[House Report 115-846]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-846
======================================================================
THE ``PERSONAL HEALTH INVESTMENT TODAY ACT'' OR THE ``PHIT ACT''
_______
July 19, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 6312]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6312) to amend the Internal Revenue Code of 1986 to
treat qualified sports and fitness expenses as amounts paid for
medical care, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-846
======================================================================
PERSONAL HEALTH INVESTMENT TODAY ACT
_______
July 19, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 6312]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6312) to amend the Internal Revenue Code of 1986 to
treat certain amounts paid for physical activity, fitness, and
exercise as amounts paid for medical care, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND............................................4
II. EXPLANATION OF THE BILL...........................................5
A. Certain Amounts Paid for Physical Activity, Fitness
and Exercise Treated as Amounts Paid for Medical Care 5
III.VOTES OF THE COMMITTEE............................................9
IV. BUDGET EFFECTS OF THE BILL.......................................10
A. Committee Estimate of Budgetary Effects............... 10
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 12
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 12
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......12
A. Committee Oversight Findings and Recommendations...... 12
B. Statement of General Performance Goals and Objectives. 12
C. Information Relating to Unfunded Mandates............. 12
D. Applicability of House Rule XXI 5(b).................. 13
E. Tax Complexity Analysis............................... 13
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 13
G. Duplication of Federal Programs....................... 13
H. Disclosure of Directed Rule Makings................... 13
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............14
B. Changes in Existing Law Proposed by the Bill, as
Reported............................................. 14
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Personal Health Investment Today Act''
or the ``PHIT Act.''
SEC. 2. CERTAIN AMOUNTS PAID FOR PHYSICAL ACTIVITY, FITNESS, AND
EXERCISE TREATED AS AMOUNTS PAID FOR MEDICAL CARE.
(a) In General.--Section 213(d)(1) of the Internal Revenue Code of
1986 is amended by striking ``or'' at the end of subparagraph (C), by
striking the period at the end of subparagraph (D) and inserting ``,
or'', and by adding at the end the following new subparagraph:
``(E) for qualified sports and fitness expenses.''.
(b) Qualified Sports and Fitness Expenses.--Section 213(d) of such
Code is amended by adding at the end the following paragraph:
``(12) Qualified sports and fitness expenses.--
``(A) In general.--The term `qualified sports and
fitness expenses' means amounts paid for--
``(i) membership at a fitness facility,
``(ii) participation or instruction in a
program of physical exercise or physical
activity, or
``(iii) safety equipment for use in a program
(including a self-directed program) of physical
exercise or physical activity.
``(B) Dollar limitations.--
``(i) Overall limitation.--The aggregate
amount treated as qualified sports and fitness
expenses with respect to any taxpayer for any
taxable year shall not exceed $500 (twice such
amount in the case of a joint return or a head
of household (as defined in section 2(b))).
``(ii) Safety equipment.--The amount treated
as qualified sports and fitness expenses with
respect to any item of safety equipment
described in subparagraph (A)(iii) shall not
exceed $250.
``(C) Certain exclusions.--
``(i) In general.--Golf, hunting, sailing,
and horseback riding shall not be treated as a
physical exercise or physical activity.
``(ii) Exercise videos, etc.--Qualified
sports and fitness expenses shall not include
videos, books, or similar materials.
``(D) Fitness facility defined.--For purposes of
subparagraph (A)(i), the term `fitness facility' means
a facility--
``(i) providing instruction in a program of
physical exercise or physical activity,
offering facilities for the preservation,
maintenance, encouragement, or development of
physical fitness, or serving 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 facilities for
any activity described in subparagraph (C)(i),
``(iv) whose health or fitness facility is
not incidental to its overall function and
purpose, and
``(v) which is fully compliant with
applicable State and Federal anti-
discrimination laws.
``(E) Programs which include components other than
physical exercise and physical activity.--Rules similar
to the rules of paragraph (6) shall apply in the case
of any program that includes physical exercise or
physical activity and also other components. For
purposes of the preceding sentence, travel and
accommodations shall be treated as an other component.
``(F) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2019,
the $500 amount in subparagraph (B)(i) and the $250
amount in subparagraph (B)(ii) shall each be increased
by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which such taxable year
begins, determined by substituting `calendar
year 2018' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence
is not a multiple of $10, such increase shall be
rounded to the next lowest multiple of $10.''.
(c) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 2018.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill H.R. 6312, as reported by the Committee on Ways
and Means, adds qualified sports and fitness expenses to the
definition of qualified medical expenses.
