I 

109TH CONGRESS 

1ST SESSION H. R. 3075 

To amend the Internal Revenue Code of 1986 to make health care coverage 

more accessible and affordable. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 27, 2005 

Mr. PAUL introduced the following bill; which was referred to the Committee 

on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to make 

health care coverage more accessible and affordable. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Comprehensive Health 

5 Care Reform Act of 2005’’. 

6 SEC. 2. REFUNDABLE CREDIT FOR HEALTH CARE COSTS. 

7 (a) IN GENERAL.—Section 35 of the Internal Rev8 enue Code of 1986 (relating to health insurance costs of 

9 eligible individuals) is amended to read as follows: 
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1 ‘‘SEC. 35. HEALTH INSURANCE COSTS. 

2 ‘‘(a) IN GENERAL.—In the case of an individual, 

3 there shall be allowed as a credit against the tax imposed 

4 by subtitle A an amount equal to the amount paid by the 

5 taxpayer for insurance which constitutes medical care for 

6 the taxpayer and the taxpayer’s spouse and dependents. 

7 ‘‘(b) LIMITATION.—The credit allowed by subsection 

8 (a) for the taxable year shall not exceed the sum of— 

9 ‘‘(1) the taxpayer’s net income tax for the tax10 able year, plus 

11 ‘‘(2) the taxpayer’s social security taxes (as de12 fined in section 24(d)) for such taxable year. 

13 For purposes of paragraph (1), the term ‘net income tax’ 

14 means the sum of the regular tax liability plus the tax 

15 imposed by section 55, reduced by the credits allowable 

16 under this part (other than this subpart). 

17 ‘‘(c) DENIAL OF DOUBLE BENEFIT.—Any amount 

18 allowed as a credit under this section shall not be taken 

19 into account in determining the amount of any deduction 

20 under this chapter.’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 162 of such Code is amended by 

23 striking subsection (l). 

24 (2) Chapter 77 of such Code is amended by 

25 striking section 7527 and by striking the item relat-
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1 ing to section 7527 in the table of sections for such 

2 chapter. 

3 (3) Subpart B of part III of subchapter A of 

4 chapter 61 of such Code is amended by striking sec5 tion 6050T and by striking the item relating to sec6 tion 6050T in the table of sections for such chapter. 

7 (4) Section 6103(l) of such Code is amended by 

8 striking paragraph (18). 

9 (5) Section 6103(p) of such Code is amended— 

10 (A) in paragraph (3)(A) by striking ‘‘(17), 

11 or (18)’’ and inserting ‘‘or (17)’’, and 

12 (B) in paragraph (4) by striking ‘‘or (17)’’ 

13 after ‘‘any other person described in subsection 

14 (l)(16)’’ each place it appears. 

15 (6) Section 7213A(a)(1)(B) of such Code is 

16 amended by striking ‘‘subsection (l)(18) or (n) of 

17 section 6103’’ and inserting ‘‘section 6103(n)’’. 

18 (7) Section 6724(d)(1)(B) of such Code is 

19 amended by striking clause (xi). 

20 (8) Section 6724(d)(2) of such Code is amend21 ed by striking subparagraph (BB). 

22 (9) The item relating to section 35 in the table 

23 of sections for subpart C of part IV of subchapter 

24 A of chapter 1 of such Code is amended to read as 

25 follows: 

‘‘Sec. 35 Health insurance costs.’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2005. 

4 SEC. 3. DISPOSITION OF UNUSED HEALTH BENEFITS IN 

5 CAFETERIA PLANS AND FLEXIBLE SPENDING 

6 ARRANGEMENTS. 

7 (a) IN GENERAL.—Section 125 of the Internal Rev8 enue Code of 1986 (relating to cafeteria plans) is amended 

9 by redesignating subsections (h) and (i) as subsections (i) 

10 and (j), respectively, and by inserting after subsection (g) 

11 the following: 

12 ‘‘(h) CARRYFORWARDS OR PAYMENTS OF CERTAIN

13 UNUSED HEALTH BENEFITS.— 

14 ‘‘(1) IN GENERAL.—For purposes of this title, 

15 a plan or other arrangement shall not fail to be 

16 treated as a cafeteria plan solely because qualified 

17 benefits under such plan include a health flexible 

18 spending arrangement under which not more than 

19 $500 of unused health benefits may be— 

20 ‘‘(A) carried forward to the succeeding 

21 plan year of such health flexible spending ar22 rangement, or 

23 ‘‘(B) paid to or on behalf of an employee 

24 as compensation as of the end of such plan year 
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1 or upon the termination of, or failure to re-en2 roll in, such plan or arrangement. 

