[House Report 115-846]
[From the U.S. Government Publishing Office]


115th Congress     }                                {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                {         115-846

======================================================================




    THE ``PERSONAL HEALTH INVESTMENT TODAY ACT'' OR THE ``PHIT ACT''

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 6312]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6312) to amend the Internal Revenue Code of 1986 to 
treat qualified sports and fitness expenses as amounts paid for 
medical care, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.







115th Congress     }                              {          Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                              {           115-846

======================================================================



 
                  PERSONAL HEALTH INVESTMENT TODAY ACT

                                _______
                                

 July 19, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 6312]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6312) to amend the Internal Revenue Code of 1986 to 
treat certain amounts paid for physical activity, fitness, and 
exercise as amounts paid for medical care, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................4
II. EXPLANATION OF THE BILL...........................................5
        A. Certain Amounts Paid for Physical Activity, Fitness 
            and Exercise Treated as Amounts Paid for Medical Care     5
III.VOTES OF THE COMMITTEE............................................9

IV. BUDGET EFFECTS OF THE BILL.......................................10
        A. Committee Estimate of Budgetary Effects...............    10
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................    12
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    12
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......12
        A. Committee Oversight Findings and Recommendations......    12
        B. Statement of General Performance Goals and Objectives.    12
        C. Information Relating to Unfunded Mandates.............    12
        D. Applicability of House Rule XXI 5(b)..................    13
        E. Tax Complexity Analysis...............................    13
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................    13
        G. Duplication of Federal Programs.......................    13
        H. Disclosure of Directed Rule Makings...................    13
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............14
        B. Changes in Existing Law Proposed by the Bill, as 
            Reported.............................................    14

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Personal Health Investment Today Act'' 
or the ``PHIT Act.''

SEC. 2. CERTAIN AMOUNTS PAID FOR PHYSICAL ACTIVITY, FITNESS, AND 
                    EXERCISE TREATED AS AMOUNTS PAID FOR MEDICAL CARE.

  (a) In General.--Section 213(d)(1) of the Internal Revenue Code of 
1986 is amended by striking ``or'' at the end of subparagraph (C), by 
striking the period at the end of subparagraph (D) and inserting ``, 
or'', and by adding at the end the following new subparagraph:
                  ``(E) for qualified sports and fitness expenses.''.
  (b) Qualified Sports and Fitness Expenses.--Section 213(d) of such 
Code is amended by adding at the end the following paragraph:
          ``(12) Qualified sports and fitness expenses.--
                  ``(A) In general.--The term `qualified sports and 
                fitness expenses' means amounts paid for--
                          ``(i) membership at a fitness facility,
                          ``(ii) participation or instruction in a 
                        program of physical exercise or physical 
                        activity, or
                          ``(iii) safety equipment for use in a program 
                        (including a self-directed program) of physical 
                        exercise or physical activity.
                  ``(B) Dollar limitations.--
                          ``(i) Overall limitation.--The aggregate 
                        amount treated as qualified sports and fitness 
                        expenses with respect to any taxpayer for any 
                        taxable year shall not exceed $500 (twice such 
                        amount in the case of a joint return or a head 
                        of household (as defined in section 2(b))).
                          ``(ii) Safety equipment.--The amount treated 
                        as qualified sports and fitness expenses with 
                        respect to any item of safety equipment 
                        described in subparagraph (A)(iii) shall not 
                        exceed $250.
                  ``(C) Certain exclusions.--
                          ``(i) In general.--Golf, hunting, sailing, 
                        and horseback riding shall not be treated as a 
                        physical exercise or physical activity.
                          ``(ii) Exercise videos, etc.--Qualified 
                        sports and fitness expenses shall not include 
                        videos, books, or similar materials.
                  ``(D) Fitness facility defined.--For purposes of 
                subparagraph (A)(i), the term `fitness facility' means 
                a facility--
                          ``(i) providing instruction in a program of 
                        physical exercise or physical activity, 
                        offering facilities for the preservation, 
                        maintenance, encouragement, or development of 
                        physical fitness, or serving as the site of 
                        such a program of a State or local government,
                          ``(ii) which is not a private club owned and 
                        operated by its members,
                          ``(iii) which does not offer facilities for 
                        any activity described in subparagraph (C)(i),
                          ``(iv) whose health or fitness facility is 
                        not incidental to its overall function and 
                        purpose, and
                          ``(v) which is fully compliant with 
                        applicable State and Federal anti-
                        discrimination laws.
                  ``(E) Programs which include components other than 
                physical exercise and physical activity.--Rules similar 
                to the rules of paragraph (6) shall apply in the case 
                of any program that includes physical exercise or 
                physical activity and also other components. For 
                purposes of the preceding sentence, travel and 
                accommodations shall be treated as an other component.
                  ``(F) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2019, 
                the $500 amount in subparagraph (B)(i) and the $250 
                amount in subparagraph (B)(ii) shall each be increased 
                by an amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which such taxable year 
                        begins, determined by substituting `calendar 
                        year 2018' for `calendar year 2016' in 
                        subparagraph (A)(ii) thereof.
                If any increase determined under the preceding sentence 
                is not a multiple of $10, such increase shall be 
                rounded to the next lowest multiple of $10.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2018.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill H.R. 6312, as reported by the Committee on Ways 
and Means, adds qualified sports and fitness expenses to the 
definition of qualified medical expenses.