B. Background and Need for Legislation
Qualified medical expenses generally are defined in law and
include expenses for diagnosis, cure, mitigation, treatment, or
prevention of disease, including prescription drugs,
transportation primarily for and essential to such care, and
qualified long-term care expenses. The list of qualified
medical expenses generally determines what services and items
are eligible for a tax deduction either through the medical
expense deduction or through existing tax-favored health care
accounts.
Under present law, sports and fitness expenses such as
memberships at a fitness facility or participation or
instruction in a program of physical exercise are not treated
as medical care expenses.
The Personal Health Investment Today Act (PHIT) expands the
definition of a medical expense to include expenses for certain
sports and fitness activities in the tax code with the
intention of improving health and preventing illness through
promoting physical activity and related safety equipment. Under
the bill, allowable expenditures from existing tax-favored
health care accounts, such as flexible spending accounts,
health savings accounts, and health reimbursement arrangements,
would be expanded to include certain physical activity
expenses.
While the Committee believes numerous activities, including
golfing, hunting, sailing and horseback riding are physical
activities, these activities do not qualify for the purposes of
a qualified medical expense under H.R. 6312.
C. Legislative History
Background
H.R. 6312 was introduced on July 6, 2018, and was referred
to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 6312, the
``Personal Health Investment Today Act'' or the ``PHIT Act'',
on July 12, 2018, and ordered the bill, as amended, favorably
reported (with a quorum being present).
Committee hearings
The policy issues associated with Health Savings Accounts
(HSAs) and need for legislative response were discussed at the
following Ways and Means hearings during the 114th and 115th
Congresses:
Full Committee Hearing on the Tax Treatment
of Health Care (April 14, 2016)
Subcommittee on Health Member Day Hearing on
Tax-Related Proposals to Improve Health Care (May 17,
2016)
Subcommittee on Health Hearing on Rising
Health Insurance Premiums Under the Affordable Care Act
(July 12, 2016)
Subcommittee on Health Hearing on Lowering
Costs and Expanding Access to Health Care through
Consumer-Directed Health Plans (June 6, 2018)
II. EXPLANATION OF THE BILL
A. Certain Amounts Paid for Physical Activity, Fitness and Exercise
Treated as Amounts Paid for Medical Care
PRESENT LAW
Health savings accounts
An individual may establish a health savings account
(``HSA'') only if the individual is covered under a plan that
meets the requirements for a high deductible health plan, as
described below. In general, HSAs provide tax-favored treatment
for current medical expenses as well as the ability to save on
a tax-favored basis for future medical expenses. In general, an
HSA is a tax-exempt trust or custodial account created
exclusively to pay for the qualified medical expenses of the
account holder and his or her spouse and dependents.
Within limits,\1\ contributions to an HSA made by or on
behalf of an eligible individual are deductible by the
individual. Contributions to an HSA are excludible from income
and employment taxes if made by the employer. Earnings in HSAs
are not taxable. Distributions from an HSA for qualified
medical expenses are not includible in gross income.
Distributions from an HSA that are not used for qualified
medical expenses are includible in gross income and are subject
to an additional tax of 20 percent. The 20-percent additional
tax does not apply if the distribution is made after death or
disability, or after the individual attains the age of Medicare
eligibility (age 65). Unlike reimbursements from a flexible
spending arrangement or health reimbursement arrangement,
distributions from an HSA are not required to be substantiated
by the employer or a third party for the distributions to be
excludible from income.
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\1\For 2018, the basic limit on annual contributions that can be
made to an HSA is $3,450 in the case of self-only coverage and $6,900
in the case of family coverage. (The 2018 limitation for family
coverage was revised by the IRS to permit taxpayers to disregard the
$6,850 limitation under the modified inflation adjustment of Pub. L.
No. 115-97. Rev. Rul. 2018-27, 2018-20 I.R.B. 591, May 14, 2018.) The
basic annual contributions limits are increased by $1,000 for
individuals who have attained age 55 by the end of the taxable year
(referred to as ``catch-up'' contributions).
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High deductible health plans
A high deductible health plan is a health plan that has a
minimum annual deductible of $1,350 (for 2018) for self-only
coverage and twice this amount for family coverage, and for
which the sum of the annual deductible and other annual out-of-
pocket expenses (other than premiums) for covered benefits does
not exceed $6,650 (for 2018) for self-only coverage and twice
this amount for family coverage.\2\ These dollar thresholds are
subject to inflation adjustment, based on chained CPI.\3\
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\2\Sec. 223(c)(2).
