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71–160 2011

THE TAX–RELATED PROVISIONS OF H.R. 3 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 16, 2011 

Serial No. 112–SRM2 

Printed for the use of the Committee on Ways and Means 

( 


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SUBCOMMITTEE ON SELECT REVENUE MEASURES 

PATRICK J. TIBERI, Ohio, Chairman 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

CHARLES W. BOUSTANY, JR., Louisiana 

KENNY MARCHANT, Texas 

RICHARD E. NEAL, Massachusetts, Ranking 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

SHELLEY BERKLEY, Nevada 


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C O N T E N T S 

Page 

Advisory of March 9, 2011, announcing the hearing ............................................ 2 

WITNESS 

Thomas A. Barthold, Chief of Staff, Joint Committee on Taxation ..................... 5 

SUBMISSIONS FOR THE RECORD 

American United for Life, statement ..................................................................... 48 

Cassing Hammond, statement ................................................................................ 51 

Center for Reproductive Rights, statement ........................................................... 54 

NARAL Pro-Choice America Foundation, statement ............................................ 61 

National Abortion Federation, statement .............................................................. 71 

National Council of Jewish Women, statement .................................................... 77 

National Health Law Program, statement ............................................................ 79 

National Partnership for Women and Families, statement ................................. 81 

Religious Coalition for Reproductive Choice, statement ...................................... 85 

Sara Rosenbaum, statement ................................................................................... 93 


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THE TAX–RELATED PROVISIONS OF H.R. 3 

THURSDAY, MARCH 16, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

1100, Longworth House Office Building, Hon. Pat Tiberi [Chairman 

of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

Wednesday, March 9, 2011 

SRM–2 

Chairman Tiberi Announces a Hearing on 

The Tax-Related Provisions of H.R. 3 

Congressman Pat Tiberi, (R–OH), Chairman of the Subcommittee on Select Revenue Measures of the Committee on Ways and Means, today announced that the 

Subcommittee will hold a hearing on the Tax Code’s treatment of abortion-related 

expenses and the changes to such tax treatment proposed by section 2 of H.R. 3— 

the No Taxpayer Funding for Abortion Act—as ordered reported by the House Judiciary Committee on March 3, 2011. The hearing will take place on Wednesday, 

March 16, 2011, in Room 1100 of the Longworth House Office Building beginning at 2:00 p.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

Rep. Chris Smith (R–NJ) introduced the No Taxpayer Funding for Abortion Act 

(H.R. 3) on January 20, 2011. The bill was referred to the Committee on the Judiciary, and, in addition, to the Committees on Energy and Commerce and Ways and 

Means. On March 3, 2011, the House Judiciary Committee ordered the bill reported 

to the House by a vote of 23–14. The Ways and Means Committee received a referral because the bill includes tax provisions that fall within the jurisdiction of the 

Committee. Ways and Means Committee Chairman Dave Camp (R–MI) asked 

Chairman Tiberi to hold a hearing for the purpose of examining these provisions 

so that the Committee can provide its expertise, ensuring that the tax provisions 

are administrable and operate as intended. 

In announcing the hearing, Chairman Tiberi said, ‘‘The Ways and Means Committee has a responsibility to lend our tax policy expertise to the development of H.R. 3 to ensure that the relevant provisions serve their intended 

purpose.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the tax policy issues raised by H.R. 3 as ordered reported by the House Judiciary Committee on March 3, 2011. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here 

to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word docuVerDate Nov 24 2008 14:53 Nov 29, 2011 Jkt 071160 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\71160\71160.XXX 71160

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ment, in compliance with the formatting requirements listed below, by the close 

of business on Wednesday, March 30, 2011. Finally, please note that due to the 

change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–3625 or (202) 225–2610. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman TIBERI. I would like to call today’s hearing to order. 

Before we proceed, I would like to introduce a new Member of the 

Subcommittee and a new Member of the Full Committee. He reigns 

from the great State of Texas. Please welcome Kenny Marchant. 

Kenny, glad to have you with us. Would you like to say a few 

words as a new Member of the Subcommittee. 

Mr. MARCHANT. Thank you, Mr. Chairman. I really appreciate 

the opportunity to serve on the Committee. I thank the steering 

committee for making the recommendation, and was thrilled to see 

that I was assigned to your Subcommittee. So I am ready to go to 

work. 

Chairman TIBERI. Great to have you. Thank you so much. The 

Ways and Means Committee derives its jurisdiction from Article 1, 

section 7, of the United States Constitution, which provides that all 

bills for raising revenue shall originate in the House of Representatives. Furthermore, Rule 21 Clause 5(a) of the rules of the House 

allows a point of order to be raised against any bill containing a 

tax or a tariff measure that is reported by a Committee other than 

the Ways and Means Committee. 

I want to thank Chairman Camp for asking me to hold the hearing today, as H.R. 3 clearly contains tax provisions within the 

Ways and Means Committee jurisdiction. I agree with Chairman 


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Camp that it is imperative for the Ways and Means Committee to 

review, and when necessary, to mark up bills containing tax-related provisions that are moving throughout the legislative process 

within other committees of jurisdiction. 

H.R. 3 was introduced by Representative Chris Smith on January 20th of 2011. The bill was referred to the Judiciary Committee, 

the Energy and Commerce Committee and the Ways and Means 

Committee. On March 3, 2011, the Judiciary Committee ordered 

the bill to be favorably reported to the House. In addition, H.R. 358 

was introduced by Representative Joseph Pitts on January 20th of 

2011. On February 15, 2011, the Energy and Commerce Committee 

ordered the bill favorably reported. The purpose of today’s hearing 

is to review and to better understand the tax-related provisions of 

both H.R. 3 and H.R. 358, which are within the Ways and Means 

Committee’s jurisdiction, and to determine to what extent these 

provisions work or don’t work as intended. 

