taxable 
                      year beginning after December 31, 2012, and which 
                      is attributable to services performed by an 
                      applicable individual during such taxable year, to 
                      the extent that the amount of such remuneration 
                      exceeds $500,000, or
                          ``(ii) in the case of deferred deduction 
                      remuneration for any taxable year beginning after 
                      December 31, 2012, which is attributable to 
                      services performed by an applicable individual 
                      during any disqualified taxable year beginning 
                      after December 31, 2009, to the extent that the 
                      amount of such remuneration exceeds $500,000 
                      reduced (but not below zero) by the sum of--
                                    ``(I) the applicable individual 
                                remuneration for such disqualified 
                                taxable year, plus
                                    ``(II) the portion of the deferred 
                                deduction remuneration for such services 
                                which was taken into account under this 
                                clause in a preceding taxable year (or 
                                which would have been taken into account 
                                under this clause in a preceding taxable 
                                year if this clause were applied by 
                                substituting `December 31, 2009' for 
                                `December 31, 2012' in the matter 
                                preceding subclause (I)).
                    ``(B) Disqualified taxable year.--For purposes of 
                this paragraph, the term `disqualified taxable year' 
                means, with respect to any employer, any taxable year 
                for which such employer is a covered health insurance 
                provider.
                    ``(C) Covered health insurance provider.--For 
                purposes of this paragraph--
                          ``(i) In general.--The term `covered health 
                      insurance provider' means--
                                    ``(I) with respect to taxable years 
                                beginning after December 31, 2009, and 
                                before January 1, 2013, any employer 
                                which is a health insurance issuer (as 
                                defined in section 9832(b)(2)) and which 
                                receives premiums from providing health 
                                insurance coverage (as defined in 
                                section 9832(b)(1)), and
                                    ``(II) with respect to taxable years 
                                beginning after December 31, 2012, any 
                                employer which is a health insurance 
                                issuer (as defined in section 
                                9832(b)(2)) and with respect to which 
                                not less than 25 percent of the gross 
                                premiums received from providing health 
                                insurance coverage (as defined in 
                                section 9832(b)(1)) is from minimum 
                                essential coverage (as defined in 
                                section 5000A(f)).
                          ``(ii) Aggregation rules.--Two or more persons 
                      who are treated as a single employer under 
                      subsection (b), (c), (m), or (o) of section 414 
                      shall be treated as a single employer, except that 
                      in applying section 1563(a) for purposes of any 
                      such subsection, paragraphs (2) and (3) thereof 
                      shall be disregarded.
                    ``(D) Applicable individual remuneration.--For 
                purposes of this paragraph, the term `applicable 
                individual

[[Page 124 STAT. 870]]

                remuneration' means, with respect to any applicable 
                individual for any disqualified taxable year, the 
                aggregate amount allowable as a deduction under this 
                chapter for such taxable year (determined without regard 
                to this subsection) for remuneration (as defined in 
                paragraph (4) without regard to subparagraphs (B), (C), 
                and (D) thereof) for services performed by such 
                individual (whether or not during the taxable year). 
                Such term shall not include any deferred deduction 
                remuneration with respect to services performed during 
                the disqualified taxable year.
                    ``(E) Deferred deduction remuneration.--For purposes 
                of this paragraph, the term `deferred deduction 
                remuneration' means remuneration which would be 
                applicable individual remuneration for services 
                performed in a disqualified taxable year but for the 
                fact that the deduction under this chapter (determined 
                without regard to this paragraph) for such remuneration 
                is allowable in a subsequent taxable year.
                    ``(F) Applicable individual.--For purposes of this 
                paragraph, the term `applicable individual' means, with 
                respect to any covered health insurance provider for any 
                disqualified taxable year, any individual--
                          ``(i) who is an officer, director, or employee 
                      in such taxable year, or
                          ``(ii) who provides services for or on behalf 
                      of such covered health insurance provider during 
                      such taxable year.
                    ``(G) Coordination.--Rules similar to the rules of 
                subparagraphs (F) and (G) of paragraph (4) shall apply 
                for purposes of this paragraph.
                    ``(H) Regulatory authority.--The Secretary may 
                prescribe such guidance, rules, or regulations as are 
                necessary to carry out the purposes of this 
                paragraph.''.

    (b) <<NOTE: 26 USC 162 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2009, with respect to services performed after such date.

SEC. 9015. ADDITIONAL HOSPITAL INSURANCE TAX ON HIGH-INCOME TAXPAYERS.