\3\Sec. 223(g).
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An individual who is covered under a high deductible health
plan is eligible to establish an HSA, provided that while such
individual is covered under the high deductible health plan,
the individual is not covered under any health plan that (1) is
not a high deductible health plan and (2) provides coverage for
any benefit (subject to certain exceptions) covered under the
high deductible health plan.\4\
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\4\Sec. 223(c)(1).
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Various types of coverage are disregarded for this purpose,
including coverage of any benefit provided by permitted
insurance, coverage (whether through insurance or otherwise)
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health
flexible savings accounts.\5\ Permitted insurance means
insurance under which substantially all of the coverage
provided relates to liabilities incurred under workers'
compensation laws, tort liabilities, liabilities relating to
ownership or use of property, or such other similar liabilities
as specified by the Secretary under regulations. Permitted
insurance also means insurance for a specified disease or
illness, and insurance paying a fixed amount per day (or other
period) of hospitalization.\6\
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\5\Sec. 223(c)(1)(B).
\6\Sec. 223(c)(3).
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Archer medical savings accounts
Like an HSA, an Archer medical savings account (``Archer
MSA'') is a tax-exempt trust or custodial account to which tax-
deductible contributions may be made by individuals with a high
deductible health plan.\7\ Only self-employed individuals and
employees of small employers are eligible to have an Archer
MSA. Archer MSAs provide tax benefits similar to those provided
by HSAs for individuals covered by high deductible health
plans. Distributions from an Archer MSA for qualified medical
expenses are excludible from gross income. Distributions from
an Archer MSA that are not used for qualified medical expenses
are includible in gross income and are subject to an additional
tax of 20 percent. The 20 percent additional tax does not apply
if the distribution is made after death or disability, or after
the individual attains the age of Medicare eligibility (i.e.,
age 65).
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\7\Sec. 220.
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Qualified medical expenses
Qualified medical expenses generally are defined under Code
section 213(d) and include expenses for diagnosis, cure,
mitigation, treatment, or prevention of disease, including
prescription drugs, transportation primarily for and essential
to such care, and qualified long-term care expenses. Qualified
medical expenses do not include expenses for insurance other
than for (1) certain premiums paid for long-term care
insurance, (2) premiums for health coverage during any period
of continuation coverage required by Federal law, (3) premiums
for health care coverage while an individual is receiving
unemployment compensation under Federal or State law, and (4)
premiums for individuals who have attained the age of Medicare
eligibility, other than premiums for Medigap policies.
Qualified medical expenses may be incurred by the account
owner, the spouse of such individual and any dependent\8\
including qualifying children, or a qualifying relative
including (1) a child or descendant of a child, (2) a brother,
sister, stepbrother or stepsister, (3) the father or mother, or
an ancestor of either, (4) a stepfather or stepmother, (5) a
son or daughter of a brother or sister of the taxpayer, (6) a
brother or sister of the father or mother of the taxpayer, (7)
a son-in-law, daughter-in-law, father-in-law, mother-in-law,
brother-in-law, or sister-in-law, or (8) an individual who, for
the taxable year of the taxpayer, has the same principal place
of abode as the taxpayer and is a member of the taxpayer's
household.
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\8\Generally as defined in sec. 152.
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Health flexible spending accounts and health reimbursement arrangements
In addition to offering health insurance, employers often
agree to reimburse medical expenses of their employees (and
their spouses and dependents). These arrangements are commonly
used by employers to pay or reimburse employees for medical
expenses that are not covered by health insurance. These
arrangements include health flexible spending accounts
(``health FSAs'') and health reimbursement arrangements
(``HRAs'').
Health FSAs
Health FSAs typically are funded on a salary reduction
basis under a cafeteria plan, meaning that employees are given
the option to reduce their current cash compensation and
instead have the amount made available for use in reimbursing
the employee for his or her medical expenses. If the health FSA
meets certain requirements, the compensation that is forgone is
not includible in gross income or wages for payroll tax
purposes.
Health FSAs that are funded on a salary reduction basis are
subject to the requirements for cafeteria plans, including a
requirement that amounts remaining in a health FSA at the end
of a plan year must be forfeited by the employee (referred to
as the ``use-it-or-lose-it'' rule).\9\
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\9\See sec. 125(d)(2). Subsequent IRS guidance has provided a grace
period for the carryover of excess benefits or contributions in a
health FSA. See, e.g., Notice 2005-42, 2005-23 I.R.B. 1204 (June 6,
2005). As an alternative to a grace period, Notice 2013-71 permits
employers to amend the cafeteria plan document to provide for up to
$500 of any unused amount as of the end of the plan year in a health
FSA to be carried over to the following year. 2013-47 I.R.B. 532
(November 18, 2013).
