I 
108TH CONGRESS 
2D SESSION 
H. R. 5355
To amend the Internal Revenue Code of 1986 to provide tax incentives 
to encourage small business health plans. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 9, 2004
Mr. BOSWELL (for himself and Mr. OSBORNE) 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 provide 
tax incentives to encourage small business health plans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Health Care Relief 
Act of 2004’’. 
SEC. 2. FIRST $2,000 OF HEALTH INSURANCE PREMIUMS 
FULLY DEDUCTIBLE. 
(a) IN GENERAL.—Subsection (a) of section 213 of 
the Internal Revenue Code of 1986 (relating to medical, 
dental, etc., expenses) is amended to read as follows:
‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be 
allowed as a deduction the following amounts not com-
pensated for by insurance or otherwise—
‘‘(1) the amount by which the amount of ex-
penses paid during the taxable year (reduced by the 
amount deductible under paragraph (2)) for medical 
care of the taxpayer, the taxpayer’s spouse, and the 
taxpayer’s dependents (as defined in section 152) ex-
ceeds 7.5 percent of adjusted gross income, plus 
‘‘(2) so much of the expenses paid during the 
taxable year for insurance which constitutes medical 
care under subsection (d)(1)(D) (other than for a 
qualified long-term care insurance contract) for such 
taxpayer, spouse, and dependents as does not exceed 
$2,000.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES DEDUCTION.—Section 62(a) of the In-
ternal Revenue Code of 1986 (defining adjusted gross in-
come) is amended by inserting after paragraph (18) the 
following new paragraph: 
‘‘(19) HEALTH
INSURANCE
PREMIUMS.—The 
deduction allowed by section 213(a)(2).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
SEC. 3. CREDIT FOR HEALTH INSURANCE EXPENSES OF 
SMALL BUSINESSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business-related credits) is amended by 
adding at the end the following: 
‘‘SEC. 45G. SMALL BUSINESS HEALTH INSURANCE EX-
PENSES. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of a small employer, the health insurance credit 
determined under this section for the taxable year is an 
amount equal to the applicable percentage of the expenses 
paid by the taxpayer during the taxable year for health 
insurance coverage for such year provided under a new 
health plan for employees of such employer. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
subsection (a), the applicable percentage is—
‘‘(1) in the case of insurance purchased as a 
member of a health benefit purchasing coalition (as 
defined in regulations prescribed by the Secretary), 
40 percent, and 
‘‘(2) in the case of insurance not described in 
paragraph (1), 30 percent. 
‘‘(c) LIMITATIONS.—
‘‘(1) PER
EMPLOYEE
DOLLAR
LIMITATION.—
The amount of expenses taken into account under
subsection (a) with respect to any employee for any 
taxable year shall not exceed—
‘‘(A) in the case of insurance purchased as 
a member of a coalition referred to in sub-
section (b)(1)—
‘‘(i) $800 in the case of self-only cov-
erage, and 
‘‘(ii) $2,000 in the case of family cov-
erage, and 
‘‘(B) in any other case—
‘‘(i) $600 in the case of self-only cov-
erage, and 
‘‘(ii) $1,500 in the case of family cov-
erage. 
In the case of an employee who is covered by a new 
health plan of the employer for only a portion of 
such taxable year, the limitation under the preceding 
sentence shall be an amount which bears the same 
ratio to such limitation (determined without regard 
to this sentence) as such portion bears to the entire 
taxable year. 
‘‘(2) PERIOD OF COVERAGE.—Expenses may be 
taken into account under subsection (a) only with 
respect to coverage for the 4-year period beginning
on the date the employer establishes a new health 
plan. 
‘‘(3) EMPLOYER MUST BEAR 65 PERCENT OF 
COST.—Expenses may be taken into account under 
subsection (a) only if at least 65 percent of the cost 
of the coverage (without regard to this section) is 
borne by the employer. 
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ has the meaning 
given such term by section 9832(b)(1). 
‘‘(2) NEW HEALTH PLAN.—
‘‘(A) IN GENERAL.—The term ‘new health 
plan’ means any arrangement of the employer 
which provides health insurance coverage to em-
ployees if—
‘‘(i) such employer (and any prede-
cessor employer) did not establish or main-
tain such arrangement (or any similar ar-
rangement) at any time during the 2 tax-
able years ending prior to the taxable year 
in which the credit under this section is 
first allowed, and 
‘‘(ii) 
such 
arrangement 
provides 
health insurance coverage to at least 70
2004, each dollar amount contained in subsections 
(c)(1) and (d)(2)(B) shall be increased by an 
amount equal to—
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2003’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$50. 
‘‘(f) TERMINATION.—This section shall not apply to 
expenses paid or incurred by an employer with respect to 
any arrangement established on or after January 1, 
2010.’’. 
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of such Code (relating to current 
year business credit) is amended by striking ‘‘plus’’ at the 
end of paragraph (13), by striking the period at the end 
of paragraph (14) and inserting ‘‘, plus’’, and by adding 
at the end the following:
‘‘(15) in the case of a small employer (as de-
fined in section 45G(d)(3)), the health insurance 
credit determined under section 45G(a).’’. 
