Title II — Taxation reform

“224. Health insurance premiums

“(a) In general—There shall be allowed as a deduction the amount of premiums paid by the taxpayer for health insurance coverage (as defined in section 9832) of the taxpayer, the taxpayer's spouse, or any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of the taxpayer.

“(b) Coordination provisions

“(1) Premium assistance credit—Subsection (a) shall not apply with respect to so much of any premium for which a credit has been allowed under section 36B.

“(2) Archer MSAs and HSAs—Subsection (a) shall not apply with respect to any amount which is treated as a qualified medical expense under either section 220(d) or 223(c).

“(3) Deduction for medical expenses—For purposes of determining the amount of the deduction under section 213, any amount for which a deduction is allowed under subsection (a) shall not be treated as an expense paid for medical care.”

“(22) Health insurance premiums—The deduction allowed by section 224.”

“36C. Refund of payroll taxes attributable to health insurance premiums

“(a) Allowance of credit—There shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the applicable percentage of the premiums paid by the taxpayer for health insurance coverage (as defined in section 9832) of the taxpayer, the taxpayer's spouse, or any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of the taxpayer.

“(b) Applicable percentage—For purposes of subsection (a), the term applicable percentage means the percentage equal to the sum of the rates of in effect under subsections (a) and (b) of section 3101.

“(c) Limitation—The amount of the credit allowed under subsection (a) shall not exceed the excess of—

“(1) the social security taxes (as defined in section 24(d)) of the taxpayer for the taxable year, reduced by

“(2) the sum of the credits allowed under section 24(d) and 32 for the taxable year.”

“(b) Denial of deduction to dependents—No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.”

“(f) Reimbursements for all medicines and drugs—For purposes of this section and section 105, reimbursement for expenses incurred for any prescription or over-the-counter medicine or drug shall be treated as a reimbursement for medical expenses.”

“(B) Certain medical expenses incurred before establishment of account treated as qualified—An expense shall not fail to be treated as a qualified medical expense solely because such expense was incurred before the establishment of the health savings account if such expense was incurred—

“(i) during either—

“(I) the taxable year in which the health savings account was established, or

“(II) the preceding taxable year, in the case of a health savings account established after the taxable year in which such expense was incurred but before the time prescribed by law for filing the return for such taxable year (not including extensions thereof), and

“(ii) for medical care which (but for the fact that it was incurred before the establishment of the account) otherwise meets the requirements of the preceding subparagraphs.”

“(D) Exception for administrative errors corrected before due date of return—Subparagraph (A) shall not apply if any payment or distribution is made to correct an administrative, clerical, or payroll contribution error and if—

“(i) such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual's return for such taxable year, and

“(ii) such distribution is accompanied by the amount of net income attributable to such contribution.”

“25E. Contributions to a health savings account

“(a) Allowance of credit—In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to so much of the qualified HSA contributions of the individual as does not exceed $5,000 ($10,000 in the case of a joint return).

“(b) Qualified HSA contribution

“(1) In general—For purposes of this section, the term qualified HSA contribution means an amount paid in cash during the taxable year by or on behalf of an individual to a health savings account (as defined in section 223(c)) of such individual.

“(2) Exception for amounts not used for qualified medical expenses—The amount taken into account as qualified HSA contributions of the individual under paragraph (1) for a taxable year shall be reduced by the amount of any distribution from such health savings account during such taxable year which is not used exclusively to pay the qualified medical expenses of the account beneficiary (within the meaning of section 223(e)(2)).

“(c) Coordination with deduction—For coordination rule, see section 223(b)(1).”

“(b) Special rules

“(1) Coordination with credit—The amount taken into account under subsection (a) with respect to any individual shall be reduced (but not below zero) by the amount of any credit allowed under section 25E for qualified HSA contributions with respect to the individual.

“(2) Denial of deduction to dependents—No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.”

“(r) Treatment of health savings accounts—For purposes of this section, any health savings account (as described in section 223 of the Internal Revenue Code of 1986) shall be treated in the same manner as an individual retirement account described in section 408 of such Code.”

“(12) Exercise equipment and physical fitness activity

“(A) In general—The term medical care shall include amounts paid—

“(i) for equipment for use in a program (including a self-directed program) of physical exercise or physical activity,

“(ii) to participate, or receive instruction, in a program of physical exercise, nutrition, or health coaching (including a self-directed program), and

“(iii) for membership at a fitness facility.