3 ‘‘(2) DISTRIBUTION OF UNUSED HEALTH BENE4 FITS ON BEHALF OF EMPLOYEE.—For purposes of 

5 paragraph (1)(B), unused health benefits paid as 

6 compensation on behalf of an employee by the em7 ployer shall be— 

8 ‘‘(A) includible in gross income and wages 

9 of the employee, whether or not a deduction for 

10 such payment is allowable under this title to the 

11 employee, and 

12 ‘‘(B) excludable from— 

13 ‘‘(i) gross income to the extent pro14 vided under section 402(e), 457(a) (with 

15 respect to contributions to an eligible de16 ferred compensation plan (as defined in 

17 section 457(b)) of an eligible employer de18 scribed in section 457(e)(1)(A)), or 220, 

19 and 

20 ‘‘(ii) wages to the extent otherwise 

21 provided for amounts so excludable. 

22 ‘‘(3) HEALTH FLEXIBLE SPENDING ARRANGE23 MENT.—For purposes of this subsection, the term 

24 ‘health flexible spending arrangement’ means a flexi25 ble spending arrangement (as defined in section 
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1 106(c)) that is a qualified benefit and only permits 

2 reimbursement for expenses for medical care (as de3 fined in section 213(d)(1)) (without regard to sub4 paragraphs (C) and (D) thereof). 

5 ‘‘(4) UNUSED HEALTH BENEFITS.—For pur6 poses of this subsection, the term ‘unused health 

7 benefits’ means the excess of—

8 ‘‘(A) the maximum amount of reimburse9 ment allowable during a plan year under a 

10 health flexible spending arrangement, over 

11 ‘‘(B) the actual amount of reimbursement 

12 during such year under such arrangement.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 subsection (a) shall apply to taxable years beginning after 

15 December 31, 2005. 

16 SEC. 4. STRENGTHENING HEALTH SAVINGS ACCOUNTS. 

17 (a) REPEAL OF REQUIREMENT FOR COVERAGE

18 UNDER HIGH DEDUCTIBLE HEALTH PLAN.—

19 (1) IN GENERAL.—Section 223 of the Internal 

20 Revenue Code of 1986 (relating to health savings ac21 counts) is amended by striking subsections (a), (b), 

22 and (c) and inserting the following: 

23 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi24 vidual, there shall be allowed as a deduction for the tax25 able year an amount equal to the aggregate amount paid 
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1 in cash during such taxable year by or on behalf of such 

2 individual to a health savings account of such individual. 

3 ‘‘(b) LIMITATIONS.— 

4 ‘‘(1) IN GENERAL.—The amount allowable as a 

5 deduction to a taxpayer under subsection (a) for the 

6 taxable year shall not exceed $8,000 ($16,000 in the 

7 case of a joint return). 

8 ‘‘(2) COORDINATION WITH OTHER CONTRIBU9 TIONS.—The limitation which would (but for this 

10 paragraph) apply under this subsection to a tax11 payer for any taxable year shall be reduced (but not 

12 below zero) by the sum of— 

13 ‘‘(A) the aggregate amount paid for such 

14 taxable year to Archer MSAs of the taxpayer, 

15 and 

16 ‘‘(B) the aggregate amount contributed to 

17 health savings accounts of the taxpayer which is 

18 excludable from the taxpayer’s gross income for 

19 such taxable year under section 106(d) (and 

20 such amount shall not be allowed as a deduc21 tion under subsection (a)). 

22 ‘‘(3) DENIAL OF DEDUCTION TO DEPEND23 ENTS.—No deduction shall be allowed under this 

24 section to any individual with respect to whom a de25 duction under section 151 is allowable to another 
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1 taxpayer for a taxable year beginning in the cal2 endar year in which such individual’s taxable year 

3 begins.’’. 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Section 223 of such Code is amended 

6 by redesignating subsections (d), (e), (f), (g), 

7 and (h) as subsections (c), (d), (e), (f), and (g), 

8 respectively. 

