[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1556 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1556

To amend the Internal Revenue Code of 1986 to extend the exclusion from 
 gross income for employer-provided health coverage to designated plan 
          beneficiaries of employees, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 6, 2007

  Mr. Smith (for himself, Ms. Cantwell, Mr. Lieberman, Mr. Wyden, Mr. 
 Kerry, Mr. Akaka, Mrs. Murray, and Mr. Dodd) 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 extend the exclusion from 
 gross income for employer-provided health coverage to designated plan 
          beneficiaries of employees, 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. SHORT TITLE.

    This Act may be cited as the ``Tax Equity for Domestic Partner and 
Health Plan Beneficiaries Act''.

SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS TO ELIGIBLE 
              BENEFICIARIES.

    (a) Exclusion of Contributions.--Section 106 of the Internal 
Revenue Code of 1986 (relating to contributions by employer to accident 
and health plans) is amended by adding at the end the following new 
subsection:
    ``(f) Coverage Provided for Eligible Beneficiaries of Employees.--
            ``(1) In general.--Subsection (a) shall apply with respect 
        to an eligible beneficiary and any qualifying child who is a 
        dependent of the eligible beneficiary.
            ``(2) Qualifying child; dependent.--For purposes of this 
        subsection--
                    ``(A) Qualifying child.--The term `qualifying 
                child' has the meaning given such term by section 
                152(c).
                    ``(B) Dependent.--The term `dependent' has the 
                meaning given such term by section 105(b).''.
    (b) Exclusion of Amounts Expended for Medical Care.--The first 
sentence of section 105(b) of such Code (relating to amounts expended 
for medical care) is amended--
            (1) by striking ``and his dependents'' and inserting ``his 
        dependents'', and
            (2) by inserting before the period at the end of the first 
        sentence the following: ``, an eligible beneficiary with 
        respect to the taxpayer, and any qualifying child of an 
        eligible beneficiary (within the meaning of section 106(f)) 
        with respect to the taxpayer''.
    (c) Payroll Taxes.--
            (1) Section 3121(a)(2) of such Code is amended--
                    (A) by striking ``or any of his dependents'' both 
                places it appears and inserting ``, any of his 
                dependents, any eligible beneficiary with respect to 
                the employee, or any qualifying children of such 
                eligible beneficiary (within the meaning of section 
                106(f)),'',
                    (B) by striking ``and their dependents'' the first 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f)),'', and
                    (C) by striking ``and their dependents'' the second 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f))''.
            (2) Section 3231(e)(1) of such Code is amended--
                    (A) by striking ``or any of his dependents'' and 
                inserting ``, any of his dependents, any eligible 
                beneficiary with respect to the employee, or any 
                qualifying children of such eligible beneficiary 
                (within the meaning of section 106(f)),'',
                    (B) by striking ``and their dependents'' the first 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f)),'', and
                    (C) by striking ``and their dependents'' the second 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f))''.
            (3) Section 3306(b)(2) of such Code is amended--
                    (A) by striking ``or any of his dependents'' both 
                places it appears and inserting ``, any of his 
                dependents, any eligible beneficiary with respect to 
                the employee, or any qualifying children of such 
                eligible beneficiary (within the meaning of section 
                106(f)),'',
                    (B) by striking ``and their dependents'' the first 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f)),'', and
                    (C) by striking ``and their dependents'' the second 
                place it appears and inserting ``, their dependents, 
                eligible beneficiaries with respect to employees, and 
                qualifying children of such eligible beneficiaries 
                (within the meaning of section 106(f))''.
            (4) Section 3401(a) of such Code is amended by striking 
        ``or'' at the end of paragraph (21), by striking the period at 
        the end of paragraph (22) and inserting ``; or'', and by 
        inserting after paragraph (22) the following new paragraph:
            ``(23) for any payment made to or for the benefit of an 
        employee or his eligible beneficiary or any qualifying children 
        of his eligible beneficiary (within the meaning of section 
        106(f)) if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(f) or under section 105 by 
        reference in section 105(b) to section 106(f).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF DEDUCTION FOR HEALTH 
              INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) 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,
                    ``(D) an individual--
                            ``(i) who satisfies the age requirements of 
                        section 152(c)(3)(A),
                            ``(ii) who bears a relationship to the 
                        taxpayer described in section 152(d)(2)(H), and
                            ``(iii) meets the requirements of section 
                        152(d)(1)(C), and
                    ``(E) an individual who--
                            ``(i) is designated by the taxpayer for 
                        purposes of this paragraph,
                            ``(ii) bears a relationship to the taxpayer 
                        described in section 152(d)(2)(H),
                            ``(iii) meets the requirements of section 
                        152(d)(1)(D), and
                            ``(iv) is not the spouse of the taxpayer 
                        and does not bear any relationship to the 
                        taxpayer described in subparagraphs (A) through 
                        (G) of section 152(d)(2).
                For purposes of subparagraph (E)(i), not more than 1 
                person may be designated by the taxpayer for any 
                taxable year.''.
    (b) Conforming Amendment.--Subparagraph (B) of section 162(l)(2) of 
the Internal Revenue Code of 1986 is amended by striking ``or of the 
spouse of the taxpayer'' and inserting ``, of the spouse of the 
taxpayer, or of any individual described in paragraph (1)(E)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