“(B) Overall dollar limitation

“(i) In general—Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

“(ii) Exception—Clause (i) shall not apply for purposes of determining whether expenses reimbursed through a health flexible spending arrangement subject to section 125(i)(1) are incurred for medical care.

“(C) Limitations related to sports and fitness equipment—Amounts paid for equipment described in subparagraph (A)(i) shall be treated as medical care only—

“(i) if such equipment is utilized exclusively for participation in fitness, exercise, sport, or other physical activity programs,

“(ii) if such equipment is not apparel or footwear, and

“(iii) in the case of any item of sports equipment (other than exercise equipment), to the extent the amount paid for such item does not exceed $250.

“(D) Fitness facility—For purposes of subparagraph (A)(iii), the term fitness facility means a facility—

“(i) which provides instruction in a program of physical exercise, offers facilities for the preservation, maintenance, encouragement, or development of physical fitness, or serves as the site of such a program of a State or local government,

“(ii) which is not a private club owned and operated by its members,

“(iii) which does not offer golf, hunting, sailing, or riding facilities,

“(iv) whose health or fitness facility is not incidental to its overall function and purpose, and

“(v) which is fully compliant with the State of jurisdiction and Federal anti-discrimination laws.”

“(13) Nutritional and dietary supplements

“(A) In general—The term medical care shall include amounts paid to purchase herbs, vitamins, minerals, homeopathic remedies, meal replacement products, and other dietary and nutritional supplements.

“(B) Limitation—Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

“(C) Meal replacement product—For purposes of this paragraph, the term meal replacement product means any product that—

“(i) is permitted to bear labeling making a claim described in section 403(r)(3) of the Federal Food, Drug, and Cosmetic Act, and

“(ii) is permitted to claim under such section that such product is low in fat and is a good source of protein, fiber, and multiple essential vitamins and minerals.

“(D) Exception—Subparagraph (B) shall not apply for purposes of determining whether expenses reimbursed through a health flexible spending arrangement subject to section 125(i)(1) are incurred for medical care.”

“(14) Periodic provider fees—The term medical care shall include—

“(A) periodic fees paid to a primary care physician for a defined set of medical services or the right to receive medical services on an as-needed basis, and

“(B) pre-paid primary care services designed to screen for, diagnose, cure, mitigate, treat, or prevent disease and promote wellness.”

“(k) Special rule with respect to health flexible spending arrangements—For purposes of applying this section with respect to any health flexible spending arrangement, amounts described in section 213(d)(14) shall not be considered insurance.”

“(15) Treatment of capitated primary care payments—Capitated primary care payments shall be treated as amounts paid for medical care.”

“199A. Physician charity and uncompensated care

“(a) In general—In the case of a physician, there shall be allowed as a deduction for the taxable year an amount equal to the sum of—

“(1) the amount such physician would have otherwise charged for qualified charity care provided by such physician during such taxable year, and

“(2) the amount of any debt owed to such physician for physicians' services which becomes worthless during such taxable year.

“(b) Definitions—For purposes of this section—

“(1) Physician—The term “physician” has the meaning given to such term in section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).

“(2) Qualified charity care—The term “qualified charity care” means physicians’ services provided on a volunteer or pro bono basis (not including any services for which an amount was charged but not paid).

“(3) Physicians' services—The term physicians' services has the meaning given such term in section 1861(q) of the Social Security Act (42 U.S.C. 1395x(q)).

“(c) Limitations

“(1) Service charge limitation—The amount determined under subsection (a) with respect to any services or debt—

“(A) shall be reduced by any reimbursement received by the physician for such services or debt, and

“(B) shall not exceed the economic index referred to in the fourth sentence of section 1842(b)(3) of the Social Security Act (42 U.S.C. 1395u(b)(3)) applicable to the qualified charity care provided or the services provided with respect to which the debt relates.

“(2) Overall limitation—The amount allowed as a deduction under subsection (a) for any taxable year shall not exceed an amount equal to 10 percent of the gross income of the taxpayer for the taxable year derived from the taxpayer’s provision of physicians’ services.

“(d) Denial of double benefit—No deduction shall be allowed under section 166 or any other provision of this title for the amount of any bad debt taken into account under subsection (a)(2) (as reduced, if applicable, under subsection (c)).”