any amount paid by an employer for insur-
ance or annuities, or into a fund to provide 
for any such payment), on account of re-
tirement, or sickness or accident disability, 
or medical and hospitalization expenses in 
connection with sickness or accident dis-
ability, or death; provided, in the case of a 
death benefit, that the employee (I) has 
not the option to receive, instead of provi-
sion for such death benefit, any part of 
such payment or, if such death benefit is 
insured, any part of the premiums (or con-
tributions to premiums) paid by the em-
ployee’s employer, and (II) has not the 
right, under the provisions of the plan or 
system or policy of insurance providing for 
such death benefit, to assign such benefit, 
or to receive a cash consideration in lieu of 
such benefit either upon the employee’s 
withdrawal from the plan or system pro-
viding for such benefit or upon termination 
of such plan or system or policy of insur-
ance or of the employee’s employment with 
such employer;
(ii) the payment by an employer 
(without deductions from the remuneration 
of the employee) of any social-insurance 
taxes or contributions imposed upon an 
employee; or 
(iii) the value of services exchanged 
for other services for which there is no 
payment other than the exchange; and 
(B) all net income from farm, business, 
professional, or other self-employment. 
(2) EMPLOYMENT.—The term ‘‘employment’’ 
means any service of whatever nature performed by 
an employee for the person employing the employee, 
irrespective of the citizenship or residence of either, 
within United States, or on or in connection with an 
American vessel or an American civil aircraft under 
a contract of service which is entered into within the 
United States or during the performance of which 
the vessel or aircraft touches at a port or airport in 
the United States, if the employee is employed on 
and in connection with such vessel or aircraft when 
outside the United States, except— 
(A) service on active duty in the Armed 
Forces of the United States;
(B) service performed in the employ of a 
State or any political subdivision thereof, or any 
instrumentality of any one or more of the fore-
going which is wholly owned by one or more 
States or political subdivisions; 
(C) casual labor not in the course of the 
employer’s trade or business; 
(D) service performed by an employee on 
or in connection with a vessel not an American 
vessel, or an aircraft not an American aircraft, 
if the employee is employed on and in connec-
tion with such vessel or aircraft when outside 
the United States; 
(E) service performed by a duly ordained 
or duly commissioned or licensed minister of 
any church in the regular exercise of the min-
ister’s ministry and service performed by a reg-
ular member of a religious order in the exercise 
of duties required by such order; 
(F) service performed by an individual as 
an employee or employee representative as de-
fined in section 1 of the Railroad Retirement 
Act of 1937 or section 1 of the Railroad Retire-
ment Act of 1974;
(G) service performance in any calendar 
quarter in the employ of any organization ex-
empt from income tax under section 501 of the 
Internal Revenue Code of 1986 if— 
(i) the remuneration for such services 
does not exceed $150; or 
(ii) such service is in connection with 
the collection of dues or premiums for a 
fraternal beneficiary society, order, or as-
sociation, and is performed away from the 
home office or is ritualistic service in con-
nection with any such society, order, or as-
sociation; or 
(iii) such service is performed by a 
student who is enrolled and is regularly at-
tending classes at a school, college, or uni-
versity; 
(H) service performed in the employ of a 
foreign government (including service as a con-
sular or other officer or employee or a nondiplo-
matic representative); 
(I) service performed in the employ of an 
instrumentality wholly owned by a foreign gov-
ernment, if—
(i) the service is of a character similar 
to that performed in foreign countries by 
employees of the United States Govern-
ment or of an instrumentality thereof; and 
(ii) the Secretary of State shall certify 
to the Secretary of Health and Human 
Services that the foreign government, with 
respect to whose instrumentality and em-
ployees thereof exemption is claimed, 
grants an equivalent exemption with re-
spect to similar service performed in the 
foreign country by employees of the United 
States Government and of instrumental-
ities thereof; and 
(J) service performed in the employ of an 
international organization entitled to enjoy 
privileges, exemptions, and immunities as an 
international organization under the Inter-
national Organizations Immunities Act. 
(3) In any case in which an individual has re-
ceived wages equal to the applicable contribution and 
benefit base (as determined under section 230 of the 
Social Security Act), in a calendar year, not less 
than $500 of such wages shall be deemed, for the 
purpose of section 104(a), to have been received by
the individual in the quarter during which the first 
of such wages were in fact received by the individual 
and in each quarter of such calendar year thereafter. 
(4) BENEFIT YEAR.—The term ‘‘benefit year’’ 
means a period commencing on July 1 of any year 
and ending on June 30 of the succeeding year. 
(5) QUARTER.—The term ‘‘quarter’’ and the 
term ‘‘calendar quarter’’ mean a period of three cal-
endar months ending on March 31, June 30, Sep-
tember 30, or December 31. 
(6) EMPLOYEE.—The term ‘‘employee’’ includes 
(in addition to any individual who is a servant under 
the law of master and servant) any individual who 
performs service, of whatever nature, for a person, 
unless the service is performed by the individual in 
pursuit of the individual’s own independently estab-
lished business. The term ‘‘employee’’ also includes 
an officer of a corporation. 