    (a) FICA.--
            (1) <<NOTE: 26 USC 3101.>>  In general.--Section 3101(b) of 
        the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``In addition'' and inserting the 
                following:
            ``(1) In general.--In addition'',
                    (B) by striking ``the following percentages of the'' 
                and inserting ``1.45 percent of the'',
                    (C) by striking ``(as defined in section 3121(b))--
                '' and all that follows and inserting ``(as defined in 
                section 3121(b)).'', and
                    (D) by adding at the end the following new 
                paragraph:
            ``(2) Additional tax.--In addition to the tax imposed by 
        paragraph (1) and the preceding subsection, there is hereby 
        imposed on every taxpayer (other than a corporation, estate, or 
        trust) a tax equal to 0.5 percent of wages which are received 
        with respect to employment (as defined in section 3121(b))

[[Page 124 STAT. 871]]

        during any taxable year beginning after December 31, 2012, and 
        which are in excess of--
                    ``(A) in the case of a joint return, $250,000, and
                    ``(B) in any other case, $200,000.''.
            (2) Collection of tax.--Section 3102 of the Internal Revenue 
        Code of 1986 <<NOTE: 26 USC 3102.>>  is amended by adding at the 
        end the following new subsection:

    ``(f) Special Rules for Additional Tax.--
            ``(1) In general.--In the case of any tax imposed by section 
        3101(b)(2), subsection (a) shall only apply to the extent to 
        which the taxpayer receives wages from the employer in excess of 
        $200,000, and the employer may disregard the amount of wages 
        received by such taxpayer's spouse.
            ``(2) Collection of amounts not withheld.--To the extent 
        that the amount of any tax imposed by section 3101(b)(2) is not 
        collected by the employer, such tax shall be paid by the 
        employee.
            ``(3) Tax paid by recipient.--If an employer, in violation 
        of this chapter, fails to deduct and withhold the tax imposed by 
        section 3101(b)(2) and thereafter the tax is paid by the 
        employee, the tax so required to be deducted and withheld shall 
        not be collected from the employer, but this paragraph shall in 
        no case relieve the employer from liability for any penalties or 
        additions to tax otherwise applicable in respect of such failure 
        to deduct and withhold.''.

    (b) SECA.--
            (1) In general.--Section 1401(b) of the Internal Revenue 
        Code of 1986 <<NOTE: 26 USC 1401.>>  is amended--
                    (A) by striking ``In addition'' and inserting the 
                following:
            ``(1) In general.--In addition'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(2) Additional tax.--
                    ``(A) In general.--In addition to the tax imposed by 
                paragraph (1) and the preceding subsection, there is 
                hereby imposed on every taxpayer (other than a 
                corporation, estate, or trust) for each taxable year 
                beginning after December 31, 2012, a tax equal to 0.5 
                percent of the self-employment income for such taxable 
                year which is in excess of--
                          ``(i) in the case of a joint return, $250,000, 
                      and
                          ``(ii) in any other case, $200,000.
                    ``(B) Coordination with fica.--The amounts under 
                clauses (i) and (ii) of subparagraph (A) shall be 
                reduced (but not below zero) by the amount of wages 
                taken into account in determining the tax imposed under 
                section 3121(b)(2) with respect to the taxpayer.''.
            (2) No deduction for additional tax.--
                    (A) In general.--Section 164(f) of such Code is 
                amended by inserting ``(other than the taxes imposed by 
                section 1401(b)(2))'' after ``section 1401)''.
                    (B) Deduction for net earnings from self-
                employment.--Subparagraph (B) of section 
                1402(a)(12) <<NOTE: 26 USC 1402.>>  is amended by 
                inserting ``(determined without regard to the rate 
                imposed under paragraph (2) of section 1401(b))'' after 
                ``for such year''.

[[Page 124 STAT. 872]]

    (c) <<NOTE: 26 USC 164 note.>>  Effective Date.--The amendments made 
by this section shall apply with respect to remuneration received, and 
taxable years beginning, after December 31, 2012.

SEC. 9016. MODIFICATION OF SECTION 833 TREATMENT OF CERTAIN HEALTH 
            ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 833 of the Internal 
Revenue Code of 1986 <<NOTE: 26 USC 833.>>  is amended by adding at the 
end the following new paragraph:
            ``(5) Nonapplication of section in case of low medical loss 
        ratio.--Notwithstanding the preceding paragraphs, this section 
        shall not apply to any organization unless such organization's 
        percentage of total premium revenue expended on reimbursement 
        for clinical services provided to enrollees under its policies 
        during such taxable year (as reported under section 2718 of the 
        Public Health Service Act) is not less than 85 percent.''.

    (b) <<NOTE: 26 USC 853 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2009.

SEC. 9017. EXCISE TAX ON ELECTIVE COSMETIC MEDICAL PROCEDURES.

    (a) In General.--Subtitle D of the Internal Revenue Code of 1986, as 
amended by this Act, is amended by adding at the end the following new 
chapter:

           ``CHAPTER 49--ELECTIVE COSMETIC MEDICAL PROCEDURES

``Sec. 5000B. Imposition of tax on elective cosmetic medical procedures.

``SEC. 5000B. <<NOTE: 26 USC 5000B.>>  IMPOSITION OF TAX ON ELECTIVE 
            COSMETIC MEDICAL PROCEDURES.

