(a) PREMIUM TAX CREDITS.--Section 36B of the Internal Revenue Code of 1986, as added by section 1401 of the Patient Protection and Affordable Care Act and amended by section 10105 of such Act, is amended--

(1) in subsection (b)(3)(A)--

(A) in clause (i), by striking "with respect to any taxpayer" and all that follows up to the end period and inserting: "for any taxable year shall be the percentage such that the applicable percentage for any taxpayer whose household income is within an income tier specified in the following table shall increase, on a sliding scale in a linear manner, from the initial premium percentage to the final premium percentage specified in such table for such income tier:

"In the case of household

income (expressed as a The initial The final

percent of poverty line) premium premium

within the following percentage percentage

income tier: is-- is--

Up to 133% 2.0% 2.0%

133% up to 150% 3.0% 4.0%

150% up to 200% 4.0% 6.3%

200% up to 250% 6.3% 8.05%

250% up to 300% 8.05% 9.5%

300% up to 400% 9.5% 9.5%"; and

(B) by striking clauses (ii) and (iii), and inserting the following:

"(ii) INDEXING.--

"(I) IN GENERAL.--Subject to subclause (II), in the case of taxable years beginning in any calendar year after 2014, the initial and final applicable percentages under clause (i) (as in effect for the preceding calendar year after application of this clause) shall be adjusted to reflect the excess of the rate of premium growth for the preceding calendar year over the rate of income growth for the preceding calendar year.

"(II) ADDITIONAL ADJUSTMENT.--Except as provided in subclause (III), in the case of any calendar year after 2018, the percentages described in subclause (I) shall, in addition to the adjustment under subclause (I), be adjusted to reflect the excess (if any) of the rate of premium growth estimated under subclause (I) for the preceding calendar year over the rate of growth in the consumer price index for the preceding calendar year.

"(III) FAILSAFE.--Subclause (II) shall apply for any calendar year only if the aggregate amount of premium tax credits under this section and cost-sharing reductions under section 1402 of the Patient Protection and Affordable Care Act for the preceding calendar year exceeds an amount equal to 0.504 percent of the gross domestic product for the preceding calendar year."; and

(2) in subsection (c)(2)(C)--

(A) by striking "9.8 percent" in clauses (i)(II) and (iv) and inserting "9.5 percent"; and

(B) by striking "(b)(3)(A)(iii)" in clause (iv) and inserting "(b)(3)(A)(ii)".

(b) COST SHARING.--Section 1402(c) of the Patient Protection and Affordable Care Act is amended--

(1) in paragraph (1)(B)(i)--

(A) in subclause (I), by striking "90" and inserting "94";

(B) in subclause (II)--

(i) by striking "80" and inserting "87"; and

(ii) by striking "and"; and

"(III) 73 percent in the case of an eligible insured whose household income is more than 200 percent but not more than 250 percent of the poverty line for a family of the size involved; and

"(IV) 70 percent in the case of an eligible insured whose household income is more than 250 percent but not more than 400 percent of the poverty line for a family of the size involved."; and

(2) in paragraph (2)--

(A) in subparagraph (A)--

(i) by striking "90" and inserting "94"; and

(ii) by striking "and";

(B) in subparagraph (B)--

(i) by striking "80" and inserting "87"; and

(ii) by striking the period and inserting "; and"; and

"(C) in the case of an eligible insured whose household income is more than 200 percent but not more than 250 percent of the poverty line for a family of the size involved, increase the plan's share of the total allowed costs of benefits provided under the plan to 73 percent of such costs.".

SEC. 1002. INDIVIDUAL RESPONSIBILITY.

(a) AMOUNTS.--Section 5000A(c) of the Internal Revenue Code of 1986, as added by section 1501(b) of the Patient Protection and Affordable Care Act and amended by section 10106 of such Act, is amended--

(1) in paragraph (2)(B)--

(A) in the matter preceding clause (i), by--

(i) inserting "the excess of" before "the taxpayer's household income"; and

(ii) inserting "for the taxable year over the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer" before "for the taxable year";

(B) in clause (i), by striking "0.5" and inserting "1.0";

(D) in clause (iii), by striking "2.0" and inserting "2.5"; and

(2) in paragraph (3)--

(A) in subparagraph (A), by striking "$750" and inserting "$695";

(B) in subparagraph (B), by striking "$495" and inserting "$325"; and

(i) in the matter preceding clause (i), by striking "$750" and inserting "$695"; and

(ii) in clause (i), by striking "$750" and inserting "$695".

(b) THRESHOLD.--Section 5000A of such Code, as so added and amended, is amended--

(1) by striking subsection (c)(4)(D); and

(2) in subsection (e)(2)--

(A) by striking "under 100 percent of poverty line" and inserting "below filing threshold"; and

(B) by striking all that follows "less than" and inserting "the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.".

SEC. 1003. EMPLOYER RESPONSIBILITY.