I look forward to working with Mr. Neal and the other Members 

of the Subcommittee to accomplish this task. In addition, I want 

to welcome our witness today, Tom Barthold, Chief of Staff of the 

Joint Committee on Taxation, to this hearing, and thank him for 

leading us with his expertise on these tax issues. I yield as much 

time as he would like to the former Chairman and to the Ranking 

Member, my friend, Mr. Neal. 

Mr. NEAL. Thank you very much, Mr. Chairman. Last week was 

the 100th anniversary of International Women’s Day, a celebration 

rooted in the struggle for women to participate in society on an 

equal footing with men. The President and many other world leaders chose this time to laud accomplishments of women and expressed renewed commitments to ending violence and discrimination against women. One way in which we can honor that struggle 

is by improving women’s health, certainly not limiting it. But last 

night I found out that we will be also debating a bill today which 

may allow hospitals to deny emergency lifesaving care to pregnant 

women, a bill not even referred to this Committee. It is expected 

that this Committee will take up H.R. 3 and H.R. 358 as introduced in a matter of weeks. H.R. 3 seeks to extend current restrictions on abortions in Federal facilities to private health care plans, 

but it doesn’t stop just there. It seeks to redefine rape, excluding 

protections for any rape short of forceable rape, a distinction surely 

lost on most victims. It seeks to redefine incest, including protections for any incest not involving a minor. 

The bill, even as modified by the Judiciary Committee, would exclude protections for women whose life is medically endangered, 

but not by the pregnancy itself, such as a woman suffering from 

brain cancer in need of chemotherapy. The American College of Obstetricians and Gynecologists, a profession dedicated solely to women’s health, expressed opposition to legislative proposals that ‘‘put 

government between a physician and a patient.’’ 

Remember how incensed we were a decade ago that medical decisions could be made by HMO bean counters, and yet here we will 

let government bean counters do it for us. And because this bill has 

not been drafted as amendments to the Internal Revenue Code, it 

is hard to capture its full reach. Can a company deduct expenses 

for research on a better birth control pill, where abortion might, 


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emphasis on the word ‘‘might,’’ be possible as part of the clinical 

trial? 

There are at least a dozen tax provisions potentially impacted by 

this imprecise language. And I have to wonder what is next in our 

Committee. Do Members in opposition to the death penalty deny 

deductions for research expenses on a drug which might be used 

in conjunction with that? Do Members in opposition to tobacco use 

deny advertising deductions to tobacco companies? The Tax Code 

can be an extremely powerful tool to accomplish a policy goal, including social policy, but it also can be a very blunt instrument. 

This is the first time in almost two decades that I have served on 

this Committee that the issue of abortion has come to us other 

than by amendments, and I am surprised that it is being brought 

to us the way that it has been. 

Mr. Chairman, both you and Chairman Camp had talked with 

great sincerity about simplifying our Tax Code, and I certainly believe both of you. We want to streamline that Tax Code for the benefit of individuals, businesses and tax administrators, and I want 

to be part of that effort, but this bill certainly doesn’t get us there. 

Thank you, Mr. Chairman. 

Chairman TIBERI. Thank you, Mr. Neal. And I ask unanimous 

consent that all Members’ written statements be included in the 

record. Without objection, so ordered. Obviously, this topic provides 

a lot of heated debate from folks, not just within the Committee, 

but outside the Committee. There is one point of clarification, Mr. 

Neal, that I want to make: that the introduced version of the bill 

talked about forceable rape. That was corrected within the Judiciary Committee’s markup. 

Mr. Barthold, thank you for appearing today. You have the customary 5 minutes to present your testimony, with your full written 

testimony submitted for the record. And you may begin. 

STATEMENT OF THOMAS BARTHOLD, 

CHIEF OF STAFF, JOINT COMMITTEE ON TAXATION 

Mr. BARTHOLD. Well, thank you, Mr. Chairman and Mr. Neal. 

It is my pleasure to present the testimony of the staff of the Joint 

Committee on Taxation concerning the potential effects on the Internal Revenue Code of H.R. 3, the No Taxpayer Funding for Abortion Act, as reported by the Committee on the Judiciary. And also 

I will make some brief comments about H.R. 358, the Protect Life 

Act. H.R. 3 as reported by Judiciary does not amend the Internal 

Revenue Code, but it does directly affect the Code by prohibiting 

certain tax benefits from being used to pay for abortions or health 

benefit plans that may cover abortions. So in particular, section 

303 of that bill seeks to prevent abortions from being paid for with 

Federal tax credits or deductions or with funds withdrawn on a tax 

preferred basis from certain trusts and accounts. 

So the purpose of my testimony today is to outline some of the 

key tax-related features of the bill and to explain which provisions 

of a Code our staff believes are clearly implicated by the bill and 

which provisions might be implicated and perhaps to discuss some 

of the questions raised by the ambiguities in the bill’s language in 

its present form for the Internal Revenue laws of the United 

States. 


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Now, as I mentioned, the bill does not directly amend the Code. 

And consequently, there is some uncertainty about which Code provisions are affected by the bill. This uncertainty relating to the 

scope of the bill is increased because the bill does not define certain 

key terms. The undefined terms include which Code sections count 

as credits under the Internal Revenue laws, what vehicles might be 

considered ‘‘tax preferred trusts or accounts’’ from which funds may 

be withdrawn on a tax preferred basis and which taxpayers are intended to be prohibited from using tax benefits to pay for abortions. 

Certain health benefits related to the Code are definitely impacted 

by the bill. These sections include the health care tax credit, the 

premium assistance credit, the Indian employment credit, the 

small business health care credit and the individual deduction for 

medical expenses. 

