[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 677 Introduced in House (IH)]
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118th CONGRESS
1st Session
H. R. 677
To amend the Internal Revenue Code of 1986 to make improvements to
Health Savings Accounts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 31, 2023
Mr. Rosendale 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 make improvements to
Health Savings Accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Health Freedom and Flexibility
Act''.
SEC. 2. REPEAL OF REQUIREMENT TO BE ENROLLED IN HEALTH PLAN.
(a) In General.--Subsection (a) of section 223 of the Internal
Revenue Code of 1986 is amended to read as follows:
``(a) Deduction Allowed.--In the case of an individual, there shall
be allowed as a deduction for the taxable year an amount equal to the
aggregate amount paid in cash during such taxable year by or on behalf
of such individual to a health savings account of such individual.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending after the date of the enactment of this Act.
SEC. 3. REPEAL OF LIMITATIONS; RETENTION OF DENIAL OF DEDUCTION TO
DEPENDENTS.
(a) In General.--Subsection (b) of section 223 of the Internal
Revenue Code of 1986 is amended to read as follows:
``(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.''.
(b) Conforming Amendment.--Subsection (f) of section 223 of such
Code is amended by striking paragraph (3) and by redesignating
paragraphs (4) through (8) as paragraphs (3) through (7), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 4. REPEAL OF RULES RELATING TO ELIGIBLE INDIVIDUAL; HIGH
DEDUCTIBLE HEALTH PLAN.
(a) In General.--Section 223 of the Internal Revenue Code of 1986
is amended by striking subsections (c) and (g) and by redesignating
subsections (d), (e), (f), and (h) as subsections (c), (d), (e), and
(f), respectively.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending after the date of the enactment of this Act.
SEC. 5. HEALTH SAVINGS ACCOUNT.
(a) In General.--Subparagraph (A) of section 223(c)(1) of the
Internal Revenue Code of 1986, as amended by the preceding sections of
this Act, is amended to read as follows:
``(A) Except in the case of a rollover contribution
described in subsection (e)(5) or section 220(f)(5), no
contribution will be accepted unless it is in cash.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending after the date of the enactment of this Act.
SEC. 6. QUALIFIED MEDICAL EXPENSES.
(a) Repeal of Purchase of Health Insurance Limitation.--Paragraph
(2) of section 223(c) of the Internal Revenue Code of 1986, as
redesignated by the preceding provisions of this Act, is amended to
read as follows:
``(2) Qualified medical expenses.--
``(A) In general.--The term `qualified medical
expenses' means, with respect to an account
beneficiary, amounts paid by such beneficiary for
medical care (as defined in section 213(d)) for such
individual, the spouse of such individual, any
dependent (as defined in section 152, determined
without regard to subsections (b)(1), (b)(2), and
(d)(1)(B) thereof) of such individual, but only to the
extent such amounts are not compensated for by
insurance or otherwise.
``(B) Menstrual care products.--For purposes of
this paragraph--
``(i) In general.--Amounts paid for
menstrual care products shall be treated as
paid for medical care.
``(ii) Definition.--The term `menstrual
care product' means a tampon, pad, liner, cup,
sponge, or similar product used by individuals
with respect to menstruation or other genital-
tract secretions.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years ending after the date of the enactment of this Act.
SEC. 7. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIPTION AND OVER-THE-
COUNTER MEDICINES AND DRUGS AND OTHER MEDICALLY NECESSARY
ITEMS.
(a) HSAs.--Paragraph (2) of section 223(c) of the Internal Revenue
Code of 1986, as redesignated by the preceding provisions of this Act,
is amended by adding at the end the following:
``(C) Prescription and over-the-counter medicines
and drugs and other medically necessary items.--For
purposes of this paragraph--
``(i) In general.--The term `qualified
medical expenses' shall include an amount paid
for any prescription or over-the-counter
medicine or drug and medically necessary items.
``(ii) Medically necessary items.--The term
`medically necessary item' means any item for
which a doctor or nurse certifies by a letter
of medical necessity that the service or
medication or item is for a medical diagnosis,
treatment, or prevention of a medical diseases
or condition.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to amounts paid in taxable years ending after the date of the
enactment of this Act.
SEC. 8. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE
ESTABLISHMENT OF ACCOUNT.
(a) In General.--Paragraph (2) of section 223(c) of the Internal
Revenue Code of 1986, as redesignated by the preceding sections of this
Act, is amended by adding at the end the following new subparagraph:
``(D) 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.''.