                 B. Background and Need for Legislation

    Qualified medical expenses generally are defined in law and 
include expenses for diagnosis, cure, mitigation, treatment, or 
prevention of disease, including prescription drugs, 
transportation primarily for and essential to such care, and 
qualified long-term care expenses. The list of qualified 
medical expenses generally determines what services and items 
are eligible for a tax deduction either through the medical 
expense deduction or through existing tax-favored health care 
accounts.
    Under present law, sports and fitness expenses such as 
memberships at a fitness facility or participation or 
instruction in a program of physical exercise are not treated 
as medical care expenses.
    The Personal Health Investment Today Act (PHIT) expands the 
definition of a medical expense to include expenses for certain 
sports and fitness activities in the tax code with the 
intention of improving health and preventing illness through 
promoting physical activity and related safety equipment. Under 
the bill, allowable expenditures from existing tax-favored 
health care accounts, such as flexible spending accounts, 
health savings accounts, and health reimbursement arrangements, 
would be expanded to include certain physical activity 
expenses.
    While the Committee believes numerous activities, including 
golfing, hunting, sailing and horseback riding are physical 
activities, these activities do not qualify for the purposes of 
a qualified medical expense under H.R. 6312.

                         C. Legislative History


Background

    H.R. 6312 was introduced on July 6, 2018, and was referred 
to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 6312, the 
``Personal Health Investment Today Act'' or the ``PHIT Act'', 
on July 12, 2018, and ordered the bill, as amended, favorably 
reported (with a quorum being present).

Committee hearings

    The policy issues associated with Health Savings Accounts 
(HSAs) and need for legislative response were discussed at the 
following Ways and Means hearings during the 114th and 115th 
Congresses:
           Full Committee Hearing on the Tax Treatment 
        of Health Care (April 14, 2016)
           Subcommittee on Health Member Day Hearing on 
        Tax-Related Proposals to Improve Health Care (May 17, 
        2016)
           Subcommittee on Health Hearing on Rising 
        Health Insurance Premiums Under the Affordable Care Act 
        (July 12, 2016)
           Subcommittee on Health Hearing on Lowering 
        Costs and Expanding Access to Health Care through 
        Consumer-Directed Health Plans (June 6, 2018)

                      II. EXPLANATION OF THE BILL


  A. Certain Amounts Paid for Physical Activity, Fitness and Exercise 
                Treated as Amounts Paid for Medical Care


                              PRESENT LAW

Health savings accounts

    An individual may establish a health savings account 
(``HSA'') only if the individual is covered under a plan that 
meets the requirements for a high deductible health plan, as 
described below. In general, HSAs provide tax-favored treatment 
for current medical expenses as well as the ability to save on 
a tax-favored basis for future medical expenses. In general, an 
HSA is a tax-exempt trust or custodial account created 
exclusively to pay for the qualified medical expenses of the 
account holder and his or her spouse and dependents.
    Within limits,\1\ contributions to an HSA made by or on 
behalf of an eligible individual are deductible by the 
individual. Contributions to an HSA are excludible from income 
and employment taxes if made by the employer. Earnings in HSAs 
are not taxable. Distributions from an HSA for qualified 
medical expenses are not includible in gross income. 
Distributions from an HSA that are not used for qualified 
medical expenses are includible in gross income and are subject 
to an additional tax of 20 percent. The 20-percent additional 
tax does not apply if the distribution is made after death or 
disability, or after the individual attains the age of Medicare 
eligibility (age 65). Unlike reimbursements from a flexible 
spending arrangement or health reimbursement arrangement, 
distributions from an HSA are not required to be substantiated 
by the employer or a third party for the distributions to be 
excludible from income.
---------------------------------------------------------------------------
    \1\For 2018, the basic limit on annual contributions that can be 
made to an HSA is $3,450 in the case of self-only coverage and $6,900 
in the case of family coverage. (The 2018 limitation for family 
coverage was revised by the IRS to permit taxpayers to disregard the 
$6,850 limitation under the modified inflation adjustment of Pub. L. 
No. 115-97. Rev. Rul. 2018-27, 2018-20 I.R.B. 591, May 14, 2018.) The 
basic annual contributions limits are increased by $1,000 for 
individuals who have attained age 55 by the end of the taxable year 
(referred to as ``catch-up'' contributions).
---------------------------------------------------------------------------