(7) AMERICAN VESSEL.—The term ‘‘American 
vessel’’ means any vessel documented or numbered 
under the laws of the United States; and includes 
any vessel which is neither documented nor num-
bered under the laws of any foreign country, if its 
crew is employed solely by one or more citizens or 
residents of the United States or corporations orga-
nized under the laws of the United States or of any 
State. 
(8) AMERICAN
AIRCRAFT.—The term ‘‘Amer-
ican aircraft’’ means an aircraft registered under the 
laws of the United States. 
(9) STATE.—The term ‘‘State’’ includes the 
District of Columbia. 
(10) UNITED
STATES.—The term ‘‘United 
States’’, when used in a geographic sense, means the 
several States, as defined in paragraph (9). 
(11) DEPENDENT.—The term ‘‘dependent’’ 
means— 
(A) an unmarried child (including a step-
child, adopted, or foster child) of an individual, 
who is under the age of 18, or who is under a 
total disability which has continued for a period 
of not less than six consecutive calendar months 
and is living with such individual or receiving 
regular support from the individual; 
(B) a wife of an individual living with such 
individual or receiving regular support from the 
individual; 
(C) a husband who is under a total dis-
ability which has continued for a period of not 
less than six consecutive calendar months, and
is living with or receiving regular and substan-
tial support from such individual; and 
(D) a parent who is living with or receiving 
regular and substantial support from such indi-
vidual. 
(12) PERSON.—The term ‘‘person’’ means an 
individual, a trust or estate, a partnership, a cor-
poration, an association, a consumer cooperative, or 
other organization. 
SEC. 902. EFFECTIVE DATE. 
The effective date of this Act shall be the date of its 
enactment, but personal health services shall first become 
available as benefits in accordance with this Act on Octo-
ber 1, 2006. 
TITLE 
X—VALUE 
ADDED 
TAX 
AND 
NATIONAL 
HEALTH 
CARE TRUST FUND 
SEC. 1001. IMPOSITION OF VALUE ADDED TAX. 
(a) IN GENERAL.—Subtitle D of the Internal Rev-
enue Code of 1986 (relating to miscellaneous excise taxes) 
is amended by inserting before chapter 31 the following 
new chapter:
‘‘CHAPTER 30—VALUE ADDED TAX 
‘‘SUBCHAPTER A. IMPOSITION OF TAX 
‘‘SUBCHAPTER B. TAXABLE TRANSACTION 
‘‘SUBCHAPTER C. TAXABLE AMOUNT; RATE OF TAX FOR CERTAIN 
TRANSACTIONS; CREDIT AGAINST TAX 
‘‘SUBCHAPTER D. ADMINISTRATION 
‘‘SUBCHAPTER E. DEFINITIONS AND SPECIAL RULES; TREATMENT OF CERTAIN 
TRANSACTIONS 
‘‘Subchapter A—Imposition of Tax 
‘‘Sec. 3901. Imposition of tax. 
‘‘SEC. 3901. IMPOSITION OF TAX. 
‘‘(a) GENERAL RULE.—A tax is hereby imposed on 
each taxable transaction. 
‘‘(b) AMOUNT OF TAX.—Except as otherwise pro-
vided in this chapter, the amount of the tax shall be 5 
percent of the taxable amount. 
‘‘Subchapter B—Taxable Transaction 
‘‘Sec. 3903. Taxable transaction. 
‘‘Sec. 3904. Commercial-type transaction. 
‘‘Sec. 3905. Taxable person. 
‘‘Sec. 3906. Transactions in the United States. 
‘‘Sec. 3907. Rules relating to other terms used in section 3903. 
‘‘SEC. 3903. TAXABLE TRANSACTION. 
‘‘For purposes of this chapter, the term ‘taxable 
transaction’ means— 
‘‘(1) the sale of property in the United States, 
‘‘(2) the performance of services in the United 
States, and 
‘‘(3) the importing of property into the United 
States,
by a taxable person in a commercial-type transaction. 
‘‘SEC. 3904. COMMERCIAL-TYPE TRANSACTION. 
‘‘(a) GENERAL RULE.—For purposes of this chapter, 
the term ‘commercial-type transaction’ means a trans-
action engaged in by— 
‘‘(1) a corporation, or 
‘‘(2) any person (other than a corporation) in 
connection with a business. 
‘‘(b) SALES AND LEASES OF REAL PROPERTY; IM-
PORTS.—For purposes of this chapter— 
‘‘(1) IN GENERAL.—The term ‘commercial-type 
transaction’ includes— 
‘‘(A) any sale or leasing of real property, 
and 
‘‘(B) any importing of property, 
whether or not such transaction is described in sub-
section (a). 
‘‘(2) CERTAIN IMPORTED ARTICLES.—Notwith-
standing paragraph (1)(B), the importing of an arti-
cle which is free of duty under part 2 of schedule 
8 of the Tariff Schedules of the United States shall 
not be treated as a commercial-type transaction un-
less such transaction is described in subsection (a).