of section 62 of such Code is amended by inserting before 
the last sentence at the end the following new paragraph: 
‘‘(21) PREMIUMS
FOR
HIGH
DEDUCTIBLE 
HEALTH PLANS.—The deduction allowed by section 
224.’’. 
(c) COORDINATION WITH SECTION 35 HEALTH IN-
SURANCE COSTS CREDIT.—Section 35(g)(2) of such Code 
is amended by striking ‘‘or 213’’ and inserting ‘‘, 213, 
or 224’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by redesignating the item relating to section 
224 as an item relating to section 225 and by inserting 
before such item the following new item: 
‘‘Sec. 224. Premiums for high deductible health plans.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 3. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID 
WITH RESPECT TO PREMIUMS FOR HIGH DE-
DUCTIBLE HEALTH PLANS AND CONTRIBU-
TIONS TO HEALTH SAVINGS ACCOUNTS. 
(a) ALLOWANCE OF CREDIT.—Subpart C of part IV 
of subchapter A of chapter 1 of the Internal Revenue Code 
of 1986 (relating to refundable credits) is amended by re-
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designating section 36 as section 37 and by inserting after 
section 35 the following new section: 
‘‘SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO 
PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 
PLANS AND CONTRIBUTIONS TO HEALTH 
SAVINGS ACCOUNTS. 
‘‘(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 product of— 
‘‘(1) the sum of the rates of tax in effect under 
sections 3101(a), 3101(b), 3111(a), and 3111(b) for 
the calendar year in which the taxable year begins, 
multiplied by 
‘‘(2) the sum of— 
‘‘(A) the aggregate amount paid by such 
individual as premiums under a high deductible 
health plan which is allowed as a deduction 
under section 224 for the taxable year, and 
‘‘(B) the aggregate amount paid to a 
health savings account of such individual which 
is allowed as a deduction under section 223 for 
the taxable year. 
‘‘(b) CREDIT LIMITED TO CERTAIN EMPLOYMENT 
TAXES.— 
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‘‘(1) IN GENERAL.—The credit allowed under 
subsection (a) with respect to any individual for any 
taxable year shall not exceed the specified employ-
ment taxes with respect to such individual for such 
taxable year. 
‘‘(2) SPECIFIED
EMPLOYMENT
TAXES.—For 
purposes of this subsection, the term ‘specified em-
ployment taxes’ means, with respect to any indi-
vidual for any taxable year, the sum of— 
‘‘(A) the taxes imposed under sections 
3101(a), 3101(b), 3111(a), 3111(b), 3201(a), 
3211(a), and 3221(a) (taking into account any 
adjustments or refunds under section 6413) 
with respect to wages and compensation re-
ceived by such individual during the calendar 
year in which such taxable year begins, and 
‘‘(B) the taxes imposed under subsections 
(a) and (b) of section 1401 with respect to the 
self-employment income of such individual for 
such taxable year. 
‘‘(c) SPECIAL RULE FOR EMPLOYMENT COMPENSA-
TION IN EXCESS OF SOCIAL SECURITY CONTRIBUTION 
BASE.— 
‘‘(1) IN GENERAL.—If the aggregate amount of 
employment compensation received by any individual 
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during the calendar year in which the taxable year 
begins exceeds the contribution and benefit base (as 
determined under section 230 of the Social Security 
Act), the amount of the credit determined under 
subsection (a) (determined before application of sub-
section (b)) shall be equal to the sum of— 
‘‘(A) the amount determined under sub-
section (a) by only taking into account so much 
of the amount determined under subsection 
(a)(2) as does not exceed such excess and by 
only taking into account the rates of tax in ef-
fect under section 3101(b) and 3111(b), and 
‘‘(B) the amount determined under sub-
section (a) by only taking into account so much 
of the amount determined under subsection 
(a)(2) as is not taken into account under sub-
paragraph (A) and by taking into account each 
of the rates of tax referred to in subsection 
(a)(1). 
‘‘(2) EMPLOYMENT COMPENSATION.—For pur-
poses of this subsection, the term ‘employment com-
pensation’ means, with respect to any individual for 
any taxable year, the sum of— 
‘‘(A) the wages (as defined in section 
3121(a)) and compensation (as defined in sec-
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tion 3231(e)) received by such individual during 
the calendar year in which such taxable year 
begins, and 
‘‘(B) the self-employment income (as de-
fined in section 1402(b)) of such individual for 
such taxable year.’’. 
(b) INCREASE IN ADDITIONAL TAX ON DISTRIBU-
TIONS NOT USED FOR QUALIFIED MEDICAL EXPENSES.— 
Paragraph (4) of section 223(f) of such Code (relating to 
additional tax on distributions not used for qualified med-
ical expenses) is amended to read as follows: 
‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT 
USED FOR QUALIFIED MEDICAL EXPENSES.— 
‘‘(A) IN GENERAL.—The tax imposed by 
this chapter on the account beneficiary for any 
taxable year in which there is a payment or dis-
tribution from a health savings account of such 
beneficiary which is includible in gross income 
under paragraph (2) shall be increased by 30 
percent of the amount which is so includible. 
‘‘(B) EXCEPTION
FOR
DISABILITY
OR 
DEATH.—In the case of payments or distribu-
tions made after the account beneficiary be-
comes disabled within the meaning of section 
72(m)(7) or dies, subparagraph (A) shall be ap-
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plied by substituting ‘15 percent’ for ‘30 per-
cent’. 
‘‘(C) 
EXCEPTION
FOR
DISTRIBUTIONS 
AFTER MEDICARE ELIGIBILITY.—In the case of 
payments or distributions made after the date 
on which the account beneficiary attains the 
age specified in section 1811 of the Social Secu-
rity Act, subparagraph (A) shall be applied by 
substituting ‘15 percent’ for ‘30 percent’.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting ‘‘or 
section 36’’ after ‘‘section 35’’. 
(2) 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 item 
relating to section 36 and by inserting after the item 
relating to section 35 the following new items: 
‘‘Sec. 36. Employment taxes paid with respect to premiums for high deductible 
health plans and contributions to health savings accounts. 
‘‘Sec. 37. Overpayments of tax.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
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