(a) PAYMENT CALCULATION.--Subparagraph (D) of subsection (d)(2) of section 4980H of the Internal Revenue Code of 1986, as added by section 1513 of the Patient Protection and Affordable Care Act and amended by section 10106 of such Act, is amended to read as follows:

"(D) APPLICATION OF EMPLOYER SIZE TO ASSESSABLE PENALTIES.--

"(i) IN GENERAL.--The number of individuals employed by an applicable large employer as full-time employees during any month shall be reduced by 30 solely for purposes of calculating--

"(I) the assessable payment under subsection (a), or

"(II) the overall limitation under subsection (b)(2).

"(ii) AGGREGATION.--In the case of persons treated as 1 employer under subparagraph (C)(i), only 1 reduction under subclause (I) or (II) shall be allowed with respect to such persons and such reduction shall be allocated among such persons ratably on the basis of the number of full- time employees employed by each such person.".

(b) APPLICABLE PAYMENT AMOUNT.--Section 4980H of such Code, as so added and amended, is amended--

(1) in the flush text following subsection (c)(1)(B), by striking "400 percent of the applicable payment amount" and inserting "an amount equal to 1/12 of $3,000";

(2) in subsection (d)(1), by striking "$750" and inserting "$2,000"; and

(3) in subsection (d)(5)(A), in the matter preceding clause (i), by striking "subsection (b)(2) and (d)(1)" and inserting "subsection (b) and paragraph (1)".

(c) COUNTING PART-TIME WORKERS IN SETTING THE THRESHOLD FOR EMPLOYER RESPONSIBILITY.--Section 4980H(d)(2) of such Code, as so added and amended and as amended by subsection (a), is amended by adding at the end the following new subparagraph:

"(E) FULL-TIME EQUIVALENTS TREATED AS FULL-TIME EMPLOYEES.--Solely for purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.".

(d) ELIMINATING WAITING PERIOD ASSESSMENT.--Section 4980H of such Code, as so added and amended and as amended by the preceding subsections, is amended by striking subsection (b) and redesignating subsections (c), (d), and (e) as subsections (b), (c), and (d), respectively.

SEC. 1004. INCOME DEFINITIONS.

(a) MODIFIED ADJUSTED GROSS INCOME.--

(1) IN GENERAL.--The following provisions of the Internal Revenue Code of 1986 are each amended by striking "modified gross" each place it appears and inserting "modified adjusted gross":

(A) Clauses (i) and (ii) of section 36B(d)(2)(A), as added by section 1401 of the Patient Protection and Affordable Care Act.

(B) Section 6103(l)(21)(A)(iv), as added by section 1414 of such Act.

(2) DEFINITION.--

(A) Section 36B(d)(2)(B) of such Code, as so added, is amended to read as follows:

"(B) MODIFIED ADJUSTED GROSS INCOME.--The term 'modified adjusted gross income' means adjusted gross income increased by--

"(i) any amount excluded from gross income under section 911, and

"(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.".

(B) Section 5000A(c)(4)(C) of such Code, as so added, is amended to read as follows:

"(C) MODIFIED ADJUSTED GROSS INCOME.--The term 'modified adjusted gross income' means adjusted gross income increased by--

"(i) any amount excluded from gross income under section 911, and

"(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.".

(b) MODIFIED ADJUSTED GROSS INCOME DEFINITION.--

(1) MEDICAID.--Section 1902 of the Social Security Act (42 U.S.C. 1396a) is amended by striking "modified gross income" each place it appears in the text and headings of the following provisions and inserting "modified adjusted gross income":

(A) Paragraph (14) of subsection (e), as added by section 2002(a) of the Patient Protection and Affordable Care Act.

(B) Subsection (gg)(4)(A), as added by section 2001(b) of such Act.

(2) CHIP.--

(A) STATE PLAN REQUIREMENTS.--Section 2102(b)(1)(B)(v) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)(v)), as added by section 2101(d)(1) of the Patient Protection and Affordable Care Act, is amended by striking "modified gross income" and inserting "modified adjusted gross income".

(B) PLAN ADMINISTRATION.--Section 2107(e)(1)(E) of the Social Security Act (42 U.S.C. 1397gg(e)(1)(E)), as added by section 2101(d)(2) of the Patient Protection and Affordable Care Act, is amended by striking "modified gross income" and inserting "modified adjusted gross income".

(c) NO EXCESS PAYMENTS.--Section 36B(f) of the Internal Revenue Code of 1986, as added by section 1401(a) of the Patient Protection and Affordable Care Act, is amended by adding at the end the following new paragraph:

"(3) INFORMATION REQUIREMENT.--Each Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c) of the Patient Protection and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any health plan provided through the Exchange:

"(A) The level of coverage described in section 1302(d) of the Patient Protection and Affordable Care Act and the period such coverage was in effect.

"(B) The total premium for the coverage without regard to the credit under this section or cost-sharing reductions under section 1402 of such Act.