High deductible health plans

    A high deductible health plan is a health plan that has a 
minimum annual deductible of $1,350 (for 2018) for self-only 
coverage and twice this amount for family coverage, and for 
which the sum of the annual deductible and other annual out-of-
pocket expenses (other than premiums) for covered benefits does 
not exceed $6,650 (for 2018) for self-only coverage and twice 
this amount for family coverage.\2\ These dollar thresholds are 
subject to inflation adjustment, based on chained CPI.\3\
---------------------------------------------------------------------------
    \2\Sec. 223(c)(2).
    \3\Sec. 223(g).
---------------------------------------------------------------------------
    An individual who is covered under a high deductible health 
plan is eligible to establish an HSA, provided that while such 
individual is covered under the high deductible health plan, 
the individual is not covered under any health plan that (1) is 
not a high deductible health plan and (2) provides coverage for 
any benefit (subject to certain exceptions) covered under the 
high deductible health plan.\4\
---------------------------------------------------------------------------
    \4\Sec. 223(c)(1).
---------------------------------------------------------------------------
    Various types of coverage are disregarded for this purpose, 
including coverage of any benefit provided by permitted 
insurance, coverage (whether through insurance or otherwise) 
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health 
flexible savings accounts.\5\ Permitted insurance means 
insurance under which substantially all of the coverage 
provided relates to liabilities incurred under workers' 
compensation laws, tort liabilities, liabilities relating to 
ownership or use of property, or such other similar liabilities 
as specified by the Secretary under regulations. Permitted 
insurance also means insurance for a specified disease or 
illness, and insurance paying a fixed amount per day (or other 
period) of hospitalization.\6\
---------------------------------------------------------------------------
    \5\Sec. 223(c)(1)(B).
    \6\Sec. 223(c)(3).
---------------------------------------------------------------------------

Archer medical savings accounts

    Like an HSA, an Archer medical savings account (``Archer 
MSA'') is a tax-exempt trust or custodial account to which tax-
deductible contributions may be made by individuals with a high 
deductible health plan.\7\ Only self-employed individuals and 
employees of small employers are eligible to have an Archer 
MSA. Archer MSAs provide tax benefits similar to those provided 
by HSAs for individuals covered by high deductible health 
plans. Distributions from an Archer MSA for qualified medical 
expenses are excludible from gross income. Distributions from 
an Archer MSA that are not used for qualified medical expenses 
are includible in gross income and are subject to an additional 
tax of 20 percent. The 20 percent additional tax does not apply 
if the distribution is made after death or disability, or after 
the individual attains the age of Medicare eligibility (i.e., 
age 65).
---------------------------------------------------------------------------
    \7\Sec. 220.
---------------------------------------------------------------------------

Qualified medical expenses

    Qualified medical expenses generally are defined under Code 
section 213(d) and include expenses for diagnosis, cure, 
mitigation, treatment, or prevention of disease, including 
prescription drugs, transportation primarily for and essential 
to such care, and qualified long-term care expenses. Qualified 
medical expenses do not include expenses for insurance other 
than for (1) certain premiums paid for long-term care 
insurance, (2) premiums for health coverage during any period 
of continuation coverage required by Federal law, (3) premiums 
for health care coverage while an individual is receiving 
unemployment compensation under Federal or State law, and (4) 
premiums for individuals who have attained the age of Medicare 
eligibility, other than premiums for Medigap policies.
    Qualified medical expenses may be incurred by the account 
owner, the spouse of such individual and any dependent\8\ 
including qualifying children, or a qualifying relative 
including (1) a child or descendant of a child, (2) a brother, 
sister, stepbrother or stepsister, (3) the father or mother, or 
an ancestor of either, (4) a stepfather or stepmother, (5) a 
son or daughter of a brother or sister of the taxpayer, (6) a 
brother or sister of the father or mother of the taxpayer, (7) 
a son-in-law, daughter-in-law, father-in-law, mother-in-law, 
brother-in-law, or sister-in-law, or (8) an individual who, for 
the taxable year of the taxpayer, has the same principal place 
of abode as the taxpayer and is a member of the taxpayer's 
household.
---------------------------------------------------------------------------
    \8\Generally as defined in sec. 152.
---------------------------------------------------------------------------

