I

107TH CONGRESS

1ST SESSION H. R. 1127

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

amounts paid for health insurance and prescription drug costs of individuals.

IN THE HOUSE OF REPRESENTATIVES

MARCH 20, 2001

Mr. STEARNS 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 allow a

deduction for amounts paid for health insurance and

prescription drug costs of individuals.

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 ‘‘Health Care Tax De5 duction Act of 2001’’.

6 SEC. 2. DEDUCTION FOR HEALTH INSURANCE AND PRE7 SCRIPTION DRUG COSTS OF INDIVIDUALS.

8 (a) IN GENERAL.—Part VII of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 is amended
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1 by redesignating section 222 as section 223 and by insert2 ing after section 221 the following new section:

3 ‘‘SEC. 222. HEALTH INSURANCE AND PRESCRIPTION DRUG

4 COSTS.

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

6 there shall be allowed as a deduction an amount equal to

7 the sum of the amount paid during the taxable year for—

8 ‘‘(1) insurance which constitutes medical care

9 for the taxpayer and the taxpayer’s spouse and de10 pendents, plus

11 ‘‘(2) unreimbursed prescription drug expenses

12 paid by the taxpayer for the taxpayer and the tax13 payer’s spouse and dependents.

14 ‘‘(b) LIMITATIONS AND SPECIAL RULES.—

15 ‘‘(1) EMPLOYER CONTRIBUTIONS TO CAFE16 TERIA PLANS, FLEXIBLE SPENDING ARRANGEMENTS,

17 AND MEDICAL SAVINGS ACCOUNTS.—Employer con18 tributions to a cafeteria plan, a flexible spending or

19 similar arrangement, or a medical savings account

20 which are excluded from gross income under section

21 106 shall be treated for purposes of subsection (a)

22 as paid by the employer.

23 ‘‘(2) DEDUCTION NOT AVAILABLE FOR PAY24 MENT OF ANCILLARY COVERAGE PREMIUMS.—Any
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1 amount paid as a premium for insurance which pro2 vides for—

3 ‘‘(A) coverage for accidents, disability, den4 tal care, vision care, or a specified illness, or

5 ‘‘(B) making payments of a fixed amount

6 per day (or other period) by reason of being

7 hospitalized,

8 shall not be taken into account under subsection (a).

9 ‘‘(3) COORDINATION WITH DEDUCTION FOR

10 HEALTH INSURANCE AND PRESCRIPTION DRUG

11 COSTS OF SELF-EMPLOYED INDIVIDUALS.—The

12 amount taken into account by the taxpayer in com13 puting the deduction under section 162(l) shall not

14 be taken into account under this section.

15 ‘‘(4) COORDINATION WITH MEDICAL EXPENSE

16 DEDUCTION.—The amount taken into account by

17 the taxpayer in computing the deduction under this

18 section shall not be taken into account under section

19 213.

20 ‘‘(c) DEFINITIONS.—For purposes of this section—

21 ‘‘(1) MEDICAL CARE.—

22 ‘‘(A) IN GENERAL.—The term ‘medical

23 care’ has the meaning given such term by sec24 tion 213(d) without regard to—

25 ‘‘(i) paragraph (1)(C) thereof, and
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1 ‘‘(ii) so much of paragraph (1)(D)

2 thereof as relates to qualified long-term

3 care insurance contracts.

4 ‘‘(B) EXCLUSION OF CERTAIN OTHER CON5 TRACTS.—The term ‘medical care’ shall not in6 clude insurance if a substantial portion of its

7 benefits are excepted benefits (as defined in sec8 tion 9832(c)).

9 ‘‘(2) UNREIMBURSED PRESCRIPTION DRUG EX10 PENSES.—The term ‘unreimbursed prescription drug

11 expenses’ means amounts paid or incurred for a pre12 scribed drug (as defined by section 213(d)(3)) the

13 cost of which to the taxpayer is not reimbursed by

14 insurance or otherwise.

15 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

16 such regulations as may be appropriate to carry out this

17 section.’’.

18 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX19 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

20 of section 62 of such Code is amended by inserting after

21 paragraph (17) the following new item:

22 ‘‘(18) HEALTH INSURANCE AND PRESCRIPTION

23 DRUG COSTS.—The deduction allowed by section

24 222.’’.
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1 (c) CLERICAL AMENDMENTS.—The table of sections

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

3 is amended by striking the last item and inserting the fol4 lowing new items:

‘‘Sec. 222. Health insurance and prescription drug costs.

‘‘Sec. 223. Cross reference.’’.

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

6 this section shall apply to taxable years beginning after

7 December 31, 2001.

8 SEC. 3. DEDUCTION FOR 100 PERCENT OF HEALTH INSUR9 ANCE AND PRESCRIPTION DRUG COSTS OF

10 SELF-EMPLOYED INDIVIDUALS.

11 (a) IN GENERAL.—Paragraph (1) of section 162(l)

12 of the Internal Revenue Code of 1986 (relating to general

13 rule for allowance of deduction for health insurance costs

14 of self-employed individuals) is amended to read as fol15 lows:

16 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

17 of an individual who is an employee within the

18 meaning of section 401(c)(1), there shall be allowed

19 as a deduction under this section an amount equal

20 to the sum of—

21 ‘‘(A) 100 percent of the amount paid dur22 ing the taxable year for insurance which con23 stitutes medical care for the taxpayer and the

24 taxpayer’s spouse and dependents, plus
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1 ‘‘(B) unreimbursed prescription drug ex2 penses (within the meaning of section

3 222(c)(2)) paid during the taxable year by the

4 taxpayer for the taxpayer and the taxpayer’s

5 spouse and dependents.’’.

6 (b) CLARIFICATION OF LIMITATIONS ON OTHER COV7 ERAGE.—The first sentence of section 162(l)(2)(B) of

8 such Code is amended to read as follows: ‘‘Paragraph (1)

9 shall not apply to any taxpayer for any calendar month

10 for which the taxpayer participates in any subsidized

11 health plan maintained by any employer (other than an

12 employer described in section 401(c)(4)) of the taxpayer

13 or the spouse of the taxpayer.’’.

14 (c) CLERICAL AMENDMENT.—The heading for sec15 tion 162(l) of such Code is amended by inserting ‘‘AND

16 PRESCRIPTION DRUG’’ after ‘‘INSURANCE’’.

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

18 this section shall apply to taxable years beginning after

19 December 31, 2001.

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