All of these sections that I just named contain tax credits and deductions that are clearly defined in the Code and that directly relate to the taxation of health benefits and medical expenses. Our 

staff also believes that it is clear that if a taxpayer withdraws 

funds from an Archer Medical Savings Account, MSAs, or a Health 

Savings Account, known as HSAs in common parlance, to pay for 

an abortion, then the amount of funds withdrawn must be included 

in the taxpayer’s income. This is because both Archer MSAs and 

HSAs are clearly tax exempt, that means that they are tax preferred, and they are trusts or accounts the funds of which are held 

exclusively for payment of qualified medical expenses. They thus 

come directly under the language of the bill as reported by Judiciary. But other sections of the Code may be impacted by the bill as 

well, depending upon the interpretation of the bill’s language. 

These sections include the COBRA premium assistance, the deduction for general business expenses, and the research credit. 

Whether COBRA premium assistance is affected by the bill depends upon whether repayment of premium assistance amounts to 

employers by the IRS—whether that is understood as a tax credit 

or as a mere procedural device for purposes of the bill. Whether the 

deduction for general business expenses is affected by the bill depends upon the breadth and interpretation of the term ‘‘taxpayer.’’ 

Whether the research credit is affected depends both upon how 

broadly the phrase ‘‘amounts paid are incurred for an abortion’’ is 

interpreted and also on the intended scope of the legislation itself. 

Under the bill, distributions or payments under employer-sponsored health plans using integral government trusts, retiree medical accounts, welfare benefit plans, including VEBAs, health flexible spending arrangements, health reimbursement arrangements, 

might need to be included in income if used to pay for an abortion. 

But here, whether employer-sponsored health plans using these arrangements are affected depends upon the interpretation of the 

bill’s language, and in particular, it is unclear whether all those vehicles that I just named are, in fact, tax preferred trusts or accounts for purposes of the bill. 

Now, last, let me note that H.R. 358, the Protect Life Act, 

amends the Patient Protection and Affordable Care Act to prohibit 

the use of premium assistance credits that were provided for under 

that Act and are section 36B of the Internal Revenue Code for 

qualified health plans that offer abortion coverage. In this respect, 


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H.R. 358 is like H.R. 3, as reported by the Judiciary Committee. 

That concludes my brief oral summary. 

As the Chairman noted, our staff has prepared a more detailed 

discussion of why we think some things might clearly fall under 

the aegis of H.R. 3 as reported by the Judiciary and where there 

are ambiguities. And I, of course, am ready to try to answer any 

question that you or the other Members of the Subcommittee might 

have. Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Barthold follows:] 


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Chairman TIBERI. Thank you, Mr. Barthold. I appreciate your 

testimony today and being here to answer questions that we might 

have. Many Americans will disagree with the notion that absent 

special circumstances such as the life of the mother, rape or incest 

abortion should be properly categorized as medical care. But the 

question I have for you today, under current tax law, all legal abortions are considered to be medical care, and the heart of the question would be, does H.R. 3 then change that or is it silent on that? 

Mr. BARTHOLD. What constitutes medical care is generally described under Treasury regulations, it is not specified in the Internal Revenue Code. And current Treasury regulations provide that 

abortions are considered medical care. H.R. 3 as reported by the 

Judiciary Committee does not amend the definition in the regulations. The effect that—one effect that it does have, however, is that 

it would narrow the scope of deductibility of what is otherwise considered to be medical care. So the short answer to your question, 

Mr. Chairman, is no, H.R. 3 does not change that abortion, that 

legal abortions, are considered to be medical care. 

Chairman TIBERI. You touched on this in your comments. The 

Internal Revenue Code is Title 26 of the U.S. Code. H.R. 3 adds 

tax provisions to Title 1 of the U.S. Code, not to Title 26. You indicated the bill’s failure to amend the Tax Code directly may cause 

some ambiguity or uncertainty about what exactly the bill does, 

and that is one of the reasons why we are here to talk to you today. 

Would it create more certainty under the Tax Code, particularly for 

taxpayers and those who analyze this legislation, if we directly 

amended the appropriate sections of the Tax Code rather than having them off-coded provisions in other areas? 

Mr. BARTHOLD. As a general matter, I would think the answer 

would have to be yes. A couple of the points that I made in my testimony is that there is a lack of clarity about whether the term 

‘‘taxpayer’’ used in H.R. 3. It seems in the language of H.R. 3 to 

be intended just to apply to individual taxpayers, but under the Internal Revenue Code, ‘‘taxpayer’’ is defined to be individuals, but 

also corporations, trusts and different types of entities. So I would 

assume that the Ways and Means Committee, if they were to address this issue, would clarify more precisely what was intended by 

‘‘taxpayer.’’ So by amending the Internal Revenue Code you would 

be providing clarity on that point. 

Chairman TIBERI. Employers generally may deduct ordinary 

and necessary expenses of conducting a trade or a business. Health 

insurance premiums for employees generally constitute a deductible business expense for that purpose. My understanding of the 

author’s intent is that H.R. 3 is not supposed to affect the employer’s business expense deduction. Does the language in the bill make 

that clear or is there ambiguity in section 303? 

Mr. BARTHOLD. Section 303 of the bill as reported in Subparagraph 2 is the language that refers to treatment of deductions. And 

it is here that there is one of the points of ambiguity that I just 

touched upon. It refers to a deduction by a taxpayer, but it also 

says the taxpayer’s spouse or dependant child. That would seem to 

suggest that taxpayer refers to just an individual not a business 

entity. However, as I just noted a moment ago, the defined term 


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taxpayer in the Internal Revenue Code includes a business entity. 

For example, a C-corporation is a taxpayer. 

So if a broader interpretation were taken of the word ‘‘taxpayer’’ 

in the context of H.R. 3 as reported, I think that is why our staff 

concluded there is ambiguity. And it could be argued by some that 

a deduction for the employer’s business expense would be implicated by the current language of H.R. 3 as reported. 

Chairman TIBERI. So your recommendation would be to clarify 

that with the author? 