SEC. 4. EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK AND ACCIDENT 
              BENEFITS PROVIDED TO MEMBERS OF A VOLUNTARY EMPLOYEES' 
              BENEFICIARY ASSOCIATION AND THEIR DEPENDENTS.

    (a) In General.--Section 501(c)(9) of the Internal Revenue Code of 
1986 (relating to list of exempt organizations) 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 `dependents' shall include any 
individual who is an eligible beneficiary and any qualifying child of 
an eligible beneficiary (within the meaning of section 106(f)), as 
determined under the terms of a medical benefit, health insurance, or 
other program under which members and their dependents are entitled to 
sick and accident benefits.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2006.

SEC. 5. FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT 
              ARRANGEMENTS.

    The Secretary of Treasury shall issue guidance of general 
applicability providing that medical expenses that otherwise qualify--
            (1) for reimbursement from a flexible spending arrangement 
        under regulations in effect on the date of the enactment of 
        this Act may be reimbursed from an employee's flexible spending 
        arrangement, notwithstanding the fact that such expenses are 
        attributable to any individual who is an eligible beneficiary 
        under the flexible spending arrangement or to any qualifying 
        child of such an eligible beneficiary (within the meaning of 
        section 106(f) of the Internal Revenue Code of 1986), and
            (2) for reimbursement from a health reimbursement 
        arrangement under administrative guidance in effect on the date 
        of the enactment of this Act may be reimbursed from an 
        employee's health reimbursement arrangement, notwithstanding 
        the fact that such expenses are attributable to an individual 
        who is not a spouse or dependent within the meaning of section 
        152 of such Code but who is designated by the employee as 
        eligible to have his or her expenses reimbursed under the 
        health reimbursement arrangement.

SEC. 6. EXTENSION OF QUALIFIED MEDICAL EXPENSES FROM HEALTH SAVINGS 
              ACCOUNTS.

    (a) In General.--Subparagraph (A) of section 223(d)(2) of the 
Internal Revenue Code of 1986 (relating to qualified medical expenses) 
is amended--
            (1) by striking ``and any dependent'' and inserting ``any 
        dependent'', and
            (2) by inserting ``, and any qualified beneficiary'' after 
        ``thereof)''.
    (b) Qualified Beneficiary.--Section 223(d)(2) of such Code is 
amended by inserting after subparagraph (C) the following new 
subparagraph:
                    ``(D) Qualified beneficiary.--For purposes of 
                subparagraph (A), the term `qualified beneficiary' 
                means any individual who is described in subparagraph 
                (D) or (E) of section 162(l)(1).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.
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