I 

110TH CONGRESS 

1ST SESSION H. R. 1820 

To amend the Internal Revenue Code of 1986 to extend the exclusion from 

gross income for employer-provided health coverage for employees’ 

spouses and dependent children to coverage provided to other eligible 

designated beneficiaries of employees. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 29, 2007 

Mr. MCDERMOTT 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 extend 

the exclusion from gross income for employer-provided 

health coverage for employees’ spouses and dependent 

children to coverage provided to other eligible designated 

beneficiaries of employees. 

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 ‘‘Tax Equity for Health 

5 Plan Beneficiaries Act of 2007’’. 


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1 SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS 

2 TO ELIGIBLE BENEFICIARIES. 

3 (a) EXCLUSION OF CONTRIBUTIONS.—Section 106 of 

4 the Internal Revenue Code of 1986 (relating to contribu5 tions by employer to accident and health plans) is amend6 ed by adding at the end the following new subsection: 

7 ‘‘(f) COVERAGE PROVIDED FOR ELIGIBLE BENE8 FICIARIES OF EMPLOYEES.— 

9 ‘‘(1) IN GENERAL.—Subsection (a) shall apply 

10 with respect to an eligible beneficiary and any quali11 fying child who is a dependent of the eligible bene12 ficiary. 

13 ‘‘(2) QUALIFYING CHILD; DEPENDENT.—For 

14 purposes of this subsection— 

15 ‘‘(A) QUALIFYING CHILD.—The term 

16 ‘qualifying child’ has the meaning given such 

17 term by section 152(c). 

18 ‘‘(B) DEPENDENT.—The term ‘dependent’ 

19 has the meaning given such term by section 

20 105(b).’’. 

21 (b) EXCLUSION OF AMOUNTS EXPENDED FOR MED22 ICAL CARE.—The first sentence of section 105(b) of such 

23 Code (relating to amounts expended for medical care) is 

24 amended by inserting before the period the following: ‘‘and 

25 eligible beneficiary and the qualifying children of the eligiVerDate Aug 31 2005 21:46 Apr 16, 2007 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1820.IH H1820

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1 ble beneficiary (within the meaning of section 106(f)) with 

2 respect to the taxpayer’’. 

3 (c) PAYROLL TAXES.— 

4 (1) Section 3121(a)(2) of such Code is amend5 ed— 

6 (A) by inserting ‘‘, or his eligible bene7 ficiary or any qualifying children of the eligible 

8 beneficiary,’’ after ‘‘his dependents’’ both places 

9 it appears, 

10 (B) by inserting ‘‘, and eligible bene11 ficiaries and qualifying children of eligible bene12 ficiaries (within the meaning of section 

13 106(f)),’’ after ‘‘their dependents’’ the first 

14 place it appears, and 

15 (C) by inserting ‘‘, eligible beneficiaries, 

16 and qualifying children of eligible beneficiaries’’ 

17 after ‘‘their dependents’’ the second place it ap18 pears. 

19 (2) Section 3231(e)(1) of such Code is amend20 ed— 

21 (A) by inserting ‘‘, or his eligible bene22 ficiary or any qualifying children of his eligible 

23 beneficiary,’’ after ‘‘his dependents’’, 

24 (B) by inserting ‘‘, and eligible bene25 ficiaries and qualifying children of eligible beneVerDate Aug 31 2005 21:46 Apr 16, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1820.IH H1820

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1 ficiaries (within the meaning of section 

2 106(f)),’’ after ‘‘their dependents’’ the first 

3 place it appears, and 

4 (C) by inserting ‘‘, eligible beneficiaries, 

5 and qualifying children of eligible beneficiaries’’ 

6 after ‘‘their dependents’’ the second place it ap7 pears. 

8 (3) Section 3306(b)(2) of such Code is amend9 ed— 

10 (A) by inserting ‘‘, or his eligible bene11 ficiary or any qualifying children of his eligible 

12 beneficiary,’’ after ‘‘his dependents’’ both places 

13 it appears, 

14 (B) by inserting ‘‘, and eligible bene15 ficiaries and qualifying children of eligible bene16 ficiaries (within the meaning of section 

17 106(f)),’’ after ‘‘their dependents’’ the first 

18 place it appears, and 

19 (C) by inserting ‘‘, eligible beneficiaries, 

20 and qualifying children of eligible beneficiaries’’ 

21 after ‘‘their dependents’’ the second place it ap22 pears. 