Mr. BARTHOLD. Taxpayers, individuals, always like things 

clarified, so I will say yes. 

Chairman TIBERI. I appreciate that. I will yield 5 minutes to 

Mr. Neal. 

Mr. NEAL. Thank you, Mr. Chairman. Mr. Barthold, let me ask 

you a few questions about H.R. 3 as introduced and amended, just 

so we have a better understanding of how it will impact women in 

their health care decisions. And just to clarify, it is the introduced 

version of H.R. 3 which was referred to Ways and Means. 

Now, let’s consider the case of a woman suffering a severe and 

chronic heart condition who has been advised to terminate her 

pregnancy. Under this bill, when she deducts those medical expense’s, the IRS would determine whether or not the deduction was 

appropriate. If the doctor believed her heart condition would worsen because of that pregnancy or may not prove to be fatal, then the 

doctor could not certify the IRS certification test as specified by 

this bill and her medical costs would be denied, is that correct? 

Mr. BARTHOLD. Let me say as you phrased it, it sounds like 

generally yes, but since you are talking about the IRS providing 

certification procedures, I think it would fall into a gray area, because as you correctly noted, the language of the bill talks about 

placing the woman, in this case, in danger of death due to the continued pregnancy. That then becomes somewhat judgmental. And 

if we are going to have a certification as to what constituents danger of death, maybe Dr. Boustany could inform you much better 

than I could. So I think as you phrased your question, Mr. Neal, 

the answer is yes, but I think because there is not a bright line 

about this kind of—this particular condition is on one side and another type of condition is on the other side that we really couldn’t 

say with certainty how it would be implemented. Sorry for the long 

answer. 

Mr. NEAL. I saw the comments from Grover Norquist this morning who has deemed this bill impacting pregnant women and their 

families as a tax increase. He apparently has received an assurance 

from this Subcommittee that the tax increase will be offset with 

some other cuts. Now, it is clear that this bill, even as modified, 

will impact not only an individual such as the woman with heart 

disease that I outlined above, but could also impact families with 

an employer-provided health insurance plan, am I correct? 

Mr. BARTHOLD. Yes. Let me offer a couple of examples. Paragraph 1 of section 303 would deny credits to the employer-provided 

plans—to an employer who provided health plans that offered abortion coverage. The small business assistance credit would therefore 

be implicated. The Indian wage credit where the credit for wages 

include compensation that includes employer-provided health beneVerDate Nov 24 2008 13:31 Nov 17, 2011 Jkt 071160 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\71160.XXX 71160

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fits, that would also be implicated. And those would be employerprovided plans. 

Mr. NEAL. Mr. Barthold, let me clear up some confusion by the 

provisions of H.R. 358. Under the new health care law, health exchange plans could cover abortion services, but only if the plans 

collected two premiums from the enrollee: One for the cost of the 

abortion coverage and one for the remaining cost of the plan, and 

kept those premiums segregated from any tax credits or other government assistance. 

Under this bill, though, no one using premium assistance credits, 

all of whom are low- to middle-income families, can still choose a 

plan covering abortion services even if they paid for that coverage 

with their own money. So all of these low- and middle-income 

women would be segregated into one plan prohibiting abortion, but 

those wealthier women not needing the premium assistance could 

be in a separate plan that did provide abortion coverage, is that 

correct? 

Mr. BARTHOLD. Yes, I would have to agree that that would 

seem to be how H.R. 358 would work. 

Mr. NEAL. And I understand that H.R. 3 was referred to the 

Ways and Means—referred to the Ways and Means Committee is 

that despite the fact that it does not amend the Tax Code, it does 

seek to end, as the title of the bill states, taxpayer funding of abortions. If this bill passes, it seems that there could be no limit to 

any tax deduction or tax credit in the Code being considered public 

financing and subject to our scrutiny. 

Mr. Barthold, one could argue that the deduction for charitable 

donations like the various tax deductions and credits targeted by 

this bill, or even the tax-exempt status afforded religious groups, 

could be viewed as a taxpayer funding of certain religions, is that 

correct? 

Mr. BARTHOLD. That is actually an open question, Mr. Neal. 

There is a case before the Ninth Circuit currently, which is essentially asking that question. It is asking, is a deduction permitted 

for a charitable donation to a church funding a State religion, so 

is a deduction to an organization a funding? So I think we would 

have to consider that an open question. 

In perhaps the context, the more direct context that you are asking, you might phrase it by saying there is a 501(c)(3) hospital organization. If abortions were performed at that hospital, and one 

made what are under present law deductible donations to the 

501(c)(3) hospital, would that be construed under the bill as funding an abortion and therefore excludable. I think the same rationale that has the case before the Ninth Circuit would say that we 

have to call that uncertain at present. 

Mr. NEAL. Last, the Hyde amendment has been accepted practice in this institution, with nobody really being in love with it, but 

at the same time, acknowledging the reality of what it has done. 

And for us to take this approach today is far different than Mr. 

Hyde would have proposed years ago. Thank you, Mr. Chairman. 

Chairman TIBERI. Thank you, Mr. Neal. I think you make a 

good point that one of the reasons why Mr. Camp wanted to have 

this hearing today is to try to clarify the way the bill is written 

versus the way it should be properly written under the Internal 


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Revenue Code and maybe potential unintended consequences, and 

one of those is, to my point earlier, that provisions of the bill are 

written to Title 1 of the U.S. Code and not to Title 26. So that is, 

again, within our jurisdiction. And unintended consequences of the 

bill within the Tax Code would need to be corrected, and it is this 

Committee’s job to do that. With that, I will yield to Mr. Berg from 

North Dakota. 

