[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2494 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 2494

To amend the Internal Revenue Code of 1986 to allow a deduction for the 
payment of premiums for high deductible health plans, to allow a credit 
  for certain employment taxes paid with respect to premiums for high 
 deductible health plans and contributions to health savings accounts, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 3, 2006

   Mr. Burns introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to allow a deduction for the 
payment of premiums for high deductible health plans, to allow a credit 
  for certain employment taxes paid with respect to premiums for high 
 deductible health plans and contributions to health savings accounts, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable year the aggregate amount 
paid by such individual as premiums under a high deductible health plan 
with respect to months during such year for which such individual is an 
eligible individual with respect to such health plan.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--The term `eligible individual' 
        has the meaning given such term by section 223(c)(1).
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' has the meaning given such term by 
        section 223(c)(2).
    ``(c) Special Rules.--
            ``(1) Deduction limits.--
                    ``(A) Deduction allowable for only 1 plan.--For 
                purposes of this section, in the case of an individual 
                covered by more than 1 high deductible health plan for 
                any month, the individual may only take into account 
                amounts paid for such month for the plan with the 
                lowest premium.
                    ``(B) Plans covering ineligible individuals.--If 2 
                or more individuals are covered by a high deductible 
                health plan for any month but only 1 of such 
                individuals is an eligible individual for such month, 
                only 50 percent of the aggregate amount paid by such 
                eligible individual as premiums under the plan with 
                respect to such month shall be taken into account for 
                purposes of this section.
            ``(2) Group health plan coverage.--
                    ``(A) In general.--No deduction shall be allowed to 
                an individual under subsection (a) for any amount paid 
                for coverage under a high deductible health plan for a 
                month if that individual participates in any coverage 
                under a group health plan (within the meaning of 
                section 5000 without regard to section 5000(d)).
                    ``(B) Exception for plans only providing 
                contributions to health savings accounts.--Subparagraph 
                (A) shall not apply to an individual if the 
                individual's only coverage under a group health plan 
                for a month consists of contributions by an employer to 
                a health savings account with respect to which the 
                individual is the account beneficiary.
                    ``(C) Exception for certain permitted coverage.--
                Subparagraph (A) shall not apply to an individual if 
                the individual's only coverage under a group health 
                plan for a month is coverage described in clause (i) or 
                (ii) of section 223(c)(1)(B).
            ``(3) Medical and health savings accounts.--Subsection (a) 
        shall not apply with respect to any amount which is paid or 
        distributed out of an Archer MSA or a health savings account 
        which is not included in gross income under section 220(f) or 
        223(f), as the case may be.
            ``(4) Coordination with deduction for health insurance of 
        self-employed individuals.--Any amount taken into account by 
        the taxpayer in computing the deduction under section 162(l) 
        shall not be taken into account under this section.
            ``(5) Coordination with medical expense deduction.--Any 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting before the last sentence at the end the following new 
paragraph:
            ``(21) Premiums for high deductible health plans.--The 
        deduction allowed by section 224.''.
    (c) Coordination With Section 35 Health Insurance Costs Credit.--
Section 35(g)(2) of such Code is amended by striking ``or 213'' and 
inserting ``, 213, or 224''.
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by redesignating the 
item relating to section 224 as an item relating to section 225 and by 
inserting before such item the following new item:

``Sec. 224. Premiums for high deductible health plans.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 2. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID WITH RESPECT TO 
              PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS AND 
              CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

    (a) Allowance of Credit.--Subpart C of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating to refundable 
credits) is amended by redesignating section 36 as section 37 and by 
inserting after section 35 the following new section:

``SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO PREMIUMS FOR HIGH 
              DEDUCTIBLE HEALTH PLANS AND CONTRIBUTIONS TO HEALTH 
              SAVINGS ACCOUNTS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to the product of--
            ``(1) the sum of the rates of tax in effect under sections 
        3101(a), 3101(b), 3111(a), and 3111(b) for the calendar year in 
        which the taxable year begins, multiplied by
            ``(2) the sum of--
                    ``(A) the aggregate amount paid by such individual 
                as premiums under a high deductible health plan which 
                is allowed as a deduction under section 224 for the 
                taxable year, and
                    ``(B) the aggregate amount paid to a health savings 
                account of such individual which is allowed as a 
                deduction under section 223 for the taxable year.
    ``(b) Credit Limited to Certain Employment Taxes.--
            ``(1) In general.--The credit allowed under subsection (a) 
        with respect to any individual for any taxable year shall not 
        exceed the specified employment taxes with respect to such 
        individual for such taxable year.
            ``(2) Specified employment taxes.--For purposes of this 
        subsection, the term `specified employment taxes' means, with 
        respect to any individual for any taxable year, the sum of--
                    ``(A) the taxes imposed under sections 3101(a), 
                3101(b), 3111(a), 3111(b), 3201(a), 3211(a), and 
                3221(a) (taking into account any adjustments or refunds 
                under section 6413) with respect to wages and 
                compensation received by such individual during the 
                calendar year in which such taxable year begins, and
                    ``(B) the taxes imposed under subsections (a) and 
                (b) of section 1401 with respect to the self-employment 
                income of such individual for such taxable year.
    ``(c) Special Rule for Employment Compensation in Excess of Social 
Security Contribution Base.--
            ``(1) In general.--If the aggregate amount of employment 
        compensation received by any individual during the calendar 
        year in which the taxable year begins exceeds the contribution 
        and benefit base (as determined under section 230 of the Social 
        Security Act), the amount of the credit determined under 
        subsection (a) (determined before application of subsection 
        (b)) shall be equal to the sum of--
                    ``(A) the amount determined under subsection (a) by 
                only taking into account so much of the amount 
                determined under subsection (a)(2) as does not exceed 
                such excess and by only taking into account the rates 
                of tax in effect under section 3101(b) and 3111(b), and
                    ``(B) the amount determined under subsection (a) by 
                only taking into account so much of the amount 
                determined under subsection (a)(2) as is not taken into 
                account under subparagraph (A) and by taking into 
                account each of the rates of tax referred to in 
                subsection (a)(1).
            ``(2) Employment compensation.--For purposes of this 
        subsection, the term `employment compensation' means, with 
        respect to any individual for any taxable year, the sum of--
                    ``(A) the wages (as defined in section 3121(a)) and 
                compensation (as defined in section 3231(e)) received 
                by such individual during the calendar year in which 
                such taxable year begins, and
                    ``(B) the self-employment income (as defined in 
                section 1402(b)) of such individual for such taxable 
                year.''.
    (b) Increase in Additional Tax on Distributions Not Used for 
Qualified Medical Expenses.--Paragraph (4) of section 223(f) of such 
Code (relating to additional tax on distributions not used for 
qualified medical expenses) is amended to read as follows:
            ``(4) Additional tax on distributions not used for 
        qualified medical expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                on the account beneficiary for any taxable year in 
                which there is a payment or distribution from a health 
                savings account of such beneficiary which is includible 
                in gross income under paragraph (2) shall be increased 
                by 30 percent of the amount which is so includible.
                    ``(B) Exception for disability or death.--In the 
                case of payments or distributions made after the 
                account beneficiary becomes disabled within the meaning 
                of section 72(m)(7) or dies, subparagraph (A) shall be 
                applied by substituting `15 percent' for `30 percent'.
                    ``(C) Exception for distributions after medicare 
                eligibility.--In the case of payments or distributions 
                made after the date on which the account beneficiary 
                attains the age specified in section 1811 of the Social 
                Security Act, subparagraph (A) shall be applied by 
                substituting `15 percent' for `30 percent'.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or section 36'' after 
        ``section 35''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the item relating to section 36 and by 
        inserting after the item relating to section 35 the following 
        new items:

        ``Sec. 36. Employment taxes paid with respect to premiums for 
                            high deductible health plans and 
                            contributions to health savings accounts.
        ``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.
                                 <all>