    ``(a) In General.--There is hereby imposed on any cosmetic surgery 
and medical procedure a tax equal to 5 percent of the amount paid for 
such procedure (determined without regard to this section), whether paid 
by insurance or otherwise.
    ``(b) Cosmetic Surgery and Medical Procedure.--For purposes of this 
section, the term `cosmetic surgery and medical procedure' means any 
cosmetic surgery (as defined in section 213(d)(9)(B)) or other similar 
procedure which--
            ``(1) is performed by a licensed medical professional, and
            ``(2) is not necessary to ameliorate a deformity arising 
        from, or directly related to, a congenital abnormality, a 
        personal injury resulting from an accident or trauma, or 
        disfiguring disease.

    ``(c) Payment of Tax.--
            ``(1) In general.--The tax imposed by this section shall be 
        paid by the individual on whom the procedure is performed.
            ``(2) Collection.--Every person receiving a payment for 
        procedures on which a tax is imposed under subsection (a) shall 
        collect the amount of the tax from the individual on whom the 
        procedure is performed and remit such tax quarterly to the 
        Secretary at such time and in such manner as provided by the 
        Secretary.
            ``(3) Secondary liability.--Where any tax imposed by 
        subsection (a) is not paid at the time payments for cosmetic 
        surgery and medical procedures are made, then to the extent that

[[Page 124 STAT. 873]]

        such tax is not collected, such tax shall be paid by the person 
        who performs the procedure.''.

    (b) Clerical Amendment.--The table of chapters for subtitle D of the 
Internal Revenue Code of 1986, as amended by this Act, is amended by 
inserting after the item relating to chapter 48 the following new item:

          ``Chapter 49--Elective Cosmetic Medical Procedures''.

    (c) <<NOTE: 26 USC 5000B note.>>  Effective Date.--The amendments 
made by this section shall apply to procedures performed on or after 
January 1, 2010.

                      Subtitle B--Other Provisions

SEC. 9021. EXCLUSION OF HEALTH BENEFITS PROVIDED BY INDIAN TRIBAL 
            GOVERNMENTS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 139C 
the following new section:

``SEC. 139D. <<NOTE: 26 USC 139D.>>  INDIAN HEALTH CARE BENEFITS.

    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income does not include the value of any qualified Indian health 
care benefit.
    ``(b) <<NOTE: Definition.>>  Qualified Indian Health Care Benefit.--
For purposes of this section, the term `qualified Indian health care 
benefit' means--
            ``(1) any health service or benefit provided or purchased, 
        directly or indirectly, by the Indian Health Service through a 
        grant to or a contract or compact with an Indian tribe or tribal 
        organization, or through a third-party program funded by the 
        Indian Health Service,
            ``(2) medical care provided or purchased by, or amounts to 
        reimburse for such medical care provided by, an Indian tribe or 
        tribal organization for, or to, a member of an Indian tribe, 
        including a spouse or dependent of such a member,
            ``(3) coverage under accident or health insurance (or an 
        arrangement having the effect of accident or health insurance), 
        or an accident or health plan, provided by an Indian tribe or 
        tribal organization for medical care to a member of an Indian 
        tribe, include a spouse or dependent of such a member, and
            ``(4) any other medical care provided by an Indian tribe or 
        tribal organization that supplements, replaces, or substitutes 
        for a program or service relating to medical care provided by 
        the Federal government to Indian tribes or members of such a 
        tribe.

    ``(c) Definitions.--For purposes of this section--
            ``(1) Indian tribe.--The term `Indian tribe' has the meaning 
        given such term by section 45A(c)(6).
            ``(2) Tribal organization.--The term `tribal organization' 
        has the meaning given such term by section 4(l) of the Indian 
        Self-Determination and Education Assistance Act.
            ``(3) Medical care.--The term `medical care' has the same 
        meaning as when used in section 213.
            ``(4) Accident or health insurance; accident or health 
        plan.--The terms `accident or health insurance' and `accident

[[Page 124 STAT. 874]]

        or health plan' have the same meaning as when used in section 
        105.
            ``(5) Dependent.--The term `dependent' has the meaning given 
        such term by section 152, determined without regard to 
        subsections (b)(1), (b)(2), and (d)(1)(B) thereof.

    ``(d) Denial of Double Benefit.--Subsection (a) shall not apply to 
the amount of any qualified Indian health care benefit which is not 
includible in gross income of the beneficiary of such benefit under any 
other provision of this chapter, or to the amount of any such benefit 
for which a deduction is allowed to such beneficiary under any other 
provision of this chapter.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 139C the 
following new item:

``Sec. 139D. Indian health care benefits.''.

    (c) <<NOTE: 26 USC 139D note.>>  Effective Date.--The amendments 
made by this section shall apply to benefits and coverage provided after 
the date of the enactment of this Act.