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HRAs
HRAs operate in a manner similar to health FSAs, in that
they are employer-maintained arrangements that reimburse
employees and their dependents\10\ for medical expenses. Some
of the rules applicable to HRAs and health FSAs are similar
(e.g., the amounts in the arrangements can be used only to
reimburse medical expenses and not for other purposes), but the
rules are not identical. In particular, HRAs cannot be funded
on a salary reduction basis and the use-it-or-lose-it rule does
not apply. Thus, amounts remaining at the end of the year may
be carried forward to be used to reimburse medical expenses in
following years.\11\ Unlike a health FSA, an HRA is permitted
to reimburse an employee for health insurance premiums.
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\10\As defined in sec. 152.
\11\Guidance with respect to HRAs, including the interaction of
health FSAs and HRAs in the case of an individual covered by both, is
provided in Notice 2002-45, 2002-2 C.B. 93 (July 15, 2002).
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Physical activity, fitness, and exercise
Sports and fitness expenses, such as membership fees at a
fitness facility or costs associated with participation or
instruction in a program of physical exercise or physical
activity, generally are not treated as medical care.\12\
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\12\See, e.g., Chief Counsel Advice Memorandum 201622031 (May 27,
2016). Under guidance, certain expenses may be treated as medical care.
For example, taxpayers may deduct the cost of a weight loss program if
the individual is diagnosed as obese or is directed by a doctor to lose
weight as treatment for a specific disease. See Rev. Rul. 2002-19,
2002-16 I.R.B. 778 (April 22, 2002).
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REASONS FOR CHANGE
The Committee believes that HSAs, Archer MSAs, health FSAs,
and HRAs are important tools that provide consumers with funds
set aside (either through their own contributions and/or
employer contributions, depending on the particular account)
for the payment of medical expenses. These tools provide
consumers the ability to choose how to spend those funds to pay
for medical care.
Although medical care currently includes amounts paid for
the prevention of disease, amounts paid for membership at a
fitness facility, participation or instruction in a program of
physical exercise or physical activity, or safety equipment for
use in a program of physical exercise or physical activity that
are widely available and contribute to the health of
individuals and prevention of disease are not treated as
medical care. The Committee believes that such sports and
fitness expenses (except for those related to certain
activities that have limited availability) up to certain dollar
caps, should be treated as medical care that may be paid from
any of the aforementioned accounts.
EXPLANATION OF PROVISION
Under the provision, qualified sports and fitness expenses
are treated as medical care. The term qualified sports and
fitness expenses means amounts paid for membership at a fitness
facility, participation or instruction in a program of physical
exercise or physical activity, or safety equipment for use in a
program (including a self-directed program) of physical
exercise or physical activity. The aggregate amount treated as
qualified sports and fitness expenses with respect to any
taxpayer for any taxable year is limited to $500 (twice that
amount in the case of a joint return or a head of household),
and the amount treated as qualified sports and fitness expenses
with respect to any single item of safety equipment is limited
to $250 with respect to any taxpayer for any taxable year.
These amounts are adjusted for inflation. Golf, hunting,
sailing, and horseback riding are not treated as a physical
exercise or physical activity for purposes of determining
qualified sports and fitness expenses. Qualified sports and
fitness expenses also do not include videos, books, or similar
materials.
A fitness facility means a facility providing instruction
in a program of physical exercise or physical activity,
offering facilities for the preservation, maintenance,
encouragement, or development of physical fitness, or serving
as the site of such a program of a State or local government,
(1) which is not a private club owned and operated by its
members, (2) which does not offer facilities for golf, hunting,
sailing or horseback riding, (3) whose health or fitness
facility is not incidental to its overall function and purpose,
and (4) which is fully compliant with applicable State and
Federal anti-discrimination laws. In the case of any program
that includes physical exercise or physical activity and also
other components (such as travel and accommodations), special
rules apply.
EFFECTIVE DATE
The provision is effective for taxable years beginning
after December 31, 2018.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 6312, the ``Personal Health Investment
Today Act,'' or the ``PHIT Act'' on July 12, 2018.
H.R. 6312 was ordered favorably reported to the House of
Representatives as amended by an amendment in the nature of a
substitute offered by Mr. Roskam by a roll call vote of 28 yeas
to 7 nays. The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Brady...................... ........ ........ ......... Mr. Neal......... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Reichert................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Thompson..... X ........ .........
