II 

109TH CONGRESS 

2D SESSION S. 2494 

To amend the Internal Revenue Code of 1986 to allow a deduction for 

the payment of premiums for high deductible health plans, to allow 

a credit for certain employment taxes paid with respect to premiums 

for high deductible health plans and contributions to health savings 

accounts, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 3, 2006 

Mr. BURNS introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to allow a 

deduction for the payment of premiums for high deductible health plans, to allow a credit for certain employment taxes paid with respect to premiums for high deductible health plans and contributions to health savings 

accounts, and for other purposes. 

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

3 SECTION 1. DEDUCTION OF PREMIUMS FOR HIGH DEDUCT4 IBLE HEALTH PLANS. 

5 (a) IN GENERAL.—Part VII of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to 


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1 additional itemized deductions for individuals) is amended 

2 by redesignating section 224 as section 225 and by insert3 ing after section 223 the following new section: 

4 ‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

5 PLANS. 

6 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi7 vidual, there shall be allowed as a deduction for the tax8 able year the aggregate amount paid by such individual 

9 as premiums under a high deductible health plan with re10 spect to months during such year for which such indi11 vidual is an eligible individual with respect to such health 

12 plan. 

13 ‘‘(b) DEFINITIONS.—For purposes of this section— 

14 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

15 individual’ has the meaning given such term by sec16 tion 223(c)(1). 

17 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The 

18 term ‘high deductible health plan’ has the meaning 

19 given such term by section 223(c)(2). 

20 ‘‘(c) SPECIAL RULES.— 

21 ‘‘(1) DEDUCTION LIMITS.— 

22 ‘‘(A) DEDUCTION ALLOWABLE FOR ONLY 1

23 PLAN.—For purposes of this section, in the 

24 case of an individual covered by more than 1 

25 high deductible health plan for any month, the 


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1 individual may only take into account amounts 

2 paid for such month for the plan with the low3 est premium. 

4 ‘‘(B) PLANS COVERING INELIGIBLE INDI5 VIDUALS.—If 2 or more individuals are covered 

6 by a high deductible health plan for any month 

7 but only 1 of such individuals is an eligible indi8 vidual for such month, only 50 percent of the 

9 aggregate amount paid by such eligible indi10 vidual as premiums under the plan with respect 

11 to such month shall be taken into account for 

12 purposes of this section. 

13 ‘‘(2) GROUP HEALTH PLAN COVERAGE.— 

14 ‘‘(A) IN GENERAL.—No deduction shall be 

15 allowed to an individual under subsection (a) 

16 for any amount paid for coverage under a high 

17 deductible health plan for a month if that indi18 vidual participates in any coverage under a 

19 group health plan (within the meaning of sec20 tion 5000 without regard to section 5000(d)). 

21 ‘‘(B) EXCEPTION FOR PLANS ONLY PRO22 VIDING CONTRIBUTIONS TO HEALTH SAVINGS

23 ACCOUNTS.—Subparagraph (A) shall not apply 

24 to an individual if the individual’s only coverage 

25 under a group health plan for a month consists 


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1 of contributions by an employer to a health sav2 ings account with respect to which the indi3 vidual is the account beneficiary. 

4 ‘‘(C) EXCEPTION FOR CERTAIN PER5 MITTED COVERAGE.—Subparagraph (A) shall 

6 not apply to an individual if the individual’s 

7 only coverage under a group health plan for a 

8 month is coverage described in clause (i) or (ii) 

9 of section 223(c)(1)(B). 

10 ‘‘(3) MEDICAL AND HEALTH SAVINGS AC11 COUNTS.—Subsection (a) shall not apply with re12 spect to any amount which is paid or distributed out 

13 of an Archer MSA or a health savings account which 

14 is not included in gross income under section 220(f) 

15 or 223(f), as the case may be. 

16 ‘‘(4) COORDINATION WITH DEDUCTION FOR

17 HEALTH INSURANCE OF SELF-EMPLOYED INDIVID18 UALS.—Any amount taken into account by the tax19 payer in computing the deduction under section 

20 162(l) shall not be taken into account under this 

21 section. 

22 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

23 DEDUCTION.—Any amount taken into account by 

24 the taxpayer in computing the deduction under this 


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1 section shall not be taken into account under section 

2 213.’’. 

3 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI4 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 

5 of section 62 of such Code is amended by inserting before 

6 the last sentence at the end the following new paragraph: 

7 ‘‘(21) PREMIUMS FOR HIGH DEDUCTIBLE

8 HEALTH PLANS.—The deduction allowed by section 

9 224.’’. 

10 (c) COORDINATION WITH SECTION 35 HEALTH IN11 SURANCE COSTS CREDIT.—Section 35(g)(2) of such Code 

12 is amended by striking ‘‘or 213’’ and inserting ‘‘, 213, 

13 or 224’’. 

14 (d) CLERICAL AMENDMENT.—The table of sections 

15 for part VII of subchapter B of chapter 1 of such Code 

16 is amended by redesignating the item relating to section 

17 224 as an item relating to section 225 and by inserting 

18 before such item the following new item: 

‘‘Sec. 224. Premiums for high deductible health plans.’’. 

19 (e) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2006. 


