Senate File 2132 - Introduced SENATE FILE 2132 BY JOHNSON A BILL FOR An Act providing a state individual income tax deduction 1 for certain health benefits plans and authorizing the 2 commissioner of insurance to assist employers and insurers 3 with implementing such health benefits plans and including 4 effective date and retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5254XS (6) 83 av/sc

S.F. 2132 Section 1. Section 422.7, Code Supplement 2009, is amended 1 by adding the following new subsection: 2 NEW SUBSECTION . 29B. If the taxpayer is ineligible to 3 qualify for exclusion of income under section 125 of the 4 Internal Revenue Code for the purchase of a health benefits 5 plan because the taxpayer is an employer, subtract, to the 6 extent not otherwise deducted in computing adjusted gross 7 income, the amount an employee of the taxpayer would be able to 8 exclude under section 125 of the Internal Revenue Code for the 9 same health benefits plan that is purchased by the taxpayer. A 10 deduction under this subsection is in lieu of a deduction under 11 subsection 29. 12 Sec. 2. Section 422.9, subsection 2, paragraph g, Code 13 Supplement 2009, is amended to read as follows: 14 g. If the taxpayer has a deduction for medical care expenses 15 under section 213 of the Internal Revenue Code, the taxpayer 16 shall recompute for the purposes of this subsection the amount 17 of the deduction under section 213 by excluding from medical 18 care, as defined in section 213, the amount subtracted under 19 section 422.7, subsection 29 or subsection 29B . 20 Sec. 3. Section 505.31, Code 2009, is amended to read as 21 follows: 22 505.31 Reimbursement accounts. 23 1. The commissioner of insurance shall assist employers 24 with twenty-five or fewer employees with implementing and 25 administering plans under section 125 of the Internal Revenue 26 Code, including medical expense reimbursement accounts and 27 dependent care accounts. The commissioner shall provide 28 information about the assistance available to small employers 29 on the insurance division’s internet site. 30 2. The commissioner of insurance may also assist insurers in 31 developing health plans that conform with the requirements of 32 section 125 of the Internal Revenue Code. 33 3. For purposes of this section, “Internal Revenue 34 Code” means the same as defined in section 422.3, subsection 5. 35 -1- LSB 5254XS (6) 83 av/sc 1/ 2

S.F. 2132 Sec. 4. EFFECTIVE UPON ENACTMENT AND RETROACTIVE 1 APPLICABILITY. This Act, being deemed of immediate importance, 2 takes effect upon enactment and applies retroactively to tax 3 years beginning on or after January 1, 2010. 4 EXPLANATION 5 This bill provides an individual income tax deduction for 6 certain health benefits plans and authorizes the commissioner 7 of insurance to assist employers and insurers with implementing 8 such health benefits plans. 9 New Code section 422.7(29B) allows an individual taxpayer 10 who is an employer to subtract, when computing net income for 11 Iowa tax purposes, the same amount that an employee would be 12 able to exclude under section 125 of the Internal Revenue Code 13 for the same health benefits plan that is purchased by the 14 taxpayer. 15 Code section 422.9(2)(g) is amended to provide that if 16 a taxpayer has a deduction for medical care expenses under 17 section 213 of the Internal Revenue Code, the taxpayer must 18 recompute deductions for state income tax purposes by excluding 19 the amount subtracted from net income under new Code section 20 422.7(29B) if such amount is deducted as a section 213 medical 21 care expense. 22 Code section 505.31 is amended to require the commissioner 23 of insurance to assist all employers, not just certain small 24 employers, with implementing and administering section 125 25 plans. The commissioner is also authorized to assist insurers 26 in developing health plans that conform with the requirements 27 of section 125. 28 The bill is effective upon enactment and applies 29 retroactively to tax years beginning on or after January 1, 30 2010. 31 -2- LSB 5254XS (6) 83 av/sc 2/ 2