    (d) <<NOTE: 26 USC 139D note.>>  No Inference.--Nothing in the 
amendments made by this section shall be construed to create an 
inference with respect to the exclusion from gross income of--
            (1) benefits provided by an Indian tribe or tribal 
        organization that are not within the scope of this section, and
            (2) benefits provided prior to the date of the enactment of 
        this Act.

SEC. 9022. ESTABLISHMENT OF SIMPLE CAFETERIA PLANS FOR SMALL BUSINESSES.

    (a) In General.--Section 125 of the Internal Revenue Code of 
1986 <<NOTE: 26 USC 125.>>  (relating to cafeteria plans), as amended by 
this Act, is amended by redesignating subsections (j) and (k) as 
subsections (k) and (l), respectively, and by inserting after subsection 
(i) the following new subsection:

    ``(j) Simple Cafeteria Plans for Small Businesses.--
            ``(1) In general.--An eligible employer maintaining a simple 
        cafeteria plan with respect to which the requirements of this 
        subsection are met for any year shall be treated as meeting any 
        applicable nondiscrimination requirement during such year.
            ``(2) Simple cafeteria plan.--For purposes of this 
        subsection, the term `simple cafeteria plan' means a cafeteria 
        plan--
                    ``(A) which is established and maintained by an 
                eligible employer, and
                    ``(B) with respect to which the contribution 
                requirements of paragraph (3), and the eligibility and 
                participation requirements of paragraph (4), are met.
            ``(3) Contribution requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if, under the plan the employer is 
                required, without regard to whether a qualified employee 
                makes any salary reduction contribution, to make a 
                contribution to provide qualified benefits under the 
                plan on behalf of each qualified employee in an amount 
                equal to--
                          ``(i) a uniform percentage (not less than 2 
                      percent) of the employee's compensation for the 
                      plan year, or

[[Page 124 STAT. 875]]

                          ``(ii) an amount which is not less than the 
                      lesser of--
                                    ``(I) 6 percent of the employee's 
                                compensation for the plan year, or
                                    ``(II) twice the amount of the 
                                salary reduction contributions of each 
                                qualified employee.
                    ``(B) Matching contributions on behalf of highly 
                compensated and key employees.--The requirements of 
                subparagraph (A)(ii) shall not be treated as met if, 
                under the plan, the rate of contributions with respect 
                to any salary reduction contribution of a highly 
                compensated or key employee at any rate of contribution 
                is greater than that with respect to an employee who is 
                not a highly compensated or key employee.
                    ``(C) Additional contributions.--Subject to 
                subparagraph (B), nothing in this paragraph shall be 
                treated as prohibiting an employer from making 
                contributions to provide qualified benefits under the 
                plan in addition to contributions required under 
                subparagraph (A).
                    ``(D) Definitions.--For purposes of this paragraph--
                          ``(i) Salary reduction contribution.--The term 
                      `salary reduction contribution' means, with 
                      respect to a cafeteria plan, any amount which is 
                      contributed to the plan at the election of the 
                      employee and which is not includible in gross 
                      income by reason of this section.
                          ``(ii) Qualified employee.--The term 
                      `qualified employee' means, with respect to a 
                      cafeteria plan, any employee who is not a highly 
                      compensated or key employee and who is eligible to 
                      participate in the plan.
                          ``(iii) Highly compensated employee.--The term 
                      `highly compensated employee' has the meaning 
                      given such term by section 414(q).
                          ``(iv) Key employee.--The term `key employee' 
                      has the meaning given such term by section 416(i).
            ``(4) Minimum eligibility and participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph shall be treated as met with respect to any 
                year if, under the plan--
                          ``(i) all employees who had at least 1,000 
                      hours of service for the preceding plan year are 
                      eligible to participate, and
                          ``(ii) each employee eligible to participate 
                      in the plan may, subject to terms and conditions 
                      applicable to all participants, elect any benefit 
                      available under the plan.
                    ``(B) Certain employees may be excluded.--For 
                purposes of subparagraph (A)(i), an employer may elect 
                to exclude under the plan employees--
                          ``(i) who have not attained the age of 21 
                      before the close of a plan year,
                          ``(ii) who have less than 1 year of service 
                      with the employer as of any day during the plan 
                      year,
                          ``(iii) who are covered under an agreement 
                      which the Secretary of Labor finds to be a 
                      collective bargaining agreement if there is 
                      evidence that the benefits