Mr. Buchanan................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Smith (NE)................. X ........ ......... Mr. Blumenauer... ........ ........ .........
Ms. Jenkins.................... X ........ ......... Mr. Kind......... X ........ .........
Mr. Paulsen.................... X ........ ......... Mr. Pascrell..... X ........ .........
Mr. Marchant................... X ........ ......... Mr. Crowley...... ........ ........ .........
Ms. Black...................... ........ ........ ......... Mr. Davis........ ........ X .........
Mr. Reed....................... X ........ ......... Ms. Sanchez...... ........ ........ .........
Mr. Kelly...................... X ........ ......... Mr. Higgins...... X ........ .........
Mr. Renacci.................... X ........ ......... Ms. Sewell....... X ........ .........
Ms. Noem....................... X ........ ......... Ms. DelBene...... X ........ .........
Mr. Holding.................... X ........ ......... Ms. Chu.......... ........ X .........
Mr. Smith (MO)................. X ........ .........
Mr. Rice....................... X ........ .........
Mr. Schweikert................. X ........ .........
Ms. Walorski................... X ........ .........
Mr. Curbelo.................... X ........ .........
Mr. Bishop..................... X ........ .........
Mr. LaHood..................... X ........ .........
Mr. Wenstrup................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6312, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal fiscal year budget receipts for the period
2019-2028:
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Fiscal Years [Millions of Dollars]
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Item 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-23 2019-28
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Certain Amounts Paid for Physical Activity, Fitness, and -226 -335 -345 -350 -355 -360 -365 -382 -403 -412 -1,611 -3,533
Exercise Treated as Amounts Paid for Medical Care[1].......
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2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-23 2019-28
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[1]Estimate includes the following off-budget effects....... -92 -98 -99 -101 -102 -104 -105 -107 -108 -110 -493 -1,026
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Pursuant to clause 8 of rule XIII of the Rules of the House
of Representatives, the following statement is made by the
Joint Committee on Taxation with respect to the provisions of
the bill amending the Internal Revenue Code of 1986: The gross
budgetary effect (before incorporating macroeconomic effects)
in any fiscal year is less than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year; therefore, the bill is not ``major legislation''
for purposes of requiring that the estimate include the
budgetary effects of changes in economic output, employment,
capital stock and other macroeconomic variables.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-reducing tax
provision involves no new tax expenditure.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6138, as
reported. As of the filing of this report, the Committee had
not received an estimate prepared by the Congressional Budget
Office (CBO).
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated into
the description portions of this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code of 1986 and has widespread applicability
to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code of 1986 and that have ``widespread applicability'' to
individuals or small businesses, within the meaning of the
rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program, (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139, or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to section 6104 of
title 31, United States Code.
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(i) of H. Res. 5 (115th Congress),
the following statement is made concerning directed rule
makings: The Committee advises that the bill requires no
directed rule makings within the meaning of such section.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
B. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS
* * * * * * *
SEC. 213. MEDICAL, DENTAL, ETC., EXPENSES.
(a) Allowance of deduction.--There shall be allowed as a
deduction the expenses paid during the taxable year, not
compensated for by insurance or otherwise, for medical care of
the taxpayer, his spouse, or a dependent (as defined in section
152, determined without regard to subsections (b)(1), (b)(2),
and (d)(1)(B) thereof), to the extent that such expenses exceed
10 percent of adjusted gross income.
(b) Limitation with respect to medicine and drugs.--An amount
paid during the taxable year for medicine or a drug shall be
taken into account under subsection (a) only if such medicine
or drug is a prescribed drug or is insulin.
(c) Special rule for decedents.--
(1) Treatment of expenses paid after death.--For
purposes of subsection (a), expenses for the medical
care of the taxpayer which are paid out of his estate
during the 1-year period beginning with the day after
the date of his death shall be treated as paid by the
taxpayer at the time incurred.
(2) Limitation.--Paragraph (1) shall not apply if the
amount paid is allowable under section 2053 as a
deduction in computing the taxable estate of the
decedent, but this paragraph shall not apply if (within
the time and in the manner and form prescribed by the
Secretary) there is filed--
(A) a statement that such amount has not been
allowed as a deduction under section 2053, and
(B) a waiver of the right to have such amount
allowed at any time as a deduction under
section 2053.