(b) Effective Date.--The amendment made by this subsection (a)
shall apply to taxable years ending after the date of the enactment of
this Act.
SEC. 9. DIRECT PRIMARY CARE; EXERCISE EQUIPMENT; DENTAL CARE ITEMS.
(a) In General.--Paragraph (2) of section 223(c) of the Internal
Revenue Code of 1986, as amended by the preceding sections of this Act,
is amended by adding at the end the following new subparagraph:
``(E) Direct primary care; exercise equipment;
dental care items.--For purposes of this paragraph--
``(i) In general.--The term `qualified
medical expenses' shall include amounts paid--
``(I) amounts paid under a direct
primary care service arrangement,
``(II) amounts paid for exercise
equipment, and
``(III) amounts paid for dental
care items.
``(ii) Direct primary care service
arrangement.--The term `direct primary care
service arrangement' means, with respect to any
individual, an arrangement under which such
individual is provided medical care (as defined
in section 213(d)) consisting solely of primary
care services provided by primary care
practitioners (as defined in section
1833(x)(2)(A) of the Social Security Act,
determined without regard to clause (ii)
thereof), if the sole compensation for such
care is a fixed periodic fee.
``(iii) Exercise or fitness equipment.--The
term `exercise or fitness equipment' means
devices such as motorized treadmills, stair
climbers or step machines, stationary bicycles,
rowing machines, weight machines, circuit
training equipment, cardiovascular equipment,
strength equipment, or other similar equipment.
``(iv) Dental care items.--The term `dental
care items' includes manual or electric
toothbrush, dental floss, and dental
mouthwash.''.
(b) Effective Date.--The amendment made by this section shall apply
to plan years ending after the date of the enactment of this Act.
SEC. 10. PROHIBITION ON USE OF FUNDS FOR ELECTIVE ABORTIONS.
(a) In General.--Paragraph (2) of section 223(c) of the Internal
Revenue Code of 1986, as amended by the preceding sections of this Act,
is amended by adding at the end the following new subparagraph:
``(F) Prohibition on use of funds for elective
abortions.--For purposes of this paragraph--
``(i) Payments for health insurance with
abortion coverage.--The term `qualified medical
expenses' shall not include amounts paid for
insurance that includes coverage for abortions.
``(ii) Payments for abortions.--The term
`qualified medical expense' shall not include
amounts paid for an abortion.
``(iii) Abortion.--The term `abortion'
means the use or prescription of any
instrument, medicine, drug, or any other
substance or device--
``(I) to intentionally kill the
unborn child of a woman known to be
pregnant, or
``(II) to intentionally terminate
the pregnancy of a woman known to be
pregnant, with an intention other
than--
``(aa) after viability, to
produce a live birth and
preserve the life and health of
the child born alive, or
``(bb) to remove a dead
unborn child.''.
(b) Effective Date.--The amendment made by this section shall apply
to plan years ending after the date of the enactment of this Act.
SEC. 11. TREATMENT AFTER DEATH IF DESIGNATED BENEFICIARY IS SPOUSE OR
CHILD OF ACCOUNT BENEFICIARY.
(a) In General.--Subparagraph (A) of section 223(e)(7) of the
Internal Revenue Code of 1986, as redesignated by the preceding
sections of this Act, is amended to read as follows:
``(A) Treatment after death if designated
beneficiary is spouse or child of account
beneficiary.--If the account beneficiary's surviving
spouse or child acquires such beneficiary's interest in
a health savings account by reason of being the
designated beneficiary of such account at the death of
the account beneficiary, such health savings account
shall be treated as if the spouse or child (as the case
may be) were the account beneficiary.''.
(b) Child Defined.--Paragraph (7) of section 223(e) of such Code,
as so redesignated, is amended by adding at the end the following:
``(C) Child.--For purposes of this paragraph, the
term `child' means, with respect to an account
beneficiary, an individual who bears a relationship to
the account beneficiary described in section
152(f)(1).''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to account beneficiaries dying in taxable years
ending after the date of the enactment of this Act.
SEC. 12. ADMINISTRATIVE ERROR CORRECTION BEFORE DUE DATE OF RETURN.
(a) In General.--Paragraph (3) of section 223(d) of the Internal
Revenue Code of 1986, as amended and redesignated by the preceding
sections of this Act, is amended by adding at the end the following new
subparagraph:
``(C) 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.