Mr. BERG. Thank you, Mr. Chairman. I wanted to address one 

issue on whether or not the impact on revenue, my understanding 

is the Joint Committee on Taxation has determined that the impact is negligible and my understanding is the CBO also has reviewed this and said the financial impact is negligible. To continue, 

back in the 1990s, Congress enacted some self-employed deductions 

enabling them to deduct the cost of their health premiums. It was 

an attempt to provide some tax equality for employer-provided 

health insurance. And my question is on section 303 which will 

deny certain deductions. What is the effect that provision would 

have on self-employers or would it affect them? 

Mr. BARTHOLD. Thank you, Mr. Berg. Our staff feels that it is 

quite clear that as reported by the Judiciary Committee that paragraph 2 of section 303, which, as you noted, would deny deductions 

for payments for abortion and abortion-related services, that a selfemployed individual under present law would not be affected. The 

deduction under present law for self-employed persons is that they 

may deduct the premium for purchasing insurance. Purchasing the 

premium of insurance is not a payment for an abortion, and so we 

feel that the clearest reading of that is there would be no effect on 

the self-employed health deduction. 

Mr. BERG. Thank you. I will yield back, Mr. Chairman. 

Chairman TIBERI. Thank you, Mr. Berg. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you very much. I guess I am not surprised that this bill has been introduced, but I am a bit mystified 

as to how it is written. It is a fairly sloppy drafting job, and I appreciate the Committee’s willingness to hold a hearing on it so at 

least the American public can hear the consequences of this poorly 

drafted bill, both its intended and unintended consequences. And 

I think it sounds like it is a priority for the majority to pass this 

bill or something similar. And I believe we all know the intended 

consequences of the legislation. That is, to make it harder or near 

impossible for women across our country to have access to a safe 

legal medical procedure and one that is protected by the Constitution, and to deny women and their families the opportunity to purchase with their own money, with their own money, private health 

insurance that covers abortion services. But because the bill is so 

badly drafted, I think that there are some other things that this 

bill is going to do that fall into the unintended consequences category. 

My read of the bill suggests that it raises taxes on millions of 

American families violating the majority’s pledge not to support tax 

increases. It also changes the entire structure of the private health 

insurance market, or if not the entire structure, I think about 80 

percent—70 to 80 percent—of the plans that cover these procedures, so a major portion of the market. And it may require that 


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the IRS snoop into what American women are doing with their own 

money. So Mr. Barthold, does H.R. 3 provide any insight into how 

this legislation would be enforced? 

For instance, would a woman have to certify that money from 

her health savings account that she may have used for other services, would she have to certify that that money was not used to pay 

for an abortion? 

Mr. BARTHOLD. Do you have in mind a pre-certification? I 

guess the reason I am halting is under present law, for payments 

from a flexible spending account or a health spending account, 

there are regulations and general guidelines. So, of course, to—the 

Treasury would have to promulgate some regulations and say, to 

make clear, what is a permissible expense and what is not a permissible expense. Now, that—— 

Mr. THOMPSON. And that burden falls on whom? 

Mr. BARTHOLD. Well, that burden falls—to comply the ultimate 

burden always falls on the individual. That doesn’t mean that everyone always complies. And to verify the compliance that is usually undertaken under audit procedures. I mean, there are payments that one could try to have paid from a health savings account today which are not permissible. 

Mr. THOMPSON. So if a woman were audited, would the IRS 

agents be at her house demanding what court documents or affidavits providing that her pregnancy was a result of incest or rape? 

Mr. BARTHOLD. Well, I am not sure how the IRS would carry 

out that audit. The burden of proof, I believe, would be on the taxpayer. So if the taxpayer had such documents or was in a position 

to obtain such documents to verify the claim, that should satisfy 

the IRS. 

Mr. THOMPSON. So it may be one of the most difficult times in 

a woman’s life, she would have to provide some sort of documentation that rape or incest was the reason that she had to have what 

I can only imagine to be a very, very difficult choice that she made 

to have this procedure? Would H.R. 3 save the government any 

money? 

Mr. BARTHOLD. As Mr. Berg had noted on the receipt side, our 

staff has estimated that it would have a negligible effect. And he 

reported, I believe this is also accurate, that the Congressional 

Budget Office said that there was only a negligible budgetary effect 

on the overall budget. 

Mr. THOMPSON. Negligible budgetary effect, but individuals 

and employers could see their taxes increased? 

Mr. BARTHOLD. Well, to have a negligible budgetary effect, it 

means that on net, there is basically next to no effect. Now, in fact, 

just maybe to be a little clearer on that, there is some potential to 

increase revenues, because as is clearly the case, some credits, for 

example, might be denied. However, we then think also one of the 

behavioral effects would be perhaps more pregnancies are carried 

to term, even if they result in an adoption, for example, and resulting spending on prenatal care, deliveries and the like, sort of increases tax reductions or tax benefits for that medical care. 

That is the basis upon which we reached our conclusion that 

there was a negligible receipts effect. 


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Chairman TIBERI. The gentleman’s time is expired. With that 

note, I would like to ask unanimous consent to submit for the 

record a Congressional Budget Office cost estimate which estimates 

that effects on direct spending would be negligible for each year 

over the 10-year period, the 10-year, window. 

Without objection, the CBO cost estimate will be submitted for 

the record. And I certainly wouldn’t want to speak for the author 

of the bill, but the intent is that millions of taxpayers do not want 

to see their tax dollars go to taxpayer fundings or credit of abortion. With that I recognize the gentleman from Texas, Mr. 

Marchant, for questions. Five minutes. 

[The information follows:] 


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Mr. MARCHANT. Thank you, Mr. Chairman. Mr. Barthold, with 

respect to tax policy, both H.R. 3 and H.R. 358 seem to have in 

common, they are both attempting to prevent the new health care 

exchanges, health care coverage exchanges, provided for in 

ObamaCare to prohibit spending any kind of taxpayer money to 

provide abortions in these government run programs. What would 

be the effect of the provisions on the insurance market if that policy were put in place with these two bills? 