(c) NO CARRYBACKS.—Subsection (d) of section 39 
of such Code (relating to carryback and carryforward of 
unused credits) is amended by adding at the end the fol-
lowing: 
‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT 
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is 
attributable to the employee health insurance ex-
penses credit determined under section 45G may be 
carried back to a taxable year beginning before Jan-
uary 1, 2004.’’. 
(d) DENIAL OF DOUBLE BENEFIT.—Section 280C of 
such Code is amended by adding at the end the following 
new subsection: 
‘‘(d) CREDIT FOR SMALL BUSINESS HEALTH INSUR-
ANCE EXPENSES.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the expenses (otherwise al-
lowable as a deduction) taken into account in deter-
mining the credit under section 45G for the taxable 
year which is equal to the amount of the credit de-
termined for such taxable year under section 
45G(a). 
‘‘(2) CONTROLLED
GROUPS.—Persons treated 
as a single employer under subsection (a) or (b) of 
section 52 shall be treated as 1 person for purposes 
of this section.’’. 
(e) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by adding at the end the fol-
lowing:
‘‘Sec. 45G. Small business health insurance expenses.’’.
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2003, for ar-
rangements established after the date of the enactment 
of this Act. 
SEC. 4. REFUNDABLE HEALTH INSURANCE COSTS CREDIT. 
(a) ALLOWANCE OF CREDIT.—
(1) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code 
of 1986 (relating to refundable personal credits) is 
amended by redesignating section 36 as section 37 
and by inserting after section 35 the following new 
section:
‘‘SEC. 36. HEALTH INSURANCE COSTS FOR UNINSURED IN-
DIVIDUALS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this subtitle for the taxable year an amount 
equal to the amount paid by the taxpayer during such tax-
able year for qualified health insurance for the taxpayer 
and the taxpayer’s spouse and dependents. 
‘‘(b) LIMITATION.—The amount allowed as a credit 
under subsection (a) for a taxable year shall not exceed 
$500. 
‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section, the term ‘qualified health insurance’ 
means health insurance coverage (as defined in section 
9832(b)(1)). 
‘‘(d) SPECIAL RULES.—
‘‘(1) COORDINATION WITH MEDICAL EXPENSE 
DEDUCTION.—The amount which would (but for this 
paragraph) be taken into account by the taxpayer 
under section 213 for the taxable year shall be re-
duced by the credit (if any) allowed by this section 
to the taxpayer for such year. 
‘‘(2) COORDINATION
WITH
DEDUCTION
FOR 
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—In the case of a taxpayer who is eligi-
ble to deduct any amount under section 162(l) for
the taxable year, this section shall apply only if the 
taxpayer elects not to claim any amount as a deduc-
tion under such section for such year. 
‘‘(3) COORDINATION WITH DEDUCTION FOR AR-
CHER MSAS AND HSAS.—In the case of a taxpayer 
who is eligible to deduct any amount under section 
220 or 223 for the taxable year, this section shall 
apply only if the taxpayer elects not to claim any 
amount as a deduction under such section for such 
year. 
‘‘(4) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which 
such individual’s taxable year begins. 
‘‘(5) COORDINATION WITH SECTION 35.—If a 
taxpayer is eligible for the credit allowed under this 
section and section 35 for any taxable year, the tax-
payer shall elect which credit is to be allowed. 
‘‘(e) EXPENSES MUST BE SUBSTANTIATED.—A pay-
ment for insurance to which subsection (a) applies may 
be taken into account under this section only if the tax-
payer substantiates such payment in such form as the Sec-
retary may prescribe.
‘‘(f) REGULATIONS.—The Secretary may prescribe 
such regulations as may be necessary to carry out the pur-
poses of this section.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 162(l) of the Internal Revenue Code 
of 1986 is amended by adding at the end the fol-
lowing: 
‘‘(6) 
ELECTION
TO
HAVE
SUBSECTION 
APPLY.—No deduction shall be allowed under para-
graph (1) for a taxable year unless the taxpayer 
elects to have this subsection apply for such year.’’. 
(2) Section 220(b) of such Code is amended by 
adding at the end the following: 
‘‘(8) 
ELECTION
TO
HAVE
SUBSECTION 
APPLY.—No deduction shall be allowed under sub-
section (a) for a taxable year unless the taxpayer 
elects to have this section apply for such year.’’. 
(3) Section 223(b) of such Code is amended by 
adding at the end the following: 
‘‘(8) 
ELECTION
TO
HAVE
SUBSECTION 
APPLY.—No deduction shall be allowed under sub-
section (a) for a taxable year unless the taxpayer 
elects to have this section apply for such year.’’.
(4) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 36 of such Code’’. 
(5) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the last 
item and inserting the following:
‘‘Sec. 36. Health insurance costs for uninsured individuals. 
‘‘Sec. 37. Overpayments of tax.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
Æ