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. 
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 ‘‘Tax Equity for Health 
Plan Beneficiaries Act of 2007’’. 
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SEC. 2. APPLICATION OF ACCIDENT AND HEALTH PLANS 
TO ELIGIBLE BENEFICIARIES. 
(a) EXCLUSION OF CONTRIBUTIONS.—Section 106 of 
the Internal Revenue Code of 1986 (relating to contribu-
tions by employer to accident and health plans) is amend-
ed by adding at the end the following new subsection: 
‘‘(f) COVERAGE PROVIDED
FOR ELIGIBLE BENE-
FICIARIES OF EMPLOYEES.— 
‘‘(1) IN GENERAL.—Subsection (a) shall apply 
with respect to an eligible beneficiary and any quali-
fying child who is a dependent of the eligible bene-
ficiary. 
‘‘(2) QUALIFYING
CHILD; DEPENDENT.—For 
purposes of this subsection— 
‘‘(A) 
QUALIFYING
CHILD.—The 
term 
‘qualifying child’ has the meaning given such 
term by section 152(c). 
‘‘(B) DEPENDENT.—The term ‘dependent’ 
has the meaning given such term by section 
105(b).’’. 
(b) EXCLUSION OF AMOUNTS EXPENDED FOR MED-
ICAL CARE.—The first sentence of section 105(b) of such 
Code (relating to amounts expended for medical care) is 
amended by inserting before the period the following: ‘‘and 
eligible beneficiary and the qualifying children of the eligi-
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ble beneficiary (within the meaning of section 106(f)) with 
respect to the taxpayer’’. 
(c) PAYROLL TAXES.— 
(1) Section 3121(a)(2) of such Code is amend-
ed— 
(A) by inserting ‘‘, or his eligible bene-
ficiary or any qualifying children of the eligible 
beneficiary,’’ after ‘‘his dependents’’ both places 
it appears, 
(B) by inserting ‘‘, and eligible bene-
ficiaries and qualifying children of eligible bene-
ficiaries 
(within 
the 
meaning 
of 
section 
106(f)),’’ after ‘‘their dependents’’ the first 
place it appears, and 
(C) by inserting ‘‘, eligible beneficiaries, 
and qualifying children of eligible beneficiaries’’ 
after ‘‘their dependents’’ the second place it ap-
pears. 
(2) Section 3231(e)(1) of such Code is amend-
ed— 
(A) by inserting ‘‘, or his eligible bene-
ficiary or any qualifying children of his eligible 
beneficiary,’’ after ‘‘his dependents’’, 
(B) by inserting ‘‘, and eligible bene-
ficiaries and qualifying children of eligible bene-
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ficiaries 
(within 
the 
meaning 
of 
section 
106(f)),’’ after ‘‘their dependents’’ the first 
place it appears, and 
(C) by inserting ‘‘, eligible beneficiaries, 
and qualifying children of eligible beneficiaries’’ 
after ‘‘their dependents’’ the second place it ap-
pears. 
(3) Section 3306(b)(2) of such Code is amend-
ed— 
(A) by inserting ‘‘, or his eligible bene-
ficiary or any qualifying children of his eligible 
beneficiary,’’ after ‘‘his dependents’’ both places 
it appears, 
(B) by inserting ‘‘, and eligible bene-
ficiaries and qualifying children of eligible bene-
ficiaries 
(within 
the 
meaning 
of 
section 
106(f)),’’ after ‘‘their dependents’’ the first 
place it appears, and 
(C) by inserting ‘‘, eligible beneficiaries, 
and qualifying children of eligible beneficiaries’’ 
after ‘‘their dependents’’ the second place it ap-
pears. 
(4) Section 3401(a) of such Code is amended 
by striking ‘‘or’’ at the end of paragraph (21), by 
striking the period at the end of paragraph (22) and 
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inserting ‘‘; or’’, and by inserting after paragraph 
(22) the following new paragraph: 
‘‘(23) for any payment made to or for the ben-
efit of an employee or his eligible beneficiary or any 
qualifying children of his eligible beneficiary (within 
the meaning of section 106(f)) if at the time of such 
payment it is reasonable to believe that the employee 
will be able to exclude such payment from income 
under section 106(f) or under section 105 by ref-
erence in section 105(b) to section 106(f);’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 3. EXPANSION OF DEPENDENCY FOR PURPOSES OF 
DEDUCTION FOR HEALTH INSURANCE COSTS 
OF SELF-EMPLOYED INDIVIDUALS. 
(a) IN GENERAL.—Subsection (l) of section 162 of 
the Internal Revenue Code of 1986 (relating to special 
rules for health insurance costs of self-employed individ-
uals) is amended by adding at the end the following new 
paragraph: 
‘‘(6) DEPENDENTS.—For purposes of this sub-
section, the term ‘dependents’ shall include the fol-
lowing with respect to the taxpayer— 
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‘‘(A) any individual who satisfies the re-
quirements 
of 
sections 
152(c)(3)(A) 
and 
152(d)(2)(H) (determined without regard to 
subsections (d)(1)(B) and (d)(1)(D) thereof), 
and 
‘‘(B) one individual who does not satisfy 
the requirements of section 152(c)(3)(A), but 
who satisfies the requirements of section 
152(d)(2)(H) (determined without regard to 
subsections (d)(1)(B) and (d)(1)(C) thereof).’’. 
(b) CONFORMING AMENDMENT.—Subparagraph (B) 
of section 162(l)(2) of such Code is amended by inserting 
‘‘or dependent (as defined in paragraph (1))’’ after 
‘‘spouse’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 4. EXTENSION TO ELIGIBLE BENEFICIARIES OF SICK 
AND 
ACCIDENT 
BENEFITS 
PROVIDED 
TO 
MEMBERS OF A VOLUNTARY EMPLOYEES’ 
BENEFICIARY ASSOCIATION AND THEIR DE-
PENDENTS. 
(a) IN GENERAL.—Section 501(c)(9) of the Internal 
Revenue Code of 1986 (relating to list of exempt organiza-
tions) is amended by adding at the end the following new 
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sentence: ‘‘For purposes of providing for the payment of 
sick and accident benefits to members of such an associa-
tion and their dependents, the term ‘dependents’ shall in-
clude any individual who is an eligible beneficiary, or 
qualified child of an eligible beneficiary, as determined 
under the terms of a medical benefit, health insurance, 
or other program under which members and their depend-
ents are entitled to sick and accident benefits.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 5. FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH 
REIMBURSEMENT ARRANGEMENTS. 
The Secretary of Treasury shall issue guidance of 
general applicability providing that medical expenses that 
otherwise qualify— 
(1) for reimbursement from a flexible spending 
arrangement under regulations in effect on the date 
of the enactment of this Act may be reimbursed 
from an employee’s flexible spending arrangement, 
notwithstanding the fact that such expenses are at-
tributable to an individual who is the employee’s eli-
gible beneficiary under any accident or health plan 
of the employer, and 
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(2) for reimbursement from a health reimburse-
ment arrangement under regulations in effect on the 
date of the enactment of this Act may be reimbursed 
from an employee’s health reimbursement arrange-
ment, notwithstanding the fact that such expenses 
are attributable to an individual who is not a spouse 
or dependent within the meaning of section 152 but 
who is designated by the employee as eligible to have 
his or her expenses reimbursed under the health re-
imbursement arrangement. 
Æ 
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