Mr. BARTHOLD. Thank you, Mr. Marchant. Let me try and clarify present law. So from the PPACA, it says that if abortion coverage is offered, and it leaves it to the States to determine what 

sort of policies would be offered through these State exchanges. So 

that if abortion coverage were offered, it must be offered and separately charged, and that no credit could be allocated to that separate charge. It does not, per se, say that there would actually have 

to be a separate insurance policy, just a separate charge. 

H.R. 3, as reported by Judiciary says, basically says unless there 

is a separate plan providing the abortion coverages, then no credit 

for the entire, for the entire plan. H.R. 358 says that if there is a 

plan that offers abortion coverage, the plan provider, the insurance 

company, must offer a plan that is parallel in all other respects, 

but with no abortion coverage, or else the plan would not qualify 

for the credit. 

So you would anticipate in H.R. 358, under that legal structure, 

that you would see these credits used only for plans that offer no 

abortion coverage. And in practice, because of relatively, I will say, 

a modest cost of legal abortions and for the moral hazard aspect 

of who would want to purchase a plan that is essentially only offering abortion coverage, then I think our economic thinking is that 

those plans would not exist under H.R. 358, that you would just 

see within the State exchanges plans offering coverage without 

abortion. The incentives are largely the same than under H.R. 3. 

So that is sort of our current economic read of what the incentives 

would lead to. 

Mr. MARCHANT. So the practical effect would be that most 

State exchanges would offer the plan? 

Mr. BARTHOLD. Well, that is not completely the case, depending who is participating. But remember, what is being denied is 

credit that could be used to purchase the plan. So if there were a 

large enough number of people participating in the State exchanges 

who were not receiving the credits to help subsidize their purchase 

of the plan, it might still be viable for insurance companies to offer 

plans that provided some abortion coverage service. 

Mr. MARCHANT. Thank you. Mr. Chairman, I yield back. 

Chairman TIBERI. Thank you. Thank you, Mr. Marchant. Again, 

welcome to the Subcommittee. With that, I yield 5 minutes to the 

gentlelady from Nevada. 

Ms. BERKLEY. Thank you very much, Mr. Chairman, and thank 

you gentlemen for allowing me to share this occasion with you on 

the panel. I was reading Bloomberg today, and I read this paragraph that I would like to share and put on the record. ‘‘I understand the point they are trying to make through the Tax Code saying abortion is not health care, said Grover Norquist, President of 

Americans for Tax Reform, a Washington-based advocacy group 


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that says 237 House Members have signed its no-tax increase 

pledge who are just concerned that policy, however well intentioned 

or virtuous, not ever mask a net tax increase.’’ 

Now, I know the difference between tax policy and social policy 

when I see one, and this is pure social policy that is going to negatively impact the tax policy of this country. And I cannot understand how people that profess to want smaller government and 

keep government out of the lives of people can be so interested in 

a piece of legislation like this, that I can’t think of anything more 

intrusive or invasive than interfering with a woman’s right to 

choose, and making it even more difficult for a woman to obtain 

what might be a lifesaving or health-restoring medical procedure. 

In my district of Las Vegas, people are hurting. Our economy is 

in a mess. They talk to me about jobs and they talk to me about 

help with their mortgage foreclosures. I can’t remember one person 

in the last year, 2 years, 10 years or 12 years that I have been 

serving in Congress, coming to me and asking me to please make 

it even more difficult for a woman to get the proper health insurance in case she has a need of a life-saving or health-restoring 

abortion procedure. 

Mr. Barthold, let me ask you a couple of questions if I may. I am 

very concerned, as I said, and you have heard me testify how bad 

things are in Las Vegas—my small businesses are hurting, many 

are going under, and they were quite robust businesses less than 

2 years ago. I am concerned about the small businesses in my district and how this might affect them. The health reform law provides for a tax credit for small employers so that they can provide 

health insurance coverage to employees. And may I say for the 

record the first 10 years that I served in Congress, every small 

business person that came into my office begged, begged the United 

States Congress to do something to help them to be able to provide 

health insurance to their employees. How would these credits be affected by H.R. 3? Would it deny credits for employer-sponsored coverage that included abortion services. 

Mr. BARTHOLD. Thank you, Ms. Berkley. As I noted in my testimony, our staff thinks that it is quite clear that H.R. 3, as reported, would say that credit could not be claimed, that the small 

business insurance purchase assistance credit could not be claimed 

for a policy that provided for abortion coverage. 

Ms. BERKLEY. Now, let me ask you, how does JCT expect employers to respond if their credits are restricted? What do you think 

is going to happen? 

Mr. BARTHOLD. Well, our economic view is that employers purchase insurance or other health care benefits as part of compensation that they offer their employees. The effect of the proposal is 

to say that a certain type of benefit could not be provided. However, the credit that is being provided would exceed the value of 

just the incremental cost, so that the overall subsidy in the small 

business case that you raised would be reduced. 

So we might expect to see small business employers reduce their 

employee coverage through the plan—through the credit. Another 

option is to try and purchase smaller or different insurance packages that do not provide abortion services. 


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Ms. BERKLEY. So in other words, and maybe you can answer 

yes or no, employers will seek coverage that does not cover abortion 

services? 

Mr. BARTHOLD. I think that would clearly be the case. 

Ms. BERKLEY. That is extremely disturbing, that is a disturbing 

outcome to me. It seems to me the implication of this bill is that 

if any of my constituents who participate in an employer-provided 

insurance plan that provides abortion coverage would have to 

change their policy, and that would mean we would be putting the 

cost of that transition on small businesses that are already hurting. 

If a company so situated wanted to keep its insurance plan exactly as it is today, would you expect the cost of doing so to rise 

dramatically—to rise under this legislation? 

Chairman TIBERI. The gentlelady’s time has expired, but the 

gentleman may answer the question. 