Health flexible spending accounts and health reimbursement arrangements

    In addition to offering health insurance, employers often 
agree to reimburse medical expenses of their employees (and 
their spouses and dependents). These arrangements are commonly 
used by employers to pay or reimburse employees for medical 
expenses that are not covered by health insurance. These 
arrangements include health flexible spending accounts 
(``health FSAs'') and health reimbursement arrangements 
(``HRAs'').
            Health FSAs
    Health FSAs typically are funded on a salary reduction 
basis under a cafeteria plan, meaning that employees are given 
the option to reduce their current cash compensation and 
instead have the amount made available for use in reimbursing 
the employee for his or her medical expenses. If the health FSA 
meets certain requirements, the compensation that is forgone is 
not includible in gross income or wages for payroll tax 
purposes.
    Health FSAs that are funded on a salary reduction basis are 
subject to the requirements for cafeteria plans, including a 
requirement that amounts remaining in a health FSA at the end 
of a plan year must be forfeited by the employee (referred to 
as the ``use-it-or-lose-it'' rule).\9\
---------------------------------------------------------------------------
    \9\See sec. 125(d)(2). Subsequent IRS guidance has provided a grace 
period for the carryover of excess benefits or contributions in a 
health FSA. See, e.g., Notice 2005-42, 2005-23 I.R.B. 1204 (June 6, 
2005). As an alternative to a grace period, Notice 2013-71 permits 
employers to amend the cafeteria plan document to provide for up to 
$500 of any unused amount as of the end of the plan year in a health 
FSA to be carried over to the following year. 2013-47 I.R.B. 532 
(November 18, 2013).
---------------------------------------------------------------------------
            HRAs
    HRAs operate in a manner similar to health FSAs, in that 
they are employer-maintained arrangements that reimburse 
employees and their dependents\10\ for medical expenses. Some 
of the rules applicable to HRAs and health FSAs are similar 
(e.g., the amounts in the arrangements can be used only to 
reimburse medical expenses and not for other purposes), but the 
rules are not identical. In particular, HRAs cannot be funded 
on a salary reduction basis and the use-it-or-lose-it rule does 
not apply. Thus, amounts remaining at the end of the year may 
be carried forward to be used to reimburse medical expenses in 
following years.\11\ Unlike a health FSA, an HRA is permitted 
to reimburse an employee for health insurance premiums.
---------------------------------------------------------------------------
    \10\As defined in sec. 152.
    \11\Guidance with respect to HRAs, including the interaction of 
health FSAs and HRAs in the case of an individual covered by both, is 
provided in Notice 2002-45, 2002-2 C.B. 93 (July 15, 2002).
---------------------------------------------------------------------------

Physical activity, fitness, and exercise

    Sports and fitness expenses, such as membership fees at a 
fitness facility or costs associated with participation or 
instruction in a program of physical exercise or physical 
activity, generally are not treated as medical care.\12\
---------------------------------------------------------------------------
    \12\See, e.g., Chief Counsel Advice Memorandum 201622031 (May 27, 
2016). Under guidance, certain expenses may be treated as medical care. 
For example, taxpayers may deduct the cost of a weight loss program if 
the individual is diagnosed as obese or is directed by a doctor to lose 
weight as treatment for a specific disease. See Rev. Rul. 2002-19, 
2002-16 I.R.B. 778 (April 22, 2002).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that HSAs, Archer MSAs, health FSAs, 
and HRAs are important tools that provide consumers with funds 
set aside (either through their own contributions and/or 
employer contributions, depending on the particular account) 
for the payment of medical expenses. These tools provide 
consumers the ability to choose how to spend those funds to pay 
for medical care.
    Although medical care currently includes amounts paid for 
the prevention of disease, amounts paid for membership at a 
fitness facility, participation or instruction in a program of 
physical exercise or physical activity, or safety equipment for 
use in a program of physical exercise or physical activity that 
are widely available and contribute to the health of 
individuals and prevention of disease are not treated as 
medical care. The Committee believes that such sports and 
fitness expenses (except for those related to certain 
activities that have limited availability) up to certain dollar 
caps, should be treated as medical care that may be paid from 
any of the aforementioned accounts.