9 (B) Section 223(f) of such Code (as redes10 ignated by subparagraph (A)) is amended to 

11 read as follows: 

12 ‘‘(f) COST-OF-LIVING ADJUSTMENT.— 

13 ‘‘(1) IN GENERAL.—In the case of any taxable 

14 year beginning in a calendar year after 2006, each 

15 dollar amount in subsection (b)(1) shall be increased 

16 by an amount equal to— 

17 ‘‘(A) such dollar amount, multiplied by 

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for the calendar 

20 year in which such taxable year begins, deter21 mined by substituting ‘calendar year 2006’ for 

22 ‘calendar year 1992’ in subparagraph (B) 

23 thereof. 
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1 ‘‘(2) ROUNDING.—If any increase under para2 graph (1) is not a multiple of $50, such increase 

3 shall be rounded to the nearest multiple of $50.’’. 

4 (C) Section 26(b)(2)(S) of such Code is 

5 amended by striking ‘‘section 223(f)(4)’’ and 

6 inserting ‘‘section 223(e)(4)’’. 

7 (D) Each of the following sections of such 

8 Code is amended by striking ‘‘section 223(d)’’ 

9 and inserting ‘‘section 223(c)’’: 

10 (i) Section 35(g)(3). 

11 (ii) Section 106(d)(1). 

12 (iii) Section 220(f)(5)(A). 

13 (iv) Section 848(e)(1)(B)(v). 

14 (v) Section 4973(a)(5). 

15 (vi) Section 4973(g). 

16 (vii) Section 4975(c)(6). 

17 (viii) Section 4975(e)(1)(E). 

18 (ix) Section 6051(a)(12). 

19 (E) Section 4973(g) of such Code is 

20 amended— 

21 (i) in paragraph (1) by striking ‘‘sec22 tion 223(f)(5)’’ and inserting ‘‘section 

23 223(e)(5)’’, 
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1 (ii) in paragraph (2)(A) by striking 

2 ‘‘section 223(f)(2)’’ and inserting ‘‘section 

3 223(e)(2)’’, and 

4 (iii) in the matter following paragraph 

5 (2) by striking ‘‘section 223(f)(3)’’ and in6 serting ‘‘section 223(e)(3)’’. 

7 (F) Section 4975(c)(6) of such Code is 

8 amended by striking ‘‘section 223(e)(2)’’ and 

9 inserting ‘‘section 223(d)(2)’’. 

10 (G) Section 6693(a)(2)(C) of such Code is 

11 amended by striking ‘‘section 223(h)’’ and in12 serting ‘‘section 223(g)’’. 

13 (b) DEDUCTION ALLOWED FOR PREMIUM PAYMENTS

14 FOR HIGH DEDUCTIBLE POLICIES.—Section 223(c)(2)(C) 

15 of such Code (as amended by subsection (a)) is amended 

16 by striking ‘‘or’’ at the end of clause (iii), by striking the 

17 period at the end of clause (iv) and inserting ‘‘, or’’, and 

18 by inserting after clause (iv) the following new clause: 

19 ‘‘(v) a high deductible health plan.’’. 

20 (c) PURCHASE OF MEDIGAP POLICIES PER21 MITTED.—Clause (iv) of section 223(c)(2)(C) of such 

22 Code (as amended by this section) is amended by striking 

23 ‘‘other than’’ and inserting ‘‘, including’’. 
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2005. 

4 SEC. 5. REPEAL OF 7.5 PERCENT THRESHOLD ON DEDUC5 TION FOR MEDICAL EXPENSES. 

6 (a) IN GENERAL.—Subsection (a) of section 213 of 

7 the Internal Revenue Code of 1986 (relating to deduction 

8 for medical expenses) is amended by striking ‘‘to the ex9 tent that such expenses exceed 7.5 percent of adjusted 

10 gross income’’. 

11 (b) EFFECTIVE DATE.—The amendment made by 

12 this section shall apply to taxable years beginning after 

13 December 31, 2005. 

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