(d) Definitions.--For purposes of this section--
(1) The term ``medical care'' means amounts paid--
(A) for the diagnosis, cure, mitigation,
treatment, or prevention of disease, or for the
purpose of affecting any structure or function
of the body,
(B) for transportation primarily for and
essential to medical care referred to in
subparagraph (A),
(C) for qualified long-term care services (as
defined in section 7702B(c)), [or]
(D) for insurance (including amounts paid as
premiums under part B of title XVIII of the
Social Security Act, relating to supplementary
medical insurance for the aged) covering
medical care referred to in subparagraphs (A)
and (B) or for any qualified long- term care
insurance contract (as defined in section
7702B(b))[.], or
(E) for qualified sports and fitness
expenses.
In the case of a qualified long-term care insurance
contract (as defined in section 7702B(b)), only
eligible long-term care premiums (as defined in
paragraph (10)) shall be taken into account under
subparagraph (D).
(2) Amounts paid for certain lodging away from home
treated as paid for medical care
Amounts paid for lodging (not lavish or extravagant
under the circumstances) while away from home primarily
for and essential to medical care referred to in
paragraph (1)(A) shall be treated as amounts paid for
medical care if--
(A) the medical care referred to in paragraph
(1)(A) is provided by a physician in a licensed
hospital (or in a medical care facility which
is related to, or the equivalent of, a licensed
hospital), and
(B) there is no significant element of
personal pleasure, recreation, or vacation in
the travel away from home.
The amount taken into account under the preceding
sentence shall not exceed $50 for each night for each
individual.
(3) Prescribed drug
The term ``prescribed drug'' means a drug or
biological which requires a prescription of a physician
for its use by an individual.
(4) Physician
The term ``physician'' has the meaning given to such
term by section 1861(r) of the Social Security Act (42
U.S.C. 1395x(r)).
(5) Special rule in the case of child of divorced
parents, etc.
Any child to whom section 152(e) applies shall be
treated as a dependent of both parents for purposes of
this section.
(6) In the case of an insurance contract under which
amounts are payable for other than medical care
referred to in subparagraphs (A), (B), and (C) of
paragraph (1)--
(A) no amount shall be treated as paid for
insurance to which paragraph (1)(D) applies
unless the charge for such insurance is either
separately stated in the contract, or furnished
to the policyholder by the insurance company in
a separate statement,
(B) the amount taken into account as the
amount paid for such insurance shall not exceed
such charge, and
(C) no amount shall be treated as paid for
such insurance if the amount specified in the
contract (or furnished to the policyholder by
the insurance company in a separate statement)
as the charge for such insurance is
unreasonably large in relation to the total
charges under the contract.
(7) Subject to the limitations of paragraph (6),
premiums paid during the taxable year by a taxpayer
before he attains the age of 65 for insurance covering
medical care (within the meaning of subparagraphs (A),
(B), and (C) of paragraph (1)) for the taxpayer, his
spouse, or a dependent after the taxpayer attains the
age of 65 shall be treated as expenses paid during the
taxable year for insurance which constitutes medical
care if premiums for such insurance are payable (on a
level payment basis) under the contract for a period of
10 years or more or until the year in which the
taxpayer attains the age of 65 (but in no case for a
period of less than 5 years).
(8) The determination of whether an individual is
married at any time during the taxable year shall be
made in accordance with the provisions of section
6013(d) (relating to determination of status as husband
and wife).
(9) Cosmetic surgery.--
(A) In general.--The term ``medical care''
does not include cosmetic surgery or other
similar procedures, unless the surgery or
procedure is necessary to ameliorate a
deformity arising from, or directly related to,
a congenital abnormality, a personal injury
resulting from an accident or trauma, or
disfiguring disease.
(B) Cosmetic surgery defined.--For purposes
of this paragraph, the term ``cosmetic
surgery'' means any procedure which is directed
at improving the patient's appearance and does
not meaningfully promote the proper function of
the body or prevent or treat illness or
disease.
(10) Eligible long-term care premiums.--
(A) In general.--For purposes of this
section, the term ``eligible long-term care
Premiums'' means the amount paid during a
taxable year for any qualified long-term care
insurance contract (as defined in section
7702B(b)) covering an individual, to the extent
such amount does not exceed the limitation
determined under the following table:
------------------------------------------------------------------------
In the case of an individual with
an attained age before the close of The limitation is:
the taxable year of:
------------------------------------------------------------------------
40 or less $200
More than 40 but not more than 50 375
More than 50 but not more than 60 750
More than 60 but not more than 70 2,000
More than 70 2,500.