Ms. BERKLEY. Thank you. 

Mr. BARTHOLD. Thank you, Mr. Chairman. As I noted just a 

moment ago, the credits offered under the small business credit 

helped tip the decision to purchase insurance. Absent that credit, 

obviously, the cost would rise. 

Ms. BERKLEY. Thank you very much. 

Chairman TIBERI. Thank you. The gentleman from Minnesota, 

Mr. Paulsen, is recognized for 5 minutes. 

Mr. PAULSEN. Thank you. Dr. Barthold, in your testimony you 

had indicated that in H.R. 3, it may deny the R&D credit and the 

Indian employment credit to employers in certain situations or circumstances. Can you explain in more detail the fact patterns you 

think could cause employers to lose potentially those credits? 

Mr. BARTHOLD. Certainly, sir. Let me start with the Indian 

employment credit, which I mentioned in my opening summary. 

The Indian employment credit provides a credit that is tied to the 

compensation of qualifying employees, and compensation is defined 

to include their cash wage, plus any health benefits that are provided. 

So in that case, if the employer were providing cash wages and 

purchasing insurance for his or her employees, a credit is provided 

based on the total cost of wage and insurance benefit provided. And 

it seems quite clear on the face of the language in H.R. 3 that that 

would be a credit for the purchase of a policy, which if the policy 

included abortion services, which included abortion services, and so 

the credit, the entire credit would be denied. 

We had—our staff had listed in the ambiguous category the research credit under section 41. We listed it as ambiguous because 

it goes to the ambiguity of, one, what constitutes an abortion for 

purposes of the bill? And two, what constitutes funding of an abortion? And so what we posited as an example in our more detailed 

document that we made available to the Members was that a business might be undertaking research into new contraceptives. Those 

contraceptives, to get them approved, requires clinical trials. 

If the contraceptives’ action were deemed to be an abortion, then 

this could be construed by going, you know, sort of two steps down 

the road of funding of the research to fund the clinical trial was 

funding an abortion and therefore the research credit under section 

41 might be denied to that business. 


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Mr. PAULSEN. Thank you, Mr. Chairman. That is all. 

Chairman TIBERI. I thank the gentleman from Minnesota. The 

gentleman from New York, Mr. Crowley, is recognized for 5 minutes. 

Mr. CROWLEY. I appreciate the Chairman for allowing me to 

participate in today’s Subcommittee hearing. I am very grateful. 

One of the bills under review is H.R. 3. That is right, H.R. number 

3. That means its enactment is a top priority for my colleagues on 

the other side of the aisle, my Republican colleagues. So to put 

things in perspective, the Republican’s first priority, H.R. 1, I am 

not saying this, but outside groups are saying, is cutting 700,000 

American jobs. 

The second priority, H.R. 2, repealing the American people’s access to some kind of health care and the same type of health care 

that Members of Congress receive and adding $230 billion to our 

deficit. 

Now priority number three, placing burdens on small businesses, 

hindering economic growth and job creation and intruding on the 

American people’s ability to make decisions about their health 

without Uncle Sam sitting at their bedside. Tick-tock, tick-tock, I 

guess we will continue to wait for the Republican job agenda. 

In the meantime, let’s take a look at H.R. 3 and how it will hurt 

America’s small businesses. Mr. Barthold, section 303, clause 1 of 

H.R. 3, prohibits tax credits for any health benefits that happen to 

include abortion. In the Joint Committee’s analysis of the tax provisions impacted by H.R. 3, you identified eight tax credits that 

would be affected by this clause alone, is that correct? 

Mr. BARTHOLD. Yes, sir. 

Mr. CROWLEY. Thank you. And one of these tax credits is a 

small business tax credit included in the Affordable Care Act, 

which assists small businesses who provide private health care coverage to their employees, is that correct, sir? 

Mr. BARTHOLD. Yes, sir. That is what Ms. Berkley and I were 

just discussing. 

Mr. CROWLEY. Yes. Thank you, sir. This tax credit is worth 35 

percent of the cost of providing private health insurance coverage, 

and in 2014 that will increase to 50 percent of the cost of providing 

health insurance. It is still early, but we have already seen that 

more small businesses are now providing private health insurance 

to their employees as a result of these tax credits. 

However, if this private health insurance happens to include 

abortion care, as 87 percent of private health plans do, then these 

employers will no longer be eligible for this tax credit under H.R. 

3, is that correct? 

Mr. BARTHOLD. Yes, sir. 

Mr. CROWLEY. Thank you, sir. This means that every small 

businessowner, right down to the mom and pops running a restaurant, will have to sort through pages of fine print just to apply 

for that tax credit. It is not always easy to tell whether a plan excludes or includes abortion procedures. With the time that they 

could be spending growing their business and creating jobs, small 

businessowners will instead spend their time flipping through paperwork and on the phone and on hold with their insurance provider to confirm whether or not that coverage is provided. We have 


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heard a lot of rhetoric lately about eliminating burdens on small 

businesses. You might even recognize some of these same arguments that were used during the debate on 1099 repeal. I supported the repeal of the 1099 requirement because I agree with 

that need to reduce paperwork and regulatory hoops that small 

businessowners have to jump through. What I don’t understand is 

why my Republican colleagues now want to impose an avalanche 

of new paperwork on small businesses. And let me be clear, these 

new onerous rules on employer-provided health care offered by Republican colleagues pertain to private health insurance plans and 

to private sector small businesses. 

We are not talking about a health plan for Federal employees 

that is subsidized by our employers, the American taxpayers. That 

plan already prohibits any form of abortion coverage. So why are 

we adding these new job killing onerous provisions on small businesses, the engine for job creation in America? Why is this bill priority number three? I know you can’t answer that question, Mr. 

Barthold, I am not asking you that, but nor can I, Mr. Barthold. 

