112TH CONGRESS 

2D SESSION H. R. 436 

AN ACT 

To amend the Internal Revenue Code of 1986 to repeal 

the excise tax on medical devices. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Health Care Cost Reduction Act of 2012’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Repeal of medical device excise tax. 

Sec. 3. Repeal of disqualification of expenses for over-the-counter drugs under 

certain accounts and arrangements. 

Sec. 4. Taxable distributions of unused balances under health flexible spending 

arrangements. 

Sec. 5. Recapture of overpayments resulting from certain federally-subsidized 

health insurance. 

6 SEC. 2. REPEAL OF MEDICAL DEVICE EXCISE TAX. 

7 (a) IN GENERAL.—Chapter 32 of the Internal Rev8 enue Code of 1986 is amended by striking subchapter E. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Subsection (a) of section 4221 of such Code 

11 is amended by striking the last sentence. 

12 (2) Paragraph (2) of section 6416(b) of such 

13 Code is amended by striking the last sentence. 

14 (c) CLERICAL AMENDMENT.—The table of sub15 chapters for chapter 32 of such Code is amended by strik16 ing the item relating to subchapter E. 

17 SEC. 3. REPEAL OF DISQUALIFICATION OF EXPENSES FOR 

18 OVER-THE-COUNTER DRUGS UNDER CERTAIN 

19 ACCOUNTS AND ARRANGEMENTS. 

20 (a) HSAS.—Subparagraph (A) of section 223(d)(2) 

21 of the Internal Revenue Code of 1986 is amended by strik22 ing the last sentence. 
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1 (b) ARCHER MSAS.—Subparagraph (A) of section 

2 220(d)(2) of such Code is amended by striking the last 

3 sentence. 

4 (c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS

5 AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Sec6 tion 106 of such Code is amended by striking subsection 

7 (f). 

8 (d) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to expenses incurred after Decem10 ber 31, 2012. 

11 SEC. 4. TAXABLE DISTRIBUTIONS OF UNUSED BALANCES 

12 UNDER HEALTH FLEXIBLE SPENDING AR13 RANGEMENTS. 

14 (a) IN GENERAL.—Section 125 of the Internal Rev15 enue Code of 1986 is amended by redesignating sub16 sections (k) and (l) as subsections (l) and (m), respec17 tively, and by inserting after subsection (j) the following 

18 new subsection: 

19 ‘‘(k) TAXABLE DISTRIBUTIONS OF UNUSED BAL20 ANCES UNDER HEALTH FLEXIBLE SPENDING ARRANGE21 MENTS.— 

22 ‘‘(1) IN GENERAL.—For purposes of this sec23 tion and sections 105(b) and 106, a plan or other 

24 arrangement which (but for any qualified distribu25 tion) would be a health flexible spending arrange-
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1 ment shall not fail to be treated as a cafeteria plan 

2 or health flexible spending arrangement (and shall 

3 not fail to be treated as an accident or health plan) 

4 merely because such arrangement provides for quali5 fied distributions. 

6 ‘‘(2) QUALIFIED DISTRIBUTIONS.—For pur7 poses of this subsection, the term ‘qualified distribu8 tion’ means any distribution to an individual under 

9 the arrangement referred to in paragraph (1) with 

10 respect to any plan year if— 

11 ‘‘(A) such distribution is made after the 

12 last date on which requests for reimbursement 

13 under such arrangement for such plan year may 

14 be made and not later than the end of the 7th 

15 month following the close of such plan year, 

16 and 

17 ‘‘(B) such distribution does not exceed the 

18 lesser of— 

19 ‘‘(i) $500, or 

20 ‘‘(ii) the excess of— 

21 ‘‘(I) the salary reduction con22 tributions made under such arrange23 ment for such plan year, over 

24 ‘‘(II) the reimbursements for ex25 penses incurred for medical care made 
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1 under such arrangement for such plan 

2 year. 

3 ‘‘(3) TAX TREATMENT OF QUALIFIED DIS4 TRIBUTIONS.—Qualified distributions shall be in5 cludible in the gross income of the employee in the 

6 taxable year in which distributed and shall be taken 

7 into account as wages or compensation under the 

8 applicable provisions of subtitle C when so distrib9 uted. 

10 ‘‘(4) COORDINATION WITH QUALIFIED RESERV11 IST DISTRIBUTIONS.—A qualified reservist distribu12 tion (as defined in subsection (h)(2)) shall not be 

13 treated as a qualified distribution and shall not be 

14 taken into account in applying the limitation of 

15 paragraph (2)(B)(i).’’. 

16 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

17 section 409A(d) of such Code is amended by striking 

18 ‘‘and’’ at the end of subparagraph (A), by striking the 

19 period at the end of subparagraph (B) and inserting ‘‘, 

20 and’’, and by adding at the end the following new subpara21 graph: 

22 ‘‘(C) a health flexible spending arrange23 ment to which subsection (h) or (k) of section 

24 125 applies.’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to plan years beginning after De3 cember 31, 2012. 

4 SEC. 5. RECAPTURE OF OVERPAYMENTS RESULTING FROM 

5 CERTAIN FEDERALLY-SUBSIDIZED HEALTH 

6 INSURANCE. 

7 (a) IN GENERAL.—Paragraph (2) of section 36B(f) 

8 of the Internal Revenue Code of 1986 is amended by strik9 ing subparagraph (B). 

10 (b) CONFORMING AMENDMENT.—So much of para11 graph (2) of section 36B(f) of such Code, as amended by 

12 subsection (a), as precedes ‘‘advance payments’’ is amend13 ed to read as follows: 

14 ‘‘(2) EXCESS ADVANCE PAYMENTS.—If the’’. 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years ending after De17 cember 31, 2013. 

Passed the House of Representatives June 7, 2012. 

Attest: 

Clerk. 

112TH CONGRESS 

2D SESSION H. R. 436 

AN ACT 

To amend the Internal Revenue Code of 1986 to 

repeal the excise tax on medical devices.