------------------------------------------------------------------------
(B) Indexing.--
(i) In general.--In the case of any
taxable year beginning in a calendar
year after 1997, each dollar amount
contained in subparagraph (A) shall be
increased by the medical care cost
adjustment of such amount for such
calendar year. If any increase
determined under the preceding sentence
is not a multiple of $10, such increase
shall be rounded to the nearest
multiple of $10.
(ii) Medical care cost adjustment.--
For purposes of clause (i), the medical
care cost adjustment for any calendar
year is the percentage (if any) by
which--
(I) the medical care
component of the C-CPI-U (as
defined in section 1(f)(6)) for
August of the preceding
calendar year, exceeds
(II) such component of the
CPI (as defined in section
1(f)(4)) for August of 1996,
multiplied by the amount
determined under section
1(f)(3)(B).
The Secretary shall, in consultation
with the Secretary of Health and Human
Services, prescribe an adjustment which
the Secretary determines is more
appropriate for purposes of this
paragraph than the adjustment described
in the preceding sentence, and the
adjustment so prescribed shall apply in
lieu of the adjustment described in the
preceding sentence.
(11) Certain payments to relatives treated as not
paid for medical care --An amount paid for a qualified
long-term care service (as defined in section 7702B(c))
provided to an individual shall be treated as not paid
for medical care if such service is provided--
(A) by the spouse of the individual or by a
relative (directly or through a partnership,
corporation, or other entity) unless the
service is provided by a licensed professional
with respect to such service, or
(B) by a corporation or partnership which is
related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ``relative''
means an individual bearing a relationship to the
individual which is described in any of subparagraphs
(A) through (G) of section 152(d)(2). This paragraph
shall not apply for purposes of section 105(b) with
respect to reimbursements through insurance.
(12) Qualified sports and fitness expenses.--
(A) In general.--The term ``qualified sports
and fitness expenses'' means amounts paid for--
(i) membership at a fitness facility,
(ii) participation or instruction in
a program of physical exercise or
physical activity, or
(iii) safety equipment for use in a
program (including a self-directed
program) of physical exercise or
physical activity.
(B) Dollar limitations.--
(i) Overall limitation.--The
aggregate amount treated as qualified
sports and fitness expenses with
respect to any taxpayer for any taxable
year shall not exceed $500 (twice such
amount in the case of a joint return or
a head of household (as defined in
section 2(b))).
(ii) Safety equipment.--The amount
treated as qualified sports and fitness
expenses with respect to any item of
safety equipment described in
subparagraph (A)(iii) shall not exceed
$250.
(C) Certain exclusions.--
(i) In general.--Golf, hunting,
sailing, and horseback riding shall not
be treated as a physical exercise or
physical activity.
(ii) Exercise videos, etc.--Qualified
sports and fitness expenses shall not
include videos, books, or similar
materials.
(D) Fitness facility defined.--For purposes
of subparagraph (A)(i), the term ``fitness
facility'' means a facility--
(i) providing instruction in a
program of physical exercise or
physical activity, offering facilities
for the preservation, maintenance,
encouragement, or development of
physical fitness, or serving 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 facilities
for any activity described in
subparagraph (C)(i),
(iv) whose health or fitness facility
is not incidental to its overall
function and purpose, and
(v) which is fully compliant with
applicable State and Federal anti-
discrimination laws.
(E) Programs which include components other
than physical exercise and physical activity.--
Rules similar to the rules of paragraph (6)
shall apply in the case of any program that
includes physical exercise or physical activity
and also other components. For purposes of the
preceding sentence, travel and accommodations
shall be treated as an other component.
(F) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after
2019, the $500 amount in subparagraph (B)(i)
and the $250 amount in subparagraph (B)(ii)
shall each be increased by an amount equal to--
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment
determined under section 1(f)(3) for
the calendar year in which such taxable
year begins, determined by substituting
``calendar year 2018'' for ``calendar
year 2016'' in subparagraph (A)(ii)
thereof.
If any increase determined under the preceding
sentence is not a multiple of $10, such
increase shall be rounded to the next lowest
multiple of $10.
(e) Exclusion of amounts allowed for care of certain
dependents.--Any expense allowed as a credit under section 21
shall not be treated as an expense paid for medical care.
(f) Special rules for 2013 through 2018.--In the case of any
taxable year--
(1) beginning after December 31, 2012, and ending
before January 1, 2017, in the case of a taxpayer if
such taxpayer or such taxpayer's spouse has attained
age 65 before the close of such taxable year, and
(2) beginning after December 31, 2016, and ending
before January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by
substituting ``7.5 percent'' for ``10 percent''.