                        EXPLANATION OF PROVISION

    Under the provision, qualified sports and fitness expenses 
are treated as medical care. The term qualified sports and 
fitness expenses means amounts paid for membership at a fitness 
facility, participation or instruction in a program of physical 
exercise or physical activity, or safety equipment for use in a 
program (including a self-directed program) of physical 
exercise or physical activity. The aggregate amount treated as 
qualified sports and fitness expenses with respect to any 
taxpayer for any taxable year is limited to $500 (twice that 
amount in the case of a joint return or a head of household), 
and the amount treated as qualified sports and fitness expenses 
with respect to any single item of safety equipment is limited 
to $250 with respect to any taxpayer for any taxable year. 
These amounts are adjusted for inflation. Golf, hunting, 
sailing, and horseback riding are not treated as a physical 
exercise or physical activity for purposes of determining 
qualified sports and fitness expenses. Qualified sports and 
fitness expenses also do not include videos, books, or similar 
materials.
    A fitness facility means a facility providing instruction 
in a program of physical exercise or physical activity, 
offering facilities for the preservation, maintenance, 
encouragement, or development of physical fitness, or serving 
as the site of such a program of a State or local government, 
(1) which is not a private club owned and operated by its 
members, (2) which does not offer facilities for golf, hunting, 
sailing or horseback riding, (3) whose health or fitness 
facility is not incidental to its overall function and purpose, 
and (4) which is fully compliant with applicable State and 
Federal anti-discrimination laws. In the case of any program 
that includes physical exercise or physical activity and also 
other components (such as travel and accommodations), special 
rules apply.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2018.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 6312, the ``Personal Health Investment 
Today Act,'' or the ``PHIT Act'' on July 12, 2018.
    H.R. 6312 was ordered favorably reported to the House of 
Representatives as amended by an amendment in the nature of a 
substitute offered by Mr. Roskam by a roll call vote of 28 yeas 
to 7 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady......................  ........  ........  .........  Mr. Neal.........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Thompson.....        X   ........  .........
Mr. Buchanan...................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Blumenauer...  ........  ........  .........
Ms. Jenkins....................        X   ........  .........  Mr. Kind.........        X   ........  .........
Mr. Paulsen....................        X   ........  .........  Mr. Pascrell.....        X   ........  .........
Mr. Marchant...................        X   ........  .........  Mr. Crowley......  ........  ........  .........
Ms. Black......................  ........  ........  .........  Mr. Davis........  ........        X   .........
Mr. Reed.......................        X   ........  .........  Ms. Sanchez......  ........  ........  .........
Mr. Kelly......................        X   ........  .........  Mr. Higgins......        X   ........  .........
Mr. Renacci....................        X   ........  .........  Ms. Sewell.......        X   ........  .........
Ms. Noem.......................        X   ........  .........  Ms. DelBene......        X   ........  .........
Mr. Holding....................        X   ........  .........  Ms. Chu..........  ........        X   .........
Mr. Smith (MO).................        X   ........  .........
Mr. Rice.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Ms. Walorski...................        X   ........  .........
Mr. Curbelo....................        X   ........  .........
Mr. Bishop.....................        X   ........  .........
Mr. LaHood.....................        X   ........  .........
Mr. Wenstrup...................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 6312, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal fiscal year budget receipts for the period 
2019-2028:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Fiscal Years [Millions of Dollars]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Item                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Certain Amounts Paid for Physical Activity, Fitness, and           -226       -335       -345       -350       -355       -360       -365       -382       -403       -412     -1,611     -3,533
 Exercise Treated as Amounts Paid for Medical Care[1].......
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2019       2020       2021       2022       2023       2024       2025       2026       2027       2028     2019-23    2019-28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[1]Estimate includes the following off-budget effects.......        -92        -98        -99       -101       -102       -104       -105       -107       -108       -110       -493     -1,026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provision involves no new tax expenditure.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 6138, as 
reported. As of the filing of this report, the Committee had 
not received an estimate prepared by the Congressional Budget 
Office (CBO).

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated into 
the description portions of this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (``IRS Reform Act'') 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code of 1986 and has widespread applicability 
to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program, (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139, or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to section 6104 of 
title 31, United States Code.

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee advises that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 213. MEDICAL, DENTAL, ETC., EXPENSES.