"(C) The aggregate amount of any advance payment of such credit or reductions under section 1412 of such Act.

"(D) The name, address, and TIN of the primary insured and the name and TIN of each other individual obtaining coverage under the policy.

"(E) Any information provided to the Exchange, including any change of circumstances, necessary to determine eligibility for, and the amount of, such credit.

"(F) Information necessary to determine whether a taxpayer has received excess advance payments.".

(d) ADULT DEPENDENTS.--

(1) EXCLUSION OF AMOUNTS EXPENDED FOR MEDICAL CARE.--The first sentence of section 105(b) of the Internal Revenue Code of 1986 (relating to amounts expended for medical care) is amended--

(A) by striking "and his dependents" and inserting "his dependents"; and

(B) by inserting before the period the following: ", and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27".

(2) SELF-EMPLOYED HEALTH INSURANCE DEDUCTION.--Section 162(l)(1) of such Code is amended to read as follows:

"(1) ALLOWANCE OF DEDUCTION.--In the case of a taxpayer who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to the amount paid during the taxable year for insurance which constitutes medical care for--

"(A) the taxpayer,

"(B) the taxpayer's spouse,

"(C) the taxpayer's dependents, and

"(D) any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27.".

(3) COVERAGE UNDER SELF-EMPLOYED DEDUCTION.--Section 162(l)(2)(B) of such Code is amended by inserting ", or any dependent, or individual described in subparagraph (D) of paragraph (1) with respect to," after "spouse of".

(4) SICK AND ACCIDENT BENEFITS PROVIDED TO MEMBERS OF A VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION AND THEIR DEPENDENTS.--Section 501(c)(9) of such Code is amended by adding at the end the following new sentence: "For purposes of providing for the payment of sick and accident benefits to members of such an association and their dependents, the term 'dependent' shall include any individual who is a child (as defined in section 152(f)(1)) of a member who as of the end of the calendar year has not attained age 27.".

(5) MEDICAL AND OTHER BENEFITS FOR RETIRED EMPLOYEES.--Section 401(h) of such Code is amended by adding at the end the following: "For purposes of this subsection, the term 'dependent' shall include any individual who is a child (as defined in section 152(f)(1)) of a retired employee who as of the end of the calendar year has not attained age 27.".

(e) FIVE PERCENT INCOME DISREGARD FOR CERTAIN INDIVIDUALS.--Section 1902(e)(14) of the Social Security Act (42 U.S.C. 1396a(e)(14)), as amended by subsection (b)(1), is further amended--

(1) in subparagraph (B), by striking "No type" and inserting "Subject to subparagraph (I), no type"; and

(2) by adding at the end the following new subparagraph:

"(I) TREATMENT OF PORTION OF MODIFIED ADJUSTED GROSS INCOME.--For purposes of determining the income eligibility of an individual for medical assistance whose eligibility is determined based on the application of modified adjusted gross income under subparagraph (A), the State shall--

"(i) determine the dollar equivalent of the difference between the upper income limit on eligibility for such an individual (expressed as a percentage of the poverty line) and such upper income limit increased by 5 percentage points; and

"(ii) notwithstanding the requirement in subparagraph (A) with respect to use of modified adjusted gross income, utilize as the applicable income of such individual, in determining such income eligibility, an amount equal to the modified adjusted gross income applicable to such individual reduced by such dollar equivalent amount.".

SEC. 1005. IMPLEMENTATION FUNDING.

(a) IN GENERAL.--There is hereby established a Health Insurance Reform Implementation Fund (referred to in this section as the "Fund") within the Department of Health and Human Services to carry out the Patient Protection and Affordable Care Act and this Act (and the amendments made by such Acts).

(b) FUNDING.--There is appropriated to the Fund, out of any funds in the Treasury not otherwise appropriated, $1,000,000,000 for Federal administrative expenses to carry out such Act (and the amendments made by such Acts).

* * * * * * *

Subtitle E--Provisions Relating to Revenue

SEC. 1401. HIGH-COST PLAN EXCISE TAX.

(a) IN GENERAL.--Section 4980I of the Internal Revenue Code of 1986, as added by section 9001 of the Patient Protection and Affordable Care Act and amended by section 10901 of such Act, is amended--

(1) in subsection (b)(3)(B)--

(A) by striking "The annual" and inserting the following:

"(i) IN GENERAL.--Except as provided in clause (ii), the annual"; and

(B) by adding at the end the following new clause:

"(ii) MULTIEMPLOYER PLAN COVERAGE.--Any coverage provided under a multiemployer plan (as defined in section 414(f)) shall be treated as coverage other than self-only coverage.";

(2) in subsection (b)(3)(C)--

(A) by striking "Except as provided in subparagraph (D)--";

(B) in clause (i)--

(i) by striking "2013" each place it appears in the heading and the text and inserting "2018";