* * * * * * *
MINORITY VIEWS
H.R. 6312 Personal Health Investment Today Act (PHIT) Act
H.R. 6312 (Smith, R-MO and Kind, D-WI) allows individuals
to use Health Savings Account (HSA) and Flexible Spending
Account (FSA) funds up to $500 for an individual ($1000 for a
family) to pay for certain fitness expenses, including fitness
facility membership; participation in a physical activity (such
as gym memberships or sports leagues); and safety equipment,
such as bike helmets. The bill excludes certain sports, such as
golf and hunting, as well as exercise instruction materials,
such as videos and books.
H.R. 6312 does not undo sabotage, premium hikes, and
benefit cuts Republicans have caused over the past 18 months.
This bill was one in a series of 11 bills the Committee marked
up that Republicans claim will help lower health care costs for
consumers. This legislation does not undo the disruption and
sabotage the Republicans have continued to inflict on the
American health care system. Instead of focusing on expansion
of HSAs and High-Deductible Health Plans (HDHPs), Democrats
encourage the Committee to redirect its attention to
legislation that could actually ensure that uninsured, low-
income, and vulnerable people have real access to care. For
example H.R. 5155, sponsored by Reps. Pallone, Neal, and Scott
would protect people with pre-existing conditions, help lower
premiums for Americans, and improve affordability of health
coverage.
Legislation busts the deficit to benefit the wealthy,
again. Altogether the 11 bills the Committee marked up would
add another $92 billion in unoffset tax cuts to the deficit.
Republican attempts to expand HSAs (and encourage more
enrollment in plans with high deductibles, covering very few
up-front health costs) are a continuation of their platform of
shifting families into health plans that provide fewer health
benefits and higher out-of-pocket costs--while providing
greater tax benefits for higher-income individuals and
corporate-special interests. According to 2014 Treasury data,
only five percent of families with adjusted gross income of
under $100,000 held money in an HSA, and those users' average
account balances were $1,700.
HDHPs and HSAs do not promote healthy behavior and this
legislation further directs consumers away from care. It is
widely acknowledged that HSAs and HDHPs lead consumers to delay
care. They do not encourage individuals to make better health
care decisions, as Republicans' ``skin in the game'' talking
points assert. Decades of research shows that exposure to high
out-of-pocket costs lead consumers to delay or forgo both
necessary and unnecessary care. Delaying care and increasing
costs run counter to Democratic policy goals of better
coordinated, high-value affordable care for American families.
This legislation demonstrates why HDHPs in their current format
do not allow consumers to see value in their health insurance.
According to the American Hospital Association, ``Hospitals
and health systems report that increased enrollment in HDHPs
over the past several years has reduced access to care and
subjected patients to costs they cannot afford. In addition,
patients enrolled in HDHPs appear to delay care until they have
reached their deductible or are in an emergency situation,
which could lead to poorer health outcomes.''
H.R. 6312 allows a tax preference for services that are not
directly related to health care. The bill allows an HSA or FSA
to be used for services that might never be used or might not
directly improve an individual's health. Because this bill
allows consumers to use tax-preferred services for leisure
activities, reducing the amount available to address the high
deductible that is supposed to drive better health purchases,
it further undermines the Republican talking point about
consumers having ``skin in the game.'' This provision is a tax
break--plain and simple.
HSAs mostly benefit high-income taxpayers while doing
little to help moderate-income families or the uninsured. High-
income individuals can best afford to save for health care
expenses and are therefore the most likely to contribute to
HSAs. Higher income filers are much more likely to establish
HSAs than lower income filers--70 percent of HSA contributions
come from households with incomes over $100,000, according to
the Joint Commission on Taxation (JCT)--and they are also
likelier to max out their contributions. Additionally, high-
income people receive the biggest tax benefit for each dollar
contributed to an HSA because the value of a tax deduction
rises with an individual's tax bracket. More than 44 percent of
Americans cannot afford a $400 emergency visit. For these
families, it is unlikely that they have excess income to devote
to a tax preferred account.
JCT estimates the cost of this bill to be $3.5 billion over
10 years. With this bill, Republicans are adding more tax cuts
and increasing the deficit. Republicans are using the deficit,
which they keep making larger with cuts for the wealthy, to
justify their deep cuts to Medicare and Medicaid. Republicans
are already proposing to cut Medicare and Medicaid by nearly a
trillion dollars to try to pay for the tax cuts they've already
enacted. This bill will only add fuel to the fire.
Richard E. Neal,
Ranking Member.
[all]