SF 2132 (LSB 5254XS (6) 83)

SENATE FILE 2132

BY  JOHNSON

A BILL FOR

An Act providing a state individual income tax deduction for certain health benefits plans and authorizing the commissioner of insurance to assist employers and insurers with implementing such health benefits plans and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code Supplement 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  29B.  If the taxpayer is ineligible to qualify for exclusion of income under section 125 of the Internal Revenue Code for the purchase of a health benefits plan because the taxpayer is an employer, subtract, to the extent not otherwise deducted in computing adjusted gross income, the amount an employee of the taxpayer would be able to exclude under section 125 of the Internal Revenue Code for the same health benefits plan that is purchased by the taxpayer. A deduction under this subsection is in lieu of a deduction under subsection 29.
    Sec. 2.  Section 422.9, subsection 2, paragraph g, Code Supplement 2009, is amended to read as follows:
   g.  If the taxpayer has a deduction for medical care expenses under section 213 of the Internal Revenue Code, the taxpayer shall recompute for the purposes of this subsection the amount of the deduction under section 213 by excluding from medical care, as defined in section 213, the amount subtracted under section 422.7, subsection 29 or subsection 29B.
    Sec. 3.  Section 505.31, Code 2009, is amended to read as follows:
   505.31  Reimbursement accounts.
   1.  The commissioner of insurance shall assist employers with twenty-five or fewer employees with implementing and administering plans under section 125 of the Internal Revenue Code, including medical expense reimbursement accounts and dependent care accounts. The commissioner shall provide information about the assistance available to small employers on the insurance division’s internet site.
   2.  The commissioner of insurance may also assist insurers in developing health plans that conform with the requirements of section 125 of the Internal Revenue Code.
   3.  For purposes of this section, “Internal Revenue Code” means the same as defined in section 422.3, subsection 5.
    Sec. 4.  EFFECTIVE UPON ENACTMENT AND RETROACTIVE APPLICABILITY.  This Act, being deemed of immediate importance, takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2010.
EXPLANATION
   This bill provides an individual income tax deduction for certain health benefits plans and authorizes the commissioner of insurance to assist employers and insurers with implementing such health benefits plans.
   New Code section 422.7(29B) allows an individual taxpayer who is an employer to subtract, when computing net income for Iowa tax purposes, the same amount that an employee would be able to exclude under section 125 of the Internal Revenue Code for the same health benefits plan that is purchased by the taxpayer.
   Code section 422.9(2)(g) is amended to provide that if a taxpayer has a deduction for medical care expenses under section 213 of the Internal Revenue Code, the taxpayer must recompute deductions for state income tax purposes by excluding the amount subtracted from net income under new Code section 422.7(29B) if such amount is deducted as a section 213 medical care expense.
   Code section 505.31 is amended to require the commissioner of insurance to assist all employers, not just certain small employers, with implementing and administering section 125 plans. The commissioner is also authorized to assist insurers in developing health plans that conform with the requirements of section 125.
   The bill is effective upon enactment and applies retroactively to tax years beginning on or after January 1, 2010.