[[Page 124 STAT. 876]]

                      covered under the cafeteria plan were the subject 
                      of good faith bargaining between employee 
                      representatives and the employer, or
                          ``(iv) who are described in section 
                      410(b)(3)(C) (relating to nonresident aliens 
                      working outside the United States).
                A plan may provide a shorter period of service or 
                younger age for purposes of clause (i) or (ii).
            ``(5) Eligible employer.--For purposes of this subsection--
                    ``(A) In general.--The term `eligible employer' 
                means, with respect to any year, any employer if such 
                employer employed an average of 100 or fewer employees 
                on business days during either of the 2 preceding years. 
                For purposes of this subparagraph, a year may only be 
                taken into account if the employer was in existence 
                throughout the year.
                    ``(B) Employers not in existence during preceding 
                year.--If an employer was not in existence throughout 
                the preceding year, the determination under subparagraph 
                (A) shall be based on the average number of employees 
                that it is reasonably expected such employer will employ 
                on business days in the current year.
                    ``(C) Growing employers retain treatment as small 
                employer.--
                          ``(i) In general.--If--
                                    ``(I) an employer was an eligible 
                                employer for any year (a `qualified 
                                year'), and
                                    ``(II) such employer establishes a 
                                simple cafeteria plan for its employees 
                                for such year,
                      then, notwithstanding the fact the employer fails 
                      to meet the requirements of subparagraph (A) for 
                      any subsequent year, such employer shall be 
                      treated as an eligible employer for such 
                      subsequent year with respect to employees (whether 
                      or not employees during a qualified year) of any 
                      trade or business which was covered by the plan 
                      during any qualified year.
                          ``(ii) Exception.--This subparagraph shall 
                      cease to apply if the employer employs an average 
                      of 200 or more employees on business days during 
                      any year preceding any such subsequent year.
                    ``(D) Special rules.--
                          ``(i) Predecessors.--Any reference in this 
                      paragraph to an employer shall include a reference 
                      to any predecessor of such employer.
                          ``(ii) Aggregation rules.--All persons treated 
                      as a single employer under subsection (a) or (b) 
                      of section 52, or subsection (n) or (o) of section 
                      414, shall be treated as one person.
            ``(6) Applicable nondiscrimination requirement.--For 
        purposes of this subsection, the term `applicable 
        nondiscrimination requirement' means any requirement under 
        subsection (b) of this section, section 79(d), section 105(h), 
        or paragraph (2), (3), (4), or (8) of section 129(d).
            ``(7) Compensation.--The term `compensation' has the meaning 
        given such term by section 414(s).''.

    (b) <<NOTE: 26 USC 125 note.>>  Effective Date.--The amendments made 
by this section shall apply to years beginning after December 31, 2010.

[[Page 124 STAT. 877]]

SEC. 9023. QUALIFYING THERAPEUTIC DISCOVERY PROJECT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 48C the following new section:

``SEC. 48D. <<NOTE: 26 USC 48D.>>  QUALIFYING THERAPEUTIC DISCOVERY 
            PROJECT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
therapeutic discovery project credit for any taxable year is an amount 
equal to 50 percent of the qualified investment for such taxable year 
with respect to any qualifying therapeutic discovery project of an 
eligible taxpayer.
    ``(b) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the aggregate 
        amount of the costs paid or incurred in such taxable year for 
        expenses necessary for and directly related to the conduct of a 
        qualifying therapeutic discovery project.
            ``(2) Limitation.--The amount which is treated as qualified 
        investment for all taxable years with respect to any qualifying 
        therapeutic discovery project shall not exceed the amount 
        certified by the Secretary as eligible for the credit under this 
        section.
            ``(3) Exclusions.--The qualified investment for any taxable 
        year with respect to any qualifying therapeutic discovery 
        project shall not take into account any cost--
                    ``(A) for remuneration for an employee described in 
                section 162(m)(3),
                    ``(B) for interest expenses,
                    ``(C) for facility maintenance expenses,
                    ``(D) which is identified as a service cost under 
                section 1.263A-1(e)(4) of title 26, Code of Federal 
                Regulations, or
                    ``(E) for any other expense as determined by the 
                Secretary as appropriate to carry out the purposes of 
                this section.
            ``(4) Certain progress expenditure rules made applicable.--
        In the case of costs described in paragraph (1) that are paid 
        for property of a character subject to an allowance for 
        depreciation, rules similar to the rules of subsections (c)(4) 
        and (d) of section 46 (as in effect on the day before the date 
        of the enactment of the Revenue Reconciliation Act of 1990) 
        shall apply for purposes of this section.
            ``(5) Application of subsection.--An investment shall be 
        considered a qualified investment under this subsection only if 
        such investment is made in a taxable year beginning in 2009 or 
        2010.