  (a) Allowance of deduction.--There shall be allowed as a 
deduction the expenses paid during the taxable year, not 
compensated for by insurance or otherwise, for medical care of 
the taxpayer, his spouse, or a dependent (as defined in section 
152, determined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof), to the extent that such expenses exceed 
10 percent of adjusted gross income.
  (b) Limitation with respect to medicine and drugs.--An amount 
paid during the taxable year for medicine or a drug shall be 
taken into account under subsection (a) only if such medicine 
or drug is a prescribed drug or is insulin.
  (c) Special rule for decedents.--
          (1) Treatment of expenses paid after death.--For 
        purposes of subsection (a), expenses for the medical 
        care of the taxpayer which are paid out of his estate 
        during the 1-year period beginning with the day after 
        the date of his death shall be treated as paid by the 
        taxpayer at the time incurred.
          (2) Limitation.--Paragraph (1) shall not apply if the 
        amount paid is allowable under section 2053 as a 
        deduction in computing the taxable estate of the 
        decedent, but this paragraph shall not apply if (within 
        the time and in the manner and form prescribed by the 
        Secretary) there is filed--
                  (A) a statement that such amount has not been 
                allowed as a deduction under section 2053, and
                  (B) a waiver of the right to have such amount 
                allowed at any time as a deduction under 
                section 2053.
  (d) Definitions.--For purposes of this section--
          (1) The term ``medical care'' means amounts paid--
                  (A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the 
                purpose of affecting any structure or function 
                of the body,
                  (B) for transportation primarily for and 
                essential to medical care referred to in 
                subparagraph (A),
                  (C) for qualified long-term care services (as 
                defined in section 7702B(c)), [or]
                  (D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the 
                Social Security Act, relating to supplementary 
                medical insurance for the aged) covering 
                medical care referred to in subparagraphs (A) 
                and (B) or for any qualified long- term care 
                insurance contract (as defined in section 
                7702B(b))[.], or
                  (E) for qualified sports and fitness 
                expenses.
        In the case of a qualified long-term care insurance 
        contract (as defined in section 7702B(b)), only 
        eligible long-term care premiums (as defined in 
        paragraph (10)) shall be taken into account under 
        subparagraph (D).
          (2) Amounts paid for certain lodging away from home 
        treated as paid for medical care
          Amounts paid for lodging (not lavish or extravagant 
        under the circumstances) while away from home primarily 
        for and essential to medical care referred to in 
        paragraph (1)(A) shall be treated as amounts paid for 
        medical care if--
                  (A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which 
                is related to, or the equivalent of, a licensed 
                hospital), and
                  (B) there is no significant element of 
                personal pleasure, recreation, or vacation in 
                the travel away from home.
        The amount taken into account under the preceding 
        sentence shall not exceed $50 for each night for each 
        individual.
          (3) Prescribed drug
          The term ``prescribed drug'' means a drug or 
        biological which requires a prescription of a physician 
        for its use by an individual.
          (4) Physician
          The term ``physician'' has the meaning given to such 
        term by section 1861(r) of the Social Security Act (42 
        U.S.C. 1395x(r)).
          (5) Special rule in the case of child of divorced 
        parents, etc.
          Any child to whom section 152(e) applies shall be 
        treated as a dependent of both parents for purposes of 
        this section.
          (6) In the case of an insurance contract under which 
        amounts are payable for other than medical care 
        referred to in subparagraphs (A), (B), and (C) of 
        paragraph (1)--
                  (A) no amount shall be treated as paid for 
                insurance to which paragraph (1)(D) applies 
                unless the charge for such insurance is either 
                separately stated in the contract, or furnished 
                to the policyholder by the insurance company in 
                a separate statement,
                  (B) the amount taken into account as the 
                amount paid for such insurance shall not exceed 
                such charge, and
                  (C) no amount shall be treated as paid for 
                such insurance if the amount specified in the 
                contract (or furnished to the policyholder by 
                the insurance company in a separate statement) 
                as the charge for such insurance is 
                unreasonably large in relation to the total 
                charges under the contract.
          (7) Subject to the limitations of paragraph (6), 
        premiums paid during the taxable year by a taxpayer 
        before he attains the age of 65 for insurance covering 
        medical care (within the meaning of subparagraphs (A), 
        (B), and (C) of paragraph (1)) for the taxpayer, his 
        spouse, or a dependent after the taxpayer attains the 
        age of 65 shall be treated as expenses paid during the 
        taxable year for insurance which constitutes medical 
        care if premiums for such insurance are payable (on a 
        level payment basis) under the contract for a period of 
        10 years or more or until the year in which the 
        taxpayer attains the age of 65 (but in no case for a 
        period of less than 5 years).
          (8) The determination of whether an individual is 
        married at any time during the taxable year shall be 
        made in accordance with the provisions of section 
        6013(d) (relating to determination of status as husband 
        and wife).
          (9) Cosmetic surgery.--
                  (A) In general.--The term ``medical care'' 
                does not include cosmetic surgery or other 
                similar procedures, unless the surgery or 
                procedure is 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.
                  (B) Cosmetic surgery defined.--For purposes 
                of this paragraph, the term ``cosmetic 
                surgery'' means any procedure which is directed 
                at improving the patient's appearance and does 
                not meaningfully promote the proper function of 
                the body or prevent or treat illness or 
                disease.
          (10) Eligible long-term care premiums.--
                  (A) In general.--For purposes of this 
                section, the term ``eligible long-term care 
                Premiums'' means the amount paid during a 
                taxable year for any qualified long-term care 
                insurance contract (as defined in section 
                7702B(b)) covering an individual, to the extent 
                such amount does not exceed the limitation 
                determined under the following table:


 
------------------------------------------------------------------------
 In the case of an individual with
an attained age before the close of           The limitation is:
        the taxable year of:
------------------------------------------------------------------------
40 or less                           $200
More than 40 but not more than 50    375
More than 50 but not more than 60    750
More than 60 but not more than 70    2,000
More than 70                         2,500.
------------------------------------------------------------------------