(ii) by striking "$8,500" in subclause (I) and inserting "$10,200 multiplied by the health cost adjustment percentage (determined by only taking into account self-only coverage)"; and

(iii) by striking "$23,000" in subclause (II) and inserting "$27,500 multiplied by the health cost adjustment percentage (determined by only taking into account coverage other than self-only coverage)";

(C) by redesignating clauses (ii) and (iii) as clauses (iv) and (v), respectively, and by inserting after clause (i) the following new clauses:

"(ii) Health cost adjustment percentage.--For purposes of clause (i), the health cost adjustment percentage is equal to 100 percent plus the excess (if any) of--

"(I) the percentage by which the per employee cost for providing coverage under the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for plan year 2018 (determined by using the benefit package for such coverage in 2010) exceeds such cost for plan year 2010, over

"(II) 55 percent.

"(iii) AGE AND GENDER ADJUSTMENT.--

"(I) IN GENERAL.--The amount determined under subclause (I) or (II) of clause (i), whichever is applicable, for any taxable period shall be increased by the amount determined under subclause (II).

"(II) AMOUNT DETERMINED.--The amount determined under this subclause is an amount equal to the excess (if any) of--

"(aa) the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for the type of coverage provided such individual in such taxable period if priced for the age and gender characteristics of all employees of the individual's employer, over

"(bb) that premium cost for the provision of such coverage under such option in such taxable period if priced for the age and gender characteristics of the national workforce.".

(D) in clause (iv), as redesignated by subparagraph (C)--

(i) by inserting "covered by the plan" after "whose employees"; and

(ii) by striking subclauses (I) and (II) and inserting the following:

"(I) the dollar amount in clause (i)(I) shall be increased by $1,650, and

"(II) the dollar amount in clause (i)(II) shall be increased by $3,450,", and

(E) in clause (v), as redesignated by subparagraph (C)--

(i) by striking "2013" and inserting "2018";

(ii) by striking "clauses (i) and (ii)" and inserting "clauses (i) (after the application of clause (ii)) and (iv)"; and

(iii) by inserting "in the case of determinations for calendar years beginning before 2020" after "1 percentage point" in subclause (II) thereof;

(3) by striking subparagraph (D) of subsection (b)(3);

(4) in subsection (d)(1)(B), by redesignating clause (ii) as clause (iii) and by inserting after clause (i) the following new clause:

"(ii) any coverage under a separate policy, certificate, or contract of insurance which provides benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye, or"; and

(5) in subsection (d), by adding at the end the following new paragraph:

"(3) EMPLOYEE.--The term 'employee' includes any former employee, surviving spouse, or other primary insured individual.".

(b) EFFECTIVE DATES.--

(1) Section 9001(c) of the Patient Protection and Affordable Care Act is amended by striking "2012" and inserting "2017".

(2) Section 10901(c) of the Patient Protection and Affordable Care Act is amended by striking "2012" and inserting "2017".

SEC. 1402. UNEARNED INCOME MEDICARE CONTRIBUTION.

(a) INVESTMENT INCOME.--

(1) IN GENERAL.--Subtitle A of the Internal Revenue Code of 1986 is amended by inserting after chapter 2 the following new chapter:

"CHAPTER 2A--UNEARNED INCOME MEDICARE CONTRIBUTION

"Sec. 1411. Imposition of tax.

"SEC. 1411. IMPOSITION OF TAX.

"(a) IN GENERAL.--Except as provided in subsection (e)--

"(1) APPLICATION TO INDIVIDUALS.--In the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of--

"(A) net investment income for such taxable year, or

"(B) the excess (if any) of--

"(i) the modified adjusted gross income for such taxable year, over

"(ii) the threshold amount.

"(2) APPLICATION TO ESTATES AND TRUSTS.--In the case of an estate or trust, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax of 3.8 percent of the lesser of--

"(A) the undistributed net investment income for such taxable year, or

"(B) the excess (if any) of--

"(i) the adjusted gross income (as defined in section 67(e)) for such taxable year, over

"(ii) the dollar amount at which the highest tax bracket in section 1(e) begins for such taxable year.

"(b) THRESHOLD AMOUNT.--For purposes of this chapter, the term 'threshold amount' means--

"(1) in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000,

"(2) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1/2 of the dollar amount determined under paragraph (1), and

"(3) in any other case, $200,000.

"(c) NET INVESTMENT INCOME.--For purposes of this chapter--

"(1) IN GENERAL.--The term 'net investment income' means the excess (if any) of--

"(A) the sum of--

"(i) gross income from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2),

"(ii) other gross income derived from a trade or business described in paragraph (2), and

"(iii) net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business not described in paragraph (2), over

"(B) the deductions allowed by this subtitle which are properly allocable to such gross income or net gain.

"(2) TRADES AND BUSINESSES TO WHICH TAX APPLIES.--A trade or business is described in this paragraph if such trade or business is--

"(A) a passive activity (within the meaning of section 469) with respect to the taxpayer, or

"(B) a trade or business of trading in financial instruments or commodities (as defined in section 475(e)(2)).