    ``(c) Definitions.--
            ``(1) Qualifying therapeutic discovery project.--The term 
        `qualifying therapeutic discovery project' means a project which 
        is designed--
                    ``(A) to treat or prevent diseases or conditions by 
                conducting pre-clinical activities, clinical trials, and 
                clinical studies, or carrying out research protocols, 
                for the purpose of securing approval of a product under 
                section 505(b) of the Federal Food, Drug, and Cosmetic 
                Act or section 351(a) of the Public Health Service Act,

[[Page 124 STAT. 878]]

                    ``(B) to diagnose diseases or conditions or to 
                determine molecular factors related to diseases or 
                conditions by developing molecular diagnostics to guide 
                therapeutic decisions, or
                    ``(C) to develop a product, process, or technology 
                to further the delivery or administration of 
                therapeutics.
            ``(2) Eligible taxpayer.--
                    ``(A) In general.--The term `eligible taxpayer' 
                means a taxpayer which employs not more than 250 
                employees in all businesses of the taxpayer at the time 
                of the submission of the application under subsection 
                (d)(2).
                    ``(B) Aggregation rules.--All persons treated as a 
                single employer under subsection (a) or (b) of section 
                52, or subsection (m) or (o) of section 414, shall be so 
                treated for purposes of this paragraph.
            ``(3) Facility maintenance expenses.--The term `facility 
        maintenance expenses' means costs paid or incurred to maintain a 
        facility, including--
                    ``(A) mortgage or rent payments,
                    ``(B) insurance payments,
                    ``(C) utility and maintenance costs, and
                    ``(D) costs of employment of maintenance personnel.

    ``(d) Qualifying Therapeutic Discovery Project Program.--
            ``(1) Establishment.--
                    ``(A) <<NOTE: Deadline.>>  In general.--Not later 
                than 60 days after the date of the enactment of this 
                section, the Secretary, in consultation with the 
                Secretary of Health and Human Services, shall establish 
                a qualifying therapeutic discovery project program to 
                consider and award certifications for qualified 
                investments eligible for credits under this section to 
                qualifying therapeutic discovery project sponsors.
                    ``(B) Limitation.--The total amount of credits that 
                may be allocated under the program shall not exceed 
                $1,000,000,000 for the 2-year period beginning with 
                2009.
            ``(2) Certification.--
                    ``(A) Application period.--Each applicant for 
                certification under this paragraph shall submit an 
                application containing such information as the Secretary 
                may require during the period beginning on the date the 
                Secretary establishes the program under paragraph (1).
                    ``(B) Time for review of applications.--The 
                Secretary shall take action to approve or deny any 
                application under subparagraph (A) within 30 days of the 
                submission of such application.
                    ``(C) Multi-year applications.--An application for 
                certification under subparagraph (A) may include a 
                request for an allocation of credits for more than 1 of 
                the years described in paragraph (1)(B).
            ``(3) Selection criteria.--In determining the qualifying 
        therapeutic discovery projects with respect to which qualified 
        investments may be certified under this section, the Secretary--
                    ``(A) shall take into consideration only those 
                projects that show reasonable potential--
                          ``(i) to result in new therapies--
                                    ``(I) to treat areas of unmet 
                                medical need, or
                                    ``(II) to prevent, detect, or treat 
                                chronic or acute diseases and 
                                conditions,

[[Page 124 STAT. 879]]

                          ``(ii) to reduce long-term health care costs 
                      in the United States, or
                          ``(iii) to significantly advance the goal of 
                      curing cancer within the 30-year period beginning 
                      on the date the Secretary establishes the program 
                      under paragraph (1), and
                    ``(B) shall take into consideration which projects 
                have the greatest potential--
                          ``(i) to create and sustain (directly or 
                      indirectly) high quality, high-paying jobs in the 
                      United States, and
                          ``(ii) to advance United States 
                      competitiveness in the fields of life, biological, 
                      and medical sciences.
            ``(4) <<NOTE: Certification. Public information.>>  
        Disclosure of allocations.--The Secretary shall, upon making a 
        certification under this subsection, publicly disclose the 
        identity of the applicant and the amount of the credit with 
        respect to such applicant.

    ``(e) Special Rules.--
            ``(1) Basis adjustment.--For purposes of this subtitle, if a 
        credit is allowed under this section for an expenditure related 
        to property of a character subject to an allowance for 
        depreciation, the basis of such property shall be reduced by the 
        amount of such credit.
            ``(2) Denial of double benefit.--
                    ``(A) Bonus depreciation.--A credit shall not be 
                allowed under this section for any investment for which 
                bonus depreciation is allowed under section 168(k), 
                1400L(b)(1), or 1400N(d)(1).
                    ``(B) Deductions.--No deduction under this subtitle 
                shall be allowed for the portion of the expenses 
                otherwise allowable as a deduction taken into account in 
                determining the credit under this section for the 
                taxable year which is equal to the amount of the credit 
                determined for such taxable year under subsection (a) 
                attributable to such portion. This subparagraph shall 
                not apply to expenses related to property of a character 
                subject to an allowance for depreciation the basis of 
                which is reduced under paragraph (1), or which are 
                described in section 280C(g).
                    ``(C) Credit for research activities.--
                          ``(i) In general.--Except as provided in 
                      clause (ii), any expenses taken into account under 
                      this section for a taxable year shall not be taken 
                      into account for purposes of determining the 
                      credit allowable under section 41 or 45C for such 
                      taxable year.
                          ``(ii) Expenses included in determining base 
                      period research expenses.--Any expenses for any 
                      taxable year which are qualified research expenses 
                      (within the meaning of section 41(b)) shall be 
                      taken into account in determining base period 
                      research expenses for purposes of applying section 
                      41 to subsequent taxable years.