                  (B) Indexing.--
                          (i) In general.--In the case of any 
                        taxable year beginning in a calendar 
                        year after 1997, each dollar amount 
                        contained in subparagraph (A) shall be 
                        increased by the medical care cost 
                        adjustment of such amount for such 
                        calendar year. If any increase 
                        determined under the preceding sentence 
                        is not a multiple of $10, such increase 
                        shall be rounded to the nearest 
                        multiple of $10.
                          (ii) Medical care cost adjustment.--
                        For purposes of clause (i), the medical 
                        care cost adjustment for any calendar 
                        year is the percentage (if any) by 
                        which--
                                  (I) the medical care 
                                component of the C-CPI-U (as 
                                defined in section 1(f)(6)) for 
                                August of the preceding 
                                calendar year, exceeds
                                  (II) such component of the 
                                CPI (as defined in section 
                                1(f)(4)) for August of 1996, 
                                multiplied by the amount 
                                determined under section 
                                1(f)(3)(B).
                        The Secretary shall, in consultation 
                        with the Secretary of Health and Human 
                        Services, prescribe an adjustment which 
                        the Secretary determines is more 
                        appropriate for purposes of this 
                        paragraph than the adjustment described 
                        in the preceding sentence, and the 
                        adjustment so prescribed shall apply in 
                        lieu of the adjustment described in the 
                        preceding sentence.
          (11) Certain payments to relatives treated as not 
        paid for medical care --An amount paid for a qualified 
        long-term care service (as defined in section 7702B(c)) 
        provided to an individual shall be treated as not paid 
        for medical care if such service is provided--
                  (A) by the spouse of the individual or by a 
                relative (directly or through a partnership, 
                corporation, or other entity) unless the 
                service is provided by a licensed professional 
                with respect to such service, or
                  (B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) 
                or 707(b)) to the individual.
        For purposes of this paragraph, the term ``relative'' 
        means an individual bearing a relationship to the 
        individual which is described in any of subparagraphs 
        (A) through (G) of section 152(d)(2). This paragraph 
        shall not apply for purposes of section 105(b) with 
        respect to reimbursements through insurance.
          (12) Qualified sports and fitness expenses.--
                  (A) In general.--The term ``qualified sports 
                and fitness expenses'' means amounts paid for--
                          (i) membership at a fitness facility,
                          (ii) participation or instruction in 
                        a program of physical exercise or 
                        physical activity, or
                          (iii) safety equipment for use in a 
                        program (including a self-directed 
                        program) of physical exercise or 
                        physical activity.
                  (B) Dollar limitations.--
                          (i) Overall limitation.--The 
                        aggregate amount treated as qualified 
                        sports and fitness expenses with 
                        respect to any taxpayer for any taxable 
                        year shall not exceed $500 (twice such 
                        amount in the case of a joint return or 
                        a head of household (as defined in 
                        section 2(b))).
                          (ii) Safety equipment.--The amount 
                        treated as qualified sports and fitness 
                        expenses with respect to any item of 
                        safety equipment described in 
                        subparagraph (A)(iii) shall not exceed 
                        $250.
                  (C) Certain exclusions.--
                          (i) In general.--Golf, hunting, 
                        sailing, and horseback riding shall not 
                        be treated as a physical exercise or 
                        physical activity.
                          (ii) Exercise videos, etc.--Qualified 
                        sports and fitness expenses shall not 
                        include videos, books, or similar 
                        materials.
                  (D) Fitness facility defined.--For purposes 
                of subparagraph (A)(i), the term ``fitness 
                facility'' means a facility--
                          (i) providing instruction in a 
                        program of physical exercise or 
                        physical activity, offering facilities 
                        for the preservation, maintenance, 
                        encouragement, or development of 
                        physical fitness, or serving as the 
                        site of such a program of a State or 
                        local government,
                          (ii) which is not a private club 
                        owned and operated by its members,
                          (iii) which does not offer facilities 
                        for any activity described in 
                        subparagraph (C)(i),
                          (iv) whose health or fitness facility 
                        is not incidental to its overall 
                        function and purpose, and
                          (v) which is fully compliant with 
                        applicable State and Federal anti-
                        discrimination laws.
                  (E) Programs which include components other 
                than physical exercise and physical activity.--
                Rules similar to the rules of paragraph (6) 
                shall apply in the case of any program that 
                includes physical exercise or physical activity 
                and also other components. For purposes of the 
                preceding sentence, travel and accommodations 
                shall be treated as an other component.
                  (F) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 
                2019, the $500 amount in subparagraph (B)(i) 
                and the $250 amount in subparagraph (B)(ii) 
                shall each be increased by an amount equal to--
                          (i) such dollar amount, multiplied by
                          (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year in which such taxable 
                        year begins, determined by substituting 
                        ``calendar year 2018'' for ``calendar 
                        year 2016'' in subparagraph (A)(ii) 
                        thereof.
                If any increase determined under the preceding 
                sentence is not a multiple of $10, such 
                increase shall be rounded to the next lowest 
                multiple of $10.
  (e) Exclusion of amounts allowed for care of certain 
dependents.--Any expense allowed as a credit under section 21 
shall not be treated as an expense paid for medical care.
  (f) Special rules for 2013 through 2018.--In the case of any 
taxable year--
          (1) beginning after December 31, 2012, and ending 
        before January 1, 2017, in the case of a taxpayer if 
        such taxpayer or such taxpayer's spouse has attained 
        age 65 before the close of such taxable year, and
          (2) beginning after December 31, 2016, and ending 
        before January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by 
substituting ``7.5 percent'' for ``10 percent''.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