"(3) INCOME ON INVESTMENT OF WORKING CAPITAL SUBJECT TO TAX.-- A rule similar to the rule of section 469(e)(1)(B) shall apply for purposes of this subsection.

"(4) EXCEPTION FOR CERTAIN ACTIVE INTERESTS IN PARTNERSHIPS AND S CORPORATIONS.--In the case of a disposition of an interest in a partnership or S corporation--

"(A) gain from such disposition shall be taken into account under clause (iii) of paragraph (1)(A) only to the extent of the net gain which would be so taken into account by the transferor if all property of the partnership or S corporation were sold for fair market value immediately before the disposition of such interest, and

"(B) a rule similar to the rule of subparagraph (A) shall apply to a loss from such disposition.

"(5) EXCEPTION FOR DISTRIBUTIONS FROM QUALIFIED PLANS.--The term 'net investment income' shall not include any distribution from a plan or arrangement described in section 401(a), 403(a), 403(b), 408, 408A, or 457(b).

"(6) SPECIAL RULE.--Net investment income shall not include any item taken into account in determining self-employment income for such taxable year on which a tax is imposed by section 1401(b).

"(d) MODIFIED ADJUSTED GROSS INCOME.--For purposes of this chapter, the term 'modified adjusted gross income' means adjusted gross income increased by the excess of--

"(1) the amount excluded from gross income under section 911(a)(1), over

"(2) the amount of any deductions (taken into account in computing adjusted gross income) or exclusions disallowed under section 911(d)(6) with respect to the amounts described in paragraph (1).

"(e) NONAPPLICATION OF SECTION.--This section shall not apply to--

"(1) a nonresident alien, or

"(2) a trust all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B).".

(2) ESTIMATED TAXES.--Section 6654 of the Internal Revenue Code of 1986 is amended--

(A) in subsection (a), by striking "and the tax under chapter 2" and inserting "the tax under chapter 2, and the tax under chapter 2A"; and

(B) in subsection (f)--

(i) by striking "minus" at the end of paragraph (2) and inserting "plus"; and

(ii) by redesignating paragraph (3) as paragraph (4) and inserting after paragraph (2) the following new paragraph:

"(3) the taxes imposed by chapter 2A, minus".

(3) CLERICAL AMENDMENT.--The table of chapters for subtitle A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to chapter 2 the following new item:

"Chapter 2A--Unearned Income Medicare Contribution".

(4) EFFECTIVE DATES.--The amendments made by this subsection shall apply to taxable years beginning after December 31, 2012.

(b) EARNED INCOME.--

(1) THRESHOLD.--

(A) FICA.--Paragraph (2) of section 3101(b) of the Internal Revenue Code of 1986, as added by section 9015 of the Patient Protection and Affordable Care Act and amended by section 10906 of such Act, is amended by striking "and" at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph:

"(B) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1/2 of the dollar amount determined under subparagraph (A), and".

(B) SECA.--Section 1401(b)(2) of the Internal Revenue Code of 1986, as added by section 9015 of the Patient Protection and Affordable Care Act and amended by section 10906 of such Act, is amended--

(i) in subparagraph (A), by striking "and" at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause:

"(ii) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1/2 of the dollar amount determined under clause (i), and"; and

(ii) in subparagraph (B), by striking "under clauses (i) and (ii)" and inserting "under clause (i), (ii), or (iii) (whichever is applicable)".

(2) ESTIMATED TAXES.--Section 6654 of the Internal Revenue Code of 1986 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

"(m) SPECIAL RULE FOR MEDICARE TAX.--For purposes of this section, the tax imposed under section 3101(b)(2) (to the extent not withheld) shall be treated as a tax imposed under chapter 2.".

(3) EFFECTIVE DATE.--The amendments made by this subsection shall apply with respect to remuneration received, and taxable years beginning after, December 31, 2012.

SEC. 1403. DELAY OF LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS UNDER CAFETERIA PLANS.

(a) IN GENERAL.--Section 10902(b) of the Patient Protection and Affordable Care Act is amended by striking "December 31, 2010" and inserting "December 31, 2012".

(b) INFLATION ADJUSTMENT.--Paragraph (2) of section 125(i) of the Internal Revenue Code of 1986, as added by section 9005 of the Patient Protection and Affordable Care Act and amended by section 10902 of such Act, is amended--

(1) in the matter preceding subparagraph (A), by striking "December 31, 2011" and inserting "December 31, 2013"; and

(2) in subparagraph (B), by striking "2010" and inserting "2012".

SEC. 1404. BRAND NAME PHARMACEUTICALS.