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1 SEC. 2. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID 

2 WITH RESPECT TO PREMIUMS FOR HIGH DE3 DUCTIBLE HEALTH PLANS AND CONTRIBU4 TIONS TO HEALTH SAVINGS ACCOUNTS. 

5 (a) ALLOWANCE OF CREDIT.—Subpart C of part IV 

6 of subchapter A of chapter 1 of the Internal Revenue Code 

7 of 1986 (relating to refundable credits) is amended by re8 designating section 36 as section 37 and by inserting after 

9 section 35 the following new section: 

10 ‘‘SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO 

11 PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

12 PLANS AND CONTRIBUTIONS TO HEALTH 

13 SAVINGS ACCOUNTS. 

14 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in15 dividual, there shall be allowed as a credit against the tax 

16 imposed by this subtitle for the taxable year an amount 

17 equal to the product of— 

18 ‘‘(1) the sum of the rates of tax in effect under 

19 sections 3101(a), 3101(b), 3111(a), and 3111(b) for 

20 the calendar year in which the taxable year begins, 

21 multiplied by 

22 ‘‘(2) the sum of— 

23 ‘‘(A) the aggregate amount paid by such 

24 individual as premiums under a high deductible 

25 health plan which is allowed as a deduction 

26 under section 224 for the taxable year, and 


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1 ‘‘(B) the aggregate amount paid to a 

2 health savings account of such individual which 

3 is allowed as a deduction under section 223 for 

4 the taxable year. 

5 ‘‘(b) CREDIT LIMITED TO CERTAIN EMPLOYMENT

6 TAXES.— 

7 ‘‘(1) IN GENERAL.—The credit allowed under 

8 subsection (a) with respect to any individual for any 

9 taxable year shall not exceed the specified employ10 ment taxes with respect to such individual for such 

11 taxable year. 

12 ‘‘(2) SPECIFIED EMPLOYMENT TAXES.—For 

13 purposes of this subsection, the term ‘specified em14 ployment taxes’ means, with respect to any indi15 vidual for any taxable year, the sum of— 

16 ‘‘(A) the taxes imposed under sections 

17 3101(a), 3101(b), 3111(a), 3111(b), 3201(a), 

18 3211(a), and 3221(a) (taking into account any 

19 adjustments or refunds under section 6413) 

20 with respect to wages and compensation re21 ceived by such individual during the calendar 

22 year in which such taxable year begins, and 

23 ‘‘(B) the taxes imposed under subsections 

24 (a) and (b) of section 1401 with respect to the 


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1 self-employment income of such individual for 

2 such taxable year. 

3 ‘‘(c) SPECIAL RULE FOR EMPLOYMENT COMPENSA4 TION IN EXCESS OF SOCIAL SECURITY CONTRIBUTION

5 BASE.— 

6 ‘‘(1) IN GENERAL.—If the aggregate amount of 

7 employment compensation received by any individual 

8 during the calendar year in which the taxable year 

9 begins exceeds the contribution and benefit base (as 

10 determined under section 230 of the Social Security 

11 Act), the amount of the credit determined under 

12 subsection (a) (determined before application of sub13 section (b)) shall be equal to the sum of— 

14 ‘‘(A) the amount determined under sub15 section (a) by only taking into account so much 

16 of the amount determined under subsection 

17 (a)(2) as does not exceed such excess and by 

18 only taking into account the rates of tax in ef19 fect under section 3101(b) and 3111(b), and 

20 ‘‘(B) the amount determined under sub21 section (a) by only taking into account so much 

22 of the amount determined under subsection 

23 (a)(2) as is not taken into account under sub24 paragraph (A) and by taking into account each 


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1 of the rates of tax referred to in subsection 

2 (a)(1). 

3 ‘‘(2) EMPLOYMENT COMPENSATION.—For pur4 poses of this subsection, the term ‘employment com5 pensation’ means, with respect to any individual for 

6 any taxable year, the sum of— 

7 ‘‘(A) the wages (as defined in section 

8 3121(a)) and compensation (as defined in sec9 tion 3231(e)) received by such individual during 

10 the calendar year in which such taxable year 

11 begins, and 

12 ‘‘(B) the self-employment income (as de13 fined in section 1402(b)) of such individual for 

14 such taxable year.’’. 

15 (b) INCREASE IN ADDITIONAL TAX ON DISTRIBU16 TIONS NOT USED FOR QUALIFIED MEDICAL EX17 PENSES.—Paragraph (4) of section 223(f) of such Code 

18 (relating to additional tax on distributions not used for 

19 qualified medical expenses) is amended to read as follows: 

20 ‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT

21 USED FOR QUALIFIED MEDICAL EXPENSES.— 

22 ‘‘(A) IN GENERAL.—The tax imposed by 

23 this chapter on the account beneficiary for any 

24 taxable year in which there is a payment or dis25 tribution from a health savings account of such 


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1 beneficiary which is includible in gross income 

2 under paragraph (2) shall be increased by 30 

3 percent of the amount which is so includible. 

4 ‘‘(B) EXCEPTION FOR DISABILITY OR

5 DEATH.—In the case of payments or distribu6 tions made after the account beneficiary be7 comes disabled within the meaning of section 

8 72(m)(7) or dies, subparagraph (A) shall be ap9 plied by substituting ‘15 percent’ for ‘30 per10 cent’. 

11 ‘‘(C) EXCEPTION FOR DISTRIBUTIONS

12 AFTER MEDICARE ELIGIBILITY.—In the case of 

13 payments or distributions made after the date 

14 on which the account beneficiary attains the 

15 age specified in section 1811 of the Social Secu16 rity Act, subparagraph (A) shall be applied by 

17 substituting ‘15 percent’ for ‘30 percent’.’’. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) Paragraph (2) of section 1324(b) of title 

20 31, United States Code, is amended by inserting ‘‘or 

21 section 36’’ after ‘‘section 35’’. 

22 (2) The table of sections for subpart C of part 

23 IV of subchapter A of chapter 1 of the Internal Rev24 enue Code of 1986 is amended by striking the item 


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1 relating to section 36 and by inserting after the item 

2 relating to section 35 the following new items: 

‘‘Sec. 36. Employment taxes paid with respect to premiums for high deductible health plans and contributions to health savings 

accounts. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2006. 

Æ 


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