       H.R. 6312 Personal Health Investment Today Act (PHIT) Act

    H.R. 6312 (Smith, R-MO and Kind, D-WI) allows individuals 
to use Health Savings Account (HSA) and Flexible Spending 
Account (FSA) funds up to $500 for an individual ($1000 for a 
family) to pay for certain fitness expenses, including fitness 
facility membership; participation in a physical activity (such 
as gym memberships or sports leagues); and safety equipment, 
such as bike helmets. The bill excludes certain sports, such as 
golf and hunting, as well as exercise instruction materials, 
such as videos and books.
    H.R. 6312 does not undo sabotage, premium hikes, and 
benefit cuts Republicans have caused over the past 18 months. 
This bill was one in a series of 11 bills the Committee marked 
up that Republicans claim will help lower health care costs for 
consumers. This legislation does not undo the disruption and 
sabotage the Republicans have continued to inflict on the 
American health care system. Instead of focusing on expansion 
of HSAs and High-Deductible Health Plans (HDHPs), Democrats 
encourage the Committee to redirect its attention to 
legislation that could actually ensure that uninsured, low-
income, and vulnerable people have real access to care. For 
example H.R. 5155, sponsored by Reps. Pallone, Neal, and Scott 
would protect people with pre-existing conditions, help lower 
premiums for Americans, and improve affordability of health 
coverage.
    Legislation busts the deficit to benefit the wealthy, 
again. Altogether the 11 bills the Committee marked up would 
add another $92 billion in unoffset tax cuts to the deficit. 
Republican attempts to expand HSAs (and encourage more 
enrollment in plans with high deductibles, covering very few 
up-front health costs) are a continuation of their platform of 
shifting families into health plans that provide fewer health 
benefits and higher out-of-pocket costs--while providing 
greater tax benefits for higher-income individuals and 
corporate-special interests. According to 2014 Treasury data, 
only five percent of families with adjusted gross income of 
under $100,000 held money in an HSA, and those users' average 
account balances were $1,700.
    HDHPs and HSAs do not promote healthy behavior and this 
legislation further directs consumers away from care. It is 
widely acknowledged that HSAs and HDHPs lead consumers to delay 
care. They do not encourage individuals to make better health 
care decisions, as Republicans' ``skin in the game'' talking 
points assert. Decades of research shows that exposure to high 
out-of-pocket costs lead consumers to delay or forgo both 
necessary and unnecessary care. Delaying care and increasing 
costs run counter to Democratic policy goals of better 
coordinated, high-value affordable care for American families. 
This legislation demonstrates why HDHPs in their current format 
do not allow consumers to see value in their health insurance.
    According to the American Hospital Association, ``Hospitals 
and health systems report that increased enrollment in HDHPs 
over the past several years has reduced access to care and 
subjected patients to costs they cannot afford. In addition, 
patients enrolled in HDHPs appear to delay care until they have 
reached their deductible or are in an emergency situation, 
which could lead to poorer health outcomes.''
    H.R. 6312 allows a tax preference for services that are not 
directly related to health care. The bill allows an HSA or FSA 
to be used for services that might never be used or might not 
directly improve an individual's health. Because this bill 
allows consumers to use tax-preferred services for leisure 
activities, reducing the amount available to address the high 
deductible that is supposed to drive better health purchases, 
it further undermines the Republican talking point about 
consumers having ``skin in the game.'' This provision is a tax 
break--plain and simple.
    HSAs mostly benefit high-income taxpayers while doing 
little to help moderate-income families or the uninsured. High-
income individuals can best afford to save for health care 
expenses and are therefore the most likely to contribute to 
HSAs. Higher income filers are much more likely to establish 
HSAs than lower income filers--70 percent of HSA contributions 
come from households with incomes over $100,000, according to 
the Joint Commission on Taxation (JCT)--and they are also 
likelier to max out their contributions. Additionally, high-
income people receive the biggest tax benefit for each dollar 
contributed to an HSA because the value of a tax deduction 
rises with an individual's tax bracket. More than 44 percent of 
Americans cannot afford a $400 emergency visit. For these 
families, it is unlikely that they have excess income to devote 
to a tax preferred account.
    JCT estimates the cost of this bill to be $3.5 billion over 
10 years. With this bill, Republicans are adding more tax cuts 
and increasing the deficit. Republicans are using the deficit, 
which they keep making larger with cuts for the wealthy, to 
justify their deep cuts to Medicare and Medicaid. Republicans 
are already proposing to cut Medicare and Medicaid by nearly a 
trillion dollars to try to pay for the tax cuts they've already 
enacted. This bill will only add fuel to the fire.
                                   Richard E. Neal,
                                           Ranking Member.

                                  [all]