23 (4) Section 3401(a) of such Code is amended 

24 by striking ‘‘or’’ at the end of paragraph (21), by 

25 striking the period at the end of paragraph (22) and 


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1 inserting ‘‘; or’’, and by inserting after paragraph 

2 (22) the following new paragraph: 

3 ‘‘(23) for any payment made to or for the ben4 efit of an employee or his eligible beneficiary or any 

5 qualifying children of his eligible beneficiary (within 

6 the meaning of section 106(f)) if at the time of such 

7 payment it is reasonable to believe that the employee 

8 will be able to exclude such payment from income 

9 under section 106(f) or under section 105 by ref10 erence in section 105(b) to section 106(f);’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2006. 

14 SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF 

15 DEDUCTION FOR HEALTH INSURANCE COSTS 

16 OF SELF-EMPLOYED INDIVIDUALS. 

17 (a) IN GENERAL.—Subsection (l) of section 162 of 

18 the Internal Revenue Code of 1986 (relating to special 

19 rules for health insurance costs of self-employed individ20 uals) is amended by adding at the end the following new 

21 paragraph: 

22 ‘‘(6) DEPENDENTS.—For purposes of this sub23 section, the term ‘dependents’ shall include the fol24 lowing with respect to the taxpayer— 


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1 ‘‘(A) any individual who satisfies the re2 quirements of sections 152(c)(3)(A) and 

3 152(d)(2)(H) (determined without regard to 

4 subsections (d)(1)(B) and (d)(1)(D) thereof), 

5 and 

6 ‘‘(B) one individual who does not satisfy 

7 the requirements of section 152(c)(3)(A), but 

8 who satisfies the requirements of section 

9 152(d)(2)(H) (determined without regard to 

10 subsections (d)(1)(B) and (d)(1)(C) thereof).’’. 

11 (b) CONFORMING AMENDMENT.—Subparagraph (B) 

12 of section 162(l)(2) of such Code is amended by inserting 

13 ‘‘or dependent (as defined in paragraph (1))’’ after 

14 ‘‘spouse’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2006. 

18 SEC. 4. EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK 

19 AND ACCIDENT BENEFITS PROVIDED TO 

20 MEMBERS OF A VOLUNTARY EMPLOYEES’ 

21 BENEFICIARY ASSOCIATION AND THEIR DE22 PENDENTS. 

23 (a) IN GENERAL.—Section 501(c)(9) of the Internal 

24 Revenue Code of 1986 (relating to list of exempt organiza25 tions) is amended by adding at the end the following new 


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1 sentence: ‘‘For purposes of providing for the payment of 

2 sick and accident benefits to members of such an associa3 tion and their dependents, the term ‘dependents’ shall in4 clude any individual who is an eligible beneficiary, or 

5 qualified child of an eligible beneficiary, as determined 

6 under the terms of a medical benefit, health insurance, 

7 or other program under which members and their depend8 ents are entitled to sick and accident benefits.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2006. 

12 SEC. 5. FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH 

13 REIMBURSEMENT ARRANGEMENTS. 

14 The Secretary of Treasury shall issue guidance of 

15 general applicability providing that medical expenses that 

16 otherwise qualify— 

17 (1) for reimbursement from a flexible spending 

18 arrangement under regulations in effect on the date 

19 of the enactment of this Act may be reimbursed 

20 from an employee’s flexible spending arrangement, 

21 notwithstanding the fact that such expenses are at22 tributable to an individual who is the employee’s eli23 gible beneficiary under any accident or health plan 

24 of the employer, and 


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1 (2) for reimbursement from a health reimburse2 ment arrangement under regulations in effect on the 

3 date of the enactment of this Act may be reimbursed 

4 from an employee’s health reimbursement arrange5 ment, notwithstanding the fact that such expenses 

6 are attributable to an individual who is not a spouse 

7 or dependent within the meaning of section 152 but 

8 who is designated by the employee as eligible to have 

9 his or her expenses reimbursed under the health re10 imbursement arrangement. 

Æ 


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