    ``(f) Coordination With Department of Treasury Grants.--In the case 
of any investment with respect to which the Secretary makes a grant 
under section 9023(e) of the Patient Protection and Affordable Care Act 
of 2009--
            ``(1) Denial of credit.--No credit shall be determined under 
        this section with respect to such investment for the

[[Page 124 STAT. 880]]

        taxable year in which such grant is made or any subsequent 
        taxable year.
            ``(2) Recapture of credits for progress expenditures made 
        before grant.--If a credit was determined under this section 
        with respect to such investment for any taxable year ending 
        before such grant is made--
                    ``(A) the tax imposed under subtitle A on the 
                taxpayer for the taxable year in which such grant is 
                made shall be increased by so much of such credit as was 
                allowed under section 38,
                    ``(B) the general business carryforwards under 
                section 39 shall be adjusted so as to recapture the 
                portion of such credit which was not so allowed, and
                    ``(C) the amount of such grant shall be determined 
                without regard to any reduction in the basis of any 
                property of a character subject to an allowance for 
                depreciation by reason of such credit.
            ``(3) Treatment of grants.--Any such grant shall not be 
        includible in the gross income of the taxpayer.''.

    (b) Inclusion as Part of Investment Credit.--Section 46 of the 
Internal Revenue Code of 1986 <<NOTE: 26 USC 46.>>  is amended--
            (1) by adding a comma at the end of paragraph (2),
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``, and'', and
            (3) by adding at the end the following new paragraph:
            ``(6) the qualifying therapeutic discovery project 
        credit.''.

    (c) Conforming Amendments.--
            (1) Section 49(a)(1)(C) of the Internal Revenue Code of 1986 
        is <<NOTE: 26 USC 49.>>  amended--
                    (A) by striking ``and'' at the end of clause (iv),
                    (B) by striking the period at the end of clause (v) 
                and inserting ``, and'', and
                    (C) by adding at the end the following new clause:
                          ``(vi) the basis of any property to which 
                      paragraph (1) of section 48D(e) applies which is 
                      part of a qualifying therapeutic discovery project 
                      under such section 48D.''.
            (2) <<NOTE: 26 USC 280C.>>  Section 280C of such Code is 
        amended by adding at the end the following new subsection:

    ``(g) Qualifying Therapeutic Discovery Project Credit.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the qualified investment (as defined in section 
        48D(b)) otherwise allowable as a deduction for the taxable year 
        which--
                    ``(A) would be qualified research expenses (as 
                defined in section 41(b)), basic research expenses (as 
                defined in section 41(e)(2)), or qualified clinical 
                testing expenses (as defined in section 45C(b)) if the 
                credit under section 41 or section 45C were allowed with 
                respect to such expenses for such taxable year, and
                    ``(B) is equal to the amount of the credit 
                determined for such taxable year under section 48D(a), 
                reduced by--
                          ``(i) the amount disallowed as a deduction by 
                      reason of section 48D(e)(2)(B), and
                          ``(ii) the amount of any basis reduction under 
                      section 48D(e)(1).
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--In the case of expenses described

[[Page 124 STAT. 881]]

        in paragraph (1)(A) taken into account in determining the credit 
        under section 48D for the taxable year, if--
                    ``(A) the amount of the portion of the credit 
                determined under such section with respect to such 
                expenses, exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for such expenses (determined without 
                regard to paragraph (1)),
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such excess.
            ``(3) <<NOTE: Applicability.>>  Controlled groups.--
        Paragraph (3) of subsection (b) shall apply for purposes of this 
        subsection.''.

    (d) Clerical Amendment.--The table of sections for subpart E 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 48C the 
following new item:

``Sec. 48D. Qualifying therapeutic discovery project credit.''.

    (e) <<NOTE: 26 USC 48D note.>>  Grants for Qualified Investments in 
Therapeutic Discovery Projects in Lieu of Tax Credits.--
            (1) In general.--Upon application, the Secretary of the 
        Treasury shall, subject to the requirements of this subsection, 
        provide a grant to each person who makes a qualified investment 
        in a qualifying therapeutic discovery project in the amount of 
        50 percent of such investment. No grant shall be made under this 
        subsection with respect to any investment unless such investment 
        is made during a taxable year beginning in 2009 or 2010.
            (2) Application.--
                    (A) In general.--At the stated election of the 
                applicant, an application for certification under 
                section 48D(d)(2) of the Internal Revenue Code of 1986 
                for a credit under such section for the taxable year of 
                the applicant which begins in 2009 shall be considered 
                to be an application for a grant under paragraph (1) for 
                such taxable year.
                    (B) Taxable years beginning in 2010.--An application 
                for a grant under paragraph (1) for a taxable year 
                beginning in 2010 shall be submitted--
                          (i) not earlier than the day after the last 
                      day of such taxable year, and
                          (ii) not later than the due date (including 
                      extensions) for filing the return of tax for such 
                      taxable year.
                    (C) Information to be submitted.--An application for 
                a grant under paragraph (1) shall include such 
                information and be in such form as the Secretary may 
                require to state the amount of the credit allowable (but 
                for the receipt of a grant under this subsection) under 
                section 48D for the taxable year for the qualified 
                investment with respect to which such application is 
                made.
            (3) Time for payment of grant.--
                    (A) In general.--The Secretary of the Treasury shall 
                make payment of the amount of any grant under paragraph 
                (1) during the 30-day period beginning on the later of--
                          (i) the date of the application for such 
                      grant, or
                          (ii) the date the qualified investment for 
                      which the grant is being made is made.