Mr. Barthold, I am frustrated as well. I can’t answer that question either. Under this proposal, the IRS will have to divert resources from finding tax cheats to scrutinizing every single small 

business filing to ensure they are not offering health coverage to 

their employees that offer abortion services. 

Mr. Barthold, I know this bill doesn’t bother to get into the details of how this new intrusion into private health care will be enforced, so I am not going to ask you to speculate. But it seems likely to me that H.R. 3 would create a massive and unnecessary burden on small businessowners and will give vast new power to the 

IRS to examine our individual health care decisions. Aside from the 

burden on small businesses and expanding the reach of the IRS, 

H.R. 3 would also mean a brand new tax burden on small businesses. I yield back the balance of my time. 

Chairman TIBERI. I guess the gentleman of New York does not 

have a question for Mr. Barthold. 

Mr. CROWLEY. I asked three or four, and he answered them. 

Thank you, sir. 

Chairman TIBERI. Thank you. The gentleman from Louisiana, 

Dr. Boustany, is recognized for 5 minutes. 

Mr. BOUSTANY. Thank you, Mr. Chairman. When we think 

about burdens on small businesses, I have to harken back to the 

burdens that the new health care law is going to add on small businesses, large businesses and on job creation in this country. I want 

to make a couple points first, and then I may have a question as 

well. To my friend from New York, part of this is protecting the 

jurisdiction of this Committee. The bill, H.R. 3, has tax implications and the bill was referred to our Committee. I am thankful 

that the Speaker and his office saw it fit to bring that bill to our 

Committee so that we can actually look at the accuracy of the language in the bill with regard to the tax provisions. I think that is 

very important. And I think it is important to protect the integrity 

of the jurisdiction of this Committee. 

My friend also referenced the expansion of IRS activities with regard to small businesses and how this bill would affect them. But 

I would also like to express that the IRS’ activity is going to be 


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vastly expanded because of the Health Care Act. And the more we 

grow government intrusion in any form into health care and personal decisions, obviously, the IRS, because there are tax implications, their role will grow. On our side of the aisle we don’t like 

it, but that is where we are today. So I just wanted to respond to 

a couple of those things. 

Dr. Barthold, with regard to FSAs, I don’t think we mentioned 

anything about the impact of this bill on FSAs, and I understand 

that the authors of H.R. 3 intended to prevent tax free distributions from FSAs from being used to pay for abortions. And people 

still could use FSA money for abortions, but they would be taxed 

on it, is that correct? 

Mr. BARTHOLD. Dr. Boustany, there is actually some—this is 

one of the areas we identified as lack of clarity. I mean, we noted 

that the staff’s view is that for Archer MSAs, for example, it is 

quite clear that that is a tax preferred account. And paragraph 3 

of section 303 of H.R. 3, too many 3s there, as reported, would say 

that the taxpayer would have to take an income inclusion for a 

payment from a tax preferred account for abortion—related to abortion services. It is not clear under present law if an FSA would be 

considered to be a tax preferred account under H.R. 3. If however, 

as you note, the intent were that it be treated as a tax preferred 

account, then following the analysis of the Archer MSA, yes, you 

could still pay for abortion services, but then the value of that payment would be included in the taxable income of the recipient. 

Mr. BOUSTANY. And so if H.R. 3, as referred by the Judiciary 

Committee, were to come to us, or would go on and be passed into 

law, I should say, then we would need further IRS guidance on this 

tax implication? 

Mr. BARTHOLD. Well, I would think that the Committee would 

want to tell the IRS—tell the Treasury to tell the IRS what the intent was in terms of the scope of a tax preferred account. Or if left 

to its own, yes, it would fall under IRS guidance as to whether an 

FSA constituted a tax preferred account. 

Mr. BOUSTANY. Thank you, Dr. Barthold. 

Mr. CROWLEY. Would the gentleman yield just for the purpose 

of adding to the record, a statement for the record? Unanimous 

consent, that is all I am asking? 

Mr. BOUSTANY. Yes, that is fine. 

Mr. CROWLEY. Mr. Chairman, I would just ask unanimous consent to include in the record a Bloomberg article that Ms. Berkley 

had mentioned. I am not so sure that you entered that into the 

record. 

Chairman TIBERI. Without objection. 

Mr. CROWLEY. I would like to actually enter that into the 

record. Thank you. 

[The information follows:] 


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Mr. BOUSTANY. Thank you. I yield back, Mr. Chairman. 

Mr. TIBERI. Thank you. I thank the gentleman from Louisiana. 

That concludes today’s hearing. Please be advised that Members 

may submit written questions to the witnesses. Those questions 

and the witness’ answers may be part of the record. 

I thank you, Dr. Barthold, for providing guidance and expertise 

to us in the drafting of the tax provisions of H.R. 3 and H.R. 358. 

As I said earlier, millions of taxpayers do not believe that their 

taxes should go to funding or subsidizing in any way abortions, and 

I hope this hearing helps inform the full Committee, as it may consider the provisions of H.R. 3 and H.R. 358 in future that fall within the Committee’s jurisdiction. 

With that, the hearing is adjourned. 

[Whereupon, at 3:00 p.m., the Subcommittee was adjourned.] 

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dkrause on DSKHT7XVN1PROD with HEARING71160a.070
91 


dkrause on DSKHT7XVN1PROD with HEARING71160a.071
92 

f 


dkrause on DSKHT7XVN1PROD with HEARING71160a.072
93 


dkrause on DSKHT7XVN1PROD with HEARING71160a.073
94 


dkrause on DSKHT7XVN1PROD with HEARING71160a.074
95 


dkrause on DSKHT7XVN1PROD with HEARING71160a.075
96 


dkrause on DSKHT7XVN1PROD with HEARING71160a.076
97 

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dkrause on DSKHT7XVN1PROD with HEARING71160a.077