(a) IN GENERAL.--Section 9008 of the Patient Protection and Affordable Care Act is amended--

(1) in subsection (a)(1), by striking "2009" and inserting "2010";

(2) in subsection (b)--

(A) by striking "$2,300,000,000" in paragraph (1) and inserting "the applicable amount"; and

(B) by adding at the end the following new paragraph:

"(4) APPLICABLE AMOUNT.--For purposes of paragraph (1), the applicable amount shall be determined in accordance with the following table:

"Calendar year Applicable amount

2011................... $2,500,000,000

2012................... $2,800,000,000

2013................... $2,800,000,000

2014................... $3,000,000,000

2015................... $3,000,000,000

2016................... $3,000,000,000

2017................... $4,000,000,000

2018................... $4,100,000,000

2019 and thereafter.... $2,800,000,000.";

(3) in subsection (d), by adding at the end the following new paragraph:

"(3) JOINT AND SEVERAL LIABILITY.--If more than one person is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of paragraph (2), all such persons shall be jointly and severally liable for payment of such fee."; and

(4) by striking subsection (j) and inserting the following new subsection:

"(j) EFFECTIVE DATE.--This section shall apply to calendar years beginning after December 31, 2010.".

(b) EFFECTIVE DATE.--The amendments made by this section shall take effect as if included in section 9008 of the Patient Protection and Affordable Care Act.

SEC. 1405. EXCISE TAX ON MEDICAL DEVICE MANUFACTURERS.

(a) IN GENERAL.--Chapter 32 of the Internal Revenue Code of 1986 is amended--

(1) by inserting after subchapter D the following new subchapter:

"Subchapter E--Medical Devices

"Sec. 4191. Medical devices.

"SEC. 4191. MEDICAL DEVICES.

"(a) IN GENERAL.--There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold.

"(b) TAXABLE MEDICAL DEVICE.--For purposes of this section--

"(1) IN GENERAL.--The term 'taxable medical device' means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans.

"(2) EXEMPTIONS.--Such term shall not include--

"(A) eyeglasses,

"(B) contact lenses,

"(C) hearing aids, and

"(D) any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use.", and

(2) by inserting after the item relating to subchapter D in the table of subchapters for such chapter the following new item:

"SUBCHAPTER E. MEDICAL DEVICES".

(b) CERTAIN EXEMPTIONS NOT TO APPLY.--

(1) Section 4221(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new sentence: "In the case of the tax imposed by section 4191, paragraphs (3), (4), (5), and (6) shall not apply.".

(2) Section 6416(b)(2) of such Code is amended by adding at the end the following: "In the case of the tax imposed by section 4191, subparagraphs (B), (C), (D), and (E) shall not apply.".

(d) REPEAL OF SECTION 9009 OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT.--Section 9009 of the Patient Protection and Affordable Care Act, as amended by section 10904 of such Act, is repealed effective as of the date of enactment of that Act.

SEC. 1406. HEALTH INSURANCE PROVIDERS.

(a) IN GENERAL.--Section 9010 of the Patient Protection and Affordable Care Act, as amended by section 10905 of such Act, is amended--

(1) in subsection (a)(1), by striking "2010" and inserting "2013";

(2) in subsection (b)(2)--

(A) by striking "For purposes of paragraph (1), the net premiums" and inserting "For purposes of paragraph (1)--

"(A) IN GENERAL.--The net premiums"; and

(B) by adding at the end the following subparagraph:

"(B) PARTIAL EXCLUSION FOR CERTAIN EXEMPT ACTIVITIES.-- After the application of subparagraph (A), only 50 percent of the remaining net premiums written with respect to health insurance for any United States health risk that are attributable to the activities (other than activities of an unrelated trade or business as defined in section 513 of the Internal Revenue Code of 1986) of any covered entity qualifying under paragraph (3), (4), (26), or (29) of section 501(c) of such Code and exempt from tax under section 501(a) of such Code shall be taken into account.";

(3) in subsection (c)--

(A) by inserting "during the calendar year in which the fee under this section is due" in paragraph (1) after "risk";

(B) in paragraph (2), by striking subparagraphs (C), (D), and (E) and inserting the following new subparagraphs:

"(C) any entity--

"(i) which is incorporated as a nonprofit corporation under a State law,

"(ii) no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in section 501(h) of the Internal Revenue Code of 1986), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office, and

"(iii) more than 80 percent of the gross revenues of which is received from government programs that target low- income, elderly, or disabled populations under titles XVIII, XIX, and XXI of the Social Security Act, and

"(D) any entity which is described in section 501(c)(9) of such Code and which is established by an entity (other than by an employer or employers) for purposes of providing health care benefits.";

(C) in paragraph (3)(A), by striking "subparagraph (C)(i)(I), (D)(i)(I), or (E)(i)" and inserting "subparagraph (C) or (D)"; and

(D) BY ADDING AT THE END THE FOLLOWING NEW PARAGRAPH:

"(4) JOINT AND SEVERAL LIABILITY.--If more than one person is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of paragraph (3), all such persons shall be jointly and severally liable for payment of such fee.";

(4) by striking subsection (e) and inserting the following:

"(e) APPLICABLE AMOUNT.--For purposes of subsection (b)(1)--

"(1) YEARS BEFORE 2019.--In the case of calendar years beginning before 2019, the applicable amount shall be determined in accordance with the following table:

"Calendar year Applicable amount

2014........... $ 8,000,000,000

2015........... $11,300,000,000

2016........... $11,300,000,000

2017........... $13,900,000,000

2018........... $14,300,000,000.