[[Page 124 STAT. 882]]

                    (B) Regulations.--In the case of investments of an 
                ongoing nature, the Secretary shall issue regulations to 
                determine the date on which a qualified investment shall 
                be deemed to have been made for purposes of this 
                paragraph.
            (4) <<NOTE: Definition.>>  Qualified investment.--For 
        purposes of this subsection, the term ``qualified investment'' 
        means a qualified investment that is certified under section 
        48D(d) of the Internal Revenue Code of 1986 for purposes of the 
        credit under such section 48D.
            (5) Application of certain rules.--
                    (A) In general.--In making grants under this 
                subsection, the Secretary of the Treasury shall apply 
                rules similar to the rules of section 50 of the Internal 
                Revenue Code of 1986. In applying such rules, any 
                increase in tax under chapter 1 of such Code by reason 
                of an investment ceasing to be a qualified investment 
                shall be imposed on the person to whom the grant was 
                made.
                    (B) Special rules.--
                          (i) Recapture of excessive grant amounts.--If 
                      the amount of a grant made under this subsection 
                      exceeds the amount allowable as a grant under this 
                      subsection, such excess shall be recaptured under 
                      subparagraph (A) as if the investment to which 
                      such excess portion of the grant relates had 
                      ceased to be a qualified investment immediately 
                      after such grant was made.
                          (ii) Grant information not treated as return 
                      information.--In no event shall the amount of a 
                      grant made under paragraph (1), the identity of 
                      the person to whom such grant was made, or a 
                      description of the investment with respect to 
                      which such grant was made be treated as return 
                      information for purposes of section 6103 of the 
                      Internal Revenue Code of 1986.
            (6) Exception for certain non-taxpayers.--The Secretary of 
        the Treasury shall not make any grant under this subsection to--
                    (A) any Federal, State, or local government (or any 
                political subdivision, agency, or instrumentality 
                thereof),
                    (B) any organization described in section 501(c) of 
                the Internal Revenue Code of 1986 and exempt from tax 
                under section 501(a) of such Code,
                    (C) any entity referred to in paragraph (4) of 
                section 54(j) of such Code, or
                    (D) any partnership or other pass-thru entity any 
                partner (or other holder of an equity or profits 
                interest) of which is described in subparagraph (A), (B) 
                or (C).
        In the case of a partnership or other pass-thru entity described 
        in subparagraph (D), partners and other holders of any equity or 
        profits interest shall provide to such partnership or entity 
        such information as the Secretary of the Treasury may require to 
        carry out the purposes of this paragraph.
            (7) Secretary.--Any reference in this subsection to the 
        Secretary of the Treasury shall be treated as including the 
        Secretary's delegate.
            (8) Other terms.--Any term used in this subsection which is 
        also used in section 48D of the Internal Revenue Code

[[Page 124 STAT. 883]]

        of 1986 shall have the same meaning for purposes of this 
        subsection as when used in such section.
            (9) Denial of double benefit.--No credit shall be allowed 
        under section 46(6) of the Internal Revenue Code of 1986 by 
        reason of section 48D of such Code for any investment for which 
        a grant is awarded under this subsection.
            (10) Appropriations.--There is hereby appropriated to the 
        Secretary of the Treasury such sums as may be necessary to carry 
        out this subsection.
            (11) Termination.--The Secretary of the Treasury shall not 
        make any grant to any person under this subsection unless the 
        application of such person for such grant is received before 
        January 1, 2013.
            (12) Protecting middle class families from tax increases.--
        It is the sense of the Senate that the Senate should reject any 
        procedural maneuver that would raise taxes on middle class 
        families, such as a motion to commit the pending legislation to 
        the Committee on Finance, which is designed to kill legislation 
        that provides tax cuts for American workers and families, 
        including the affordability tax credit and the small business 
        tax credit.

    (f) <<NOTE: 26 USC 46 note.>>  Effective Date.--The amendments made 
by subsections (a) through (d) of this section shall apply to amounts 
paid or incurred after December 31, 2008, in taxable years beginning 
after such date.