EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED ORGANIZATIONS PROVIDING HEALTH COVERAGE FOR HIGH-RISK INDIVIDUALS.

SEC. 341. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED ORGANIZATIONS PROVIDING HEALTH COVERAGE FOR HIGH-RISK INDIVIDUALS. (a) In General.— Subsection (c) of section 501 (relating to list of exempt organizations) is amended by adding at the end the following new paragraph: “(26) Any membership organization if— “(A) such organization is established by a State exclusively to provide coverage for medical care (as defined in section 213(d)) on a not-for-profit basis to individuals described in subparagraph (B) through— “(i) insurance issued by the organization, or “(ii) a health maintenance organization under an arrangement with the organization, “(B) the only individuals receiving such coverage through the organization are individuals— “(i) who are residents of such State, and “(ii) who, by reason of the existence or history of a medical condition— “(I) are unable to acquire medical care coverage for such condition through insurance or from a health maintenance organization, or “(II) are able to acquire such coverage only at a rate which is substantially in excess of the rate for such coverage through the membership organization, “(C) the composition of the membership in such organization is specified by such State, and “(D) no part of the net earnings of the organization inures to the benefit of any private shareholder or individual.”. (b) Effective Date.— The amendment made by this section shall apply to taxable years beginning after December 31, 1996.