"(2) YEARS AFTER 2018.--In the case of any calendar year beginning after 2018, the applicable amount shall be the applicable amount for the preceding calendar year increased by the rate of premium growth (within the meaning of section 36B(b)(3)(A)(ii) of the Internal Revenue Code of 1986) for such preceding calendar year.";

(5) in subsection (g), by adding at the end the following new paragraphs:

"(3) ACCURACY-RELATED PENALTY.--

"(A) IN GENERAL.--In the case of any understatement of a covered entity's net premiums written with respect to health insurance for any United States health risk for any calendar year, there shall be paid by the covered entity making such understatement, an amount equal to the excess of--

"(i) the amount of the covered entity's fee under this section for the calendar year the Secretary determines should have been paid in the absence of any such understatement, over

"(ii) the amount of such fee the Secretary determined based on such understatement.

"(B) UNDERSTATEMENT.--For purposes of this paragraph, an understatement of a covered entity's net premiums written with respect to health insurance for any United States health risk for any calendar year is the difference between the amount of such net premiums written as reported on the return filed by the covered entity under paragraph (1) and the amount of such net premiums written that should have been reported on such return.

"(C) TREATMENT OF PENALTY.--The penalty imposed under subparagraph (A) shall be subject to the provisions of subtitle F of the Internal Revenue Code of 1986 that apply to assessable penalties imposed under chapter 68 of such Code.

"(4) TREATMENT OF INFORMATION.--Section 6103 of the Internal Revenue Code of 1986 shall not apply to any information reported under this subsection."; and

(6) by striking subsection (j) and inserting the following new subsection:

"(j) EFFECTIVE DATE.--This section shall apply to calendar years beginning after December 31, 2013.".

(b) EFFECTIVE DATE.--The amendments made by this section shall take effect as if included in section 9010 of the Patient Protection and Affordable Care Act.

SEC. 1407. DELAY OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO MEDICARE PART D SUBSIDY.

Section 9012(b) of the Patient Protection and Affordable Care Act is amended by striking "2010" and inserting "2012".

SEC. 1408. ELIMINATION OF UNINTENDED APPLICATION OF CELLULOSIC BIOFUEL PRODUCER CREDIT.

(a) IN GENERAL.--Section 40(b)(6)(E) of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause:

"(iii) EXCLUSION OF UNPROCESSED FUELS.--The term 'cellulosic biofuel' shall not include any fuel if--

"(I) more than 4 percent of such fuel (determined by weight) is any combination of water and sediment, or

"(II) the ash content of such fuel is more than 1 percent (determined by weight).".

(b) EFFECTIVE DATE.--The amendment made by this section shall apply to fuels sold or used on or after January 1, 2010.

SEC. 1409. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE AND PENALTIES.

(a) IN GENERAL.--Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

"(o) CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.--

"(1) APPLICATION OF DOCTRINE.--In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if--

"(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and

"(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

"(2) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTENTIAL.--

"(A) IN GENERAL.--The potential for profit of a transaction shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) are met with respect to the transaction only if the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected.

"(B) TREATMENT OF FEES AND FOREIGN TAXES.--Fees and other transaction expenses shall be taken into account as expenses in determining pre-tax profit under subparagraph (A). The Secretary shall issue regulations requiring foreign taxes to be treated as expenses in determining pre-tax profit in appropriate cases.

"(3) STATE AND LOCAL TAX BENEFITS.--For purposes of paragraph (1), any State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect.

"(4) FINANCIAL ACCOUNTING BENEFITS.--For purposes of paragraph (1)(B), achieving a financial accounting benefit shall not be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of Federal income tax.

"(5) DEFINITIONS AND SPECIAL RULES.--For purposes of this subsection--

"(A) ECONOMIC SUBSTANCE DOCTRINE.--The term 'economic substance doctrine' means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.

"(B) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS.-- In the case of an individual, paragraph (1) shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

"(C) DETERMINATION OF APPLICATION OF DOCTRINE NOT AFFECTED.--The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.

"(D) TRANSACTION.--The term 'transaction' includes a series of transactions.".

(b) PENALTY FOR UNDERPAYMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.--

(1) IN GENERAL.--Subsection (b) of section 6662 is amended by inserting after paragraph (5) the following new paragraph:

"(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.".

(2) INCREASED PENALTY FOR NONDISCLOSED TRANSACTIONS.--Section 6662 is amended by adding at the end the following new subsection:

"(i) INCREASE IN PENALTY IN CASE OF NONDISCLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.--

"(1) IN GENERAL.--In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting '40 percent' for '20 percent'.