Any net income described in clause (ii) shall be
included in the gross income of the individual for the
taxable year in which it is received.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 13. CONFORMING AMENDMENTS.
(a) Section 26(b)(2) of the Internal Revenue Code of 1986 is
amended--
(1) by striking ``, 223(b)(8)(B)(i)(II),'' in subparagraph
(S), and
(2) by striking ``223(f)(4)'' in subparagraph (U) and
inserting ``223(e)(3)''.
(b) Section 106 of such Code is amended--
(1) by amending subsection (d)(1) to read as follows:
``(1) In general.--In the case of an employee, amounts
contributed by such employee's employer to any health savings
account (as defined in section 223(c)) of such employee shall
be treated as employer-provided coverage for medical expenses
under an accident or health plan.'',
(2) in subsection (e)--
(A) by striking paragraphs (3) and (4) and
redesignating paragraph (5) as paragraph (4),
(B) by inserting after paragraph (2) the following
new paragraph:
``(3) Treatment as rollover contribution.--A qualified HSA
distribution shall be treated as a rollover contribution
described in section 223(e)(4).'', and
(C) by striking ``to any eligible individual
covered under a high deductible health plan of the
employer'' in paragraph (4)(B)(ii) (as so redesignated)
and inserting ``to any employee with respect to whom a
health savings account has been established''.
(c) Section 408 of such Code is amended--
(1) in subsection (d)(9)(A) by striking ``who is an
eligible individual (as defined in section 223(c)) and''; and
(2) in subsection (d)(9)(C)--
(A) by striking ``Limitations.--'' in the heading
and all that follows through ``(ii) One-time
transfer.--'' in clause (ii), and inserting ``One-time
transfer.--'',
(B) by redesignating subclauses (I) and (II) as
clauses (i) and (ii) and moving such clauses 2 ems to
the left, and
(C) by striking ``subclause (II)'' in clause (i),
as so redesignated, and inserting ``clause (ii)''.
(d) Section 877A(g)(6) of such Code is amended by striking
``223(f)(4)'' and inserting ``223(e)(3)''.
(e) Section 4973 of such Code is amended by striking subsection (g)
and by redesignating subsection (h) as subsection (g).
(f) Section 4975 of such Code is amended--
(1) in subsection (c)(6)--
(A) by striking ``section 223(d)'' and inserting
``section 223(c)'', and
(B) by striking ``section 223(e)(2)'' and inserting
``section 223(d)(2)'', and
(2) in subsection (e)(1)(E), by striking ``section 223(d)''
and inserting ``section 223(c)''.
(g) Sections 35(g)(3), 220(f)(5)(A), 848(e)(1)(B)(v), 4973(a)(5),
and 6051(a)(12) of such Code are each amended by striking ``section
223(d)'' each place it appears and inserting ``section 223(c)''.
(h) Section 4980G of such Code is amended--
(1) by amending subsection (b) to read as follows:
``(b) Rules and Requirements.--
``(1) In general.--An employer meets the requirements of
this subsection for any calendar year if the employer makes
available comparable contributions to the health savings
accounts of all comparable participating employees for each
coverage period during such calendar year.
``(2) Comparable contributions.--
``(A) In general.--For purposes of paragraph (1),
the term `comparable contributions' means
contributions--
``(i) which are the same amount, or
``(ii) if the employees are covered by a
health plan, which are the same percentage of
the annual deductible limit under the plan
covering the employees.
``(B) Part-year employees.--In the case of an
employee who is employed by the employer for only a
portion of the calendar year, a contribution to the
health savings account of such employee shall be
treated as comparable if it is an amount which bears
the same ratio to the comparable amount (determined
without regard to this subparagraph) as such portion
bears to the entire calendar year.
``(3) Comparable participating employees.--For purposes of
paragraph (1), the term `comparable participating employees'
means all employees who are covered (if at all) under the same
health plan of the employer and have the same category of
coverage. For purposes of the preceding sentence, the
categories of coverage are self-only and family coverage.
``(4) Part-time employees.--
``(A) In general.--Paragraph (3) shall be applied
separately with respect to part-time employees and
other employees.
``(B) Part-time employee.--For purposes of
subparagraph (A), the term `part-time employee' means
any employee who is customarily employed for fewer than
30 hours per week.'', and
(2) in subsection (d) by striking ``section 4980E'' and
inserting ``this section''.
(i) Section 6693(a)(2)(C) of such Code is amended by striking
``section 223(h)'' and inserting ``section 223(f)''.
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