I
105TH CONGRESS
2D SESSION
H. R. 3816
To amend the Internal Revenue Code of 1986 to allow the deduction for
contributions to medical savings accounts, and the deduction for health
insurance costs, to employees of small employers that do not offer any
group health plan to their employees.
IN THE HOUSE OF REPRESENTATIVES
MAY 7, 1998
Mr. LIPINSKI 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 the
deduction for contributions to medical savings accounts,
and the deduction for health insurance costs, to employ-
ees of small employers that do not offer any group health
plan to their employees.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. MSA AND HEALTH INSURANCE DEDUCTIONS
FOR EMPLOYEES OF SMALL EMPLOYERS
WHICH DO NOT OFFER ANY GROUP HEALTH
PLAN TO THEIR EMPLOYEES.
(a) WAIVER OF REQUIREMENT THAT HIGH DEDUCT-
IBLE HEALTH PLAN BE PROVIDED BY EMPLOYER.—Sub-
paragraph (A) of section 220(c)(1) of the Internal Reve-
nue Code of 1986 (defining eligible individual) is amended
by adding at the end the following flush sentence:
‘‘In the case of a small employer which does not
maintain a group health plan for its employees,
clause (iii)(I) shall not apply to employees of
such employer (nor to spouses of such employ-
ees), and the limitations of subsections (i) and
(j) shall not apply to such employees (and
spouses).’’.
(b) DEDUCTION FOR HEALTH INSURANCE COSTS.—
(1) IN GENERAL.—Part VII of subchapter B of
chapter 1 of such Code (relating to additional
itemized deductions) is amended by redesignating
section 222 as section 223 and by inserting after
section 221 the following new section:
‘‘SEC. 222. HEALTH INSURANCE COSTS OF EMPLOYEES OF
CERTAIN SMALL EMPLOYERS.
‘‘(a) IN GENERAL.—In the case of an eligible individ-
ual, there shall be allowed as a deduction an amount equal
to applicable percentage (as defined in section 162(l)) of
the amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, his
spouse, and dependents.
‘‘(b) LIMITATIONS.—
‘‘(1) LIMITATION BASED ON EARNED INCOME
FROM SMALL EMPLOYER.—No deduction shall be al-
lowed under subsection (a) to the extent that the
amount of such deduction exceeds the taxpayer’s
wages, salaries, tips, and other employee compensa-
tion includible in gross income which are attrib-
utable to employment by an employer referred to in
subsection (c) during the period that the individual
is an eligible individual.
‘‘(2) EMPLOYEES WITH SELF-EMPLOYMENT IN-
COME INELIGIBLE.—No deduction shall be allowed
under subsection (a) for an amount paid for insur-
ance referred to in subsection (a) to the extent that
such amount is allocable to coverage for a month for
which the individual has earned income (as defined
in section 401(c)(2)).
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of sub-
section (a), the term ‘eligible individual’ means, with re-
spect to any period, any individual who for such period
is an employee of a small employer (as defined in section
220(c)(4)) which does not maintain a group health plan
for its employees for such period.
‘‘(d) COORDINATION WITH MEDICAL DEDUCTION.—
Any amount paid by a taxpayer for insurance to which
subsection (a) applies shall not be taken into account in
computing the amount allowable to the taxpayer as a de-
duction under section 213(a).’’
(2) DEDUCTION ALLOWED WHETHER OR NOT
TAXPAYER
ITEMIZES
OTHER
DEDUCTIONS.—Sub-
section (a) of section 62 of such Code is amended
by inserting after paragraph (17) the following new
paragraph:
‘‘(18) HEALTH INSURANCE COSTS OF EMPLOY-
EES OF CERTAIN SMALL EMPLOYERS.—The deduc-
tion allowed by section 222.’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 of
such Code is amended by striking the last item and
inserting the following new items:
‘‘Sec. 222. Health insurance costs of employees of certain small
employers.
‘‘Sec. 223. Cross reference.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
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