"(2) NONDISCLOSED NONECONOMIC SUBSTANCE TRANSACTIONS.--For purposes of this subsection, the term 'nondisclosed noneconomic substance transaction' means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

"(3) SPECIAL RULE FOR AMENDED RETURNS.--In no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.".

(3) CONFORMING AMENDMENT.--Subparagraph (B) of section 6662A(e)(2) is amended--

(A) by striking "section 6662(h)" and inserting "subsections (h) or (i) of section 6662"; and

(B) by striking "gross valuation misstatement penalty" in the heading and inserting "certain increased underpayment penalties".

(1) REASONABLE CAUSE EXCEPTION FOR UNDERPAYMENTS.--Subsection (c) of section 6664 is amended--

(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

(B) by striking "paragraph (2)" in paragraph (4)(A), as so redesignated, and inserting "paragraph (3)"; and

"(2) EXCEPTION.--Paragraph (1) shall not apply to any portion of an underpayment which is attributable to one or more transactions described in section 6662(b)(6).".

(2) REASONABLE CAUSE EXCEPTION FOR REPORTABLE TRANSACTION UNDERSTATEMENTS.--Subsection (d) of section 6664 is amended--

(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

(B) by striking "paragraph (2)(C)" in paragraph (4), as so redesignated, and inserting "paragraph (3)(C)"; and

"(2) EXCEPTION.--Paragraph (1) shall not apply to any portion of a reportable transaction understatement which is attributable to one or more transactions described in section 6662(b)(6).".

(d) APPLICATION OF PENALTY FOR ERRONEOUS CLAIM FOR REFUND OR CREDIT TO NONECONOMIC SUBSTANCE TRANSACTIONS.--Section 6676 is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection:

"(c) NONECONOMIC SUBSTANCE TRANSACTIONS TREATED AS LACKING REASONABLE BASIS.--For purposes of this section, any excessive amount which is attributable to any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.".

(e) EFFECTIVE DATE.--

(1) IN GENERAL.--Except as otherwise provided in this subsection, the amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

(2) UNDERPAYMENTS.--The amendments made by subsections (b) and (c)(1) shall apply to underpayments attributable to transactions entered into after the date of the enactment of this Act.

(3) UNDERSTATEMENTS.--The amendments made by subsection (c)(2) shall apply to understatements attributable to transactions entered into after the date of the enactment of this Act.

(4) REFUNDS AND CREDITS.--The amendment made by subsection (d) shall apply to refunds and credits attributable to transactions entered into after the date of the enactment of this Act.

SEC. 1410. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

The percentage under paragraph (1) of section 202(b) of the Corporate Estimated Tax Shift Act of 2009 in effect on the date of the enactment of this Act is increased by 15.75 percentage points.

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TITLE II--EDUCATION AND HEALTH

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Subtitle B--Health

SEC. 2301. INSURANCE REFORMS.

(a) EXTENDING CERTAIN INSURANCE REFORMS TO GRANDFATHERED PLANS.-- Section 1251(a) of the Patient Protection and Affordable Care Act, as added by section 10103(d) of such Act, is amended by adding at the end the following:

"(4) APPLICATION OF CERTAIN PROVISIONS.--

"(A) IN GENERAL.--The following provisions of the Public Health Service Act (as added by this title) shall apply to grandfathered health plans for plan years beginning with the first plan year to which such provisions would otherwise apply:

"(i) Section 2708 (relating to excessive waiting periods).

"(ii) Those provisions of section 2711 relating to lifetime limits.

"(iii) Section 2712 (relating to rescissions).

"(iv) Section 2714 (relating to extension of dependent coverage).

"(B) PROVISIONS APPLICABLE ONLY TO GROUP HEALTH PLANS.--

"(i) PROVISIONS DESCRIBED.--Those provisions of section 2711 relating to annual limits and the provisions of section 2704 (relating to pre-existing condition exclusions) of the Public Health Service Act (as added by this subtitle) shall apply to grandfathered health plans that are group health plans for plan years beginning with the first plan year to which such provisions otherwise apply.

"(ii) ADULT CHILD COVERAGE.--For plan years beginning before January 1, 2014, the provisions of section 2714 of the Public Health Service Act (as added by this subtitle) shall apply in the case of an adult child with respect to a grandfathered health plan that is a group health plan only if such adult child is not eligible to enroll in an eligible employer-sponsored health plan (as defined in section 5000A(f)(2) of the Internal Revenue Code of 1986) other than such grandfathered health plan.".

(b) CLARIFICATION REGARDING DEPENDENT COVERAGE.--Section 2714(a) of the Public Health Service Act, as added by section 1001(5) of the Patient Protection and Affordable Care Act, is amended by striking "(who is not married)".

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Speaker of the House of Representatives.

Vice President of the United States and President of the Senate.

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