BILL NUMBER: AB 2292	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 29, 2008

INTRODUCED BY   Assembly Member Garrick
    (   Coauthors:   Assembly Members 
 DeVore,   Horton,   and Maze   )

    (   Coauthors:   Senators  
Battin,   Cox,   Hollingsworth,   and
Runner   ) 

                        FEBRUARY 21, 2008

   An act to amend Sections 17072, 17215, and 19184 of, to amend and
repeal Sections 17131.4, 17131.5, 17215.1, and 17215.4 of, and to add
Sections 17138.5, 17138.6, and 17216 to, the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2292, as amended, Garrick. Income tax: health savings accounts.

   The Personal Income Tax Law authorizes various deductions in
computing income that is subject to tax under that law.
   This bill would, for taxable years beginning on and after January
1, 2008, allow a deduction in connection with health savings accounts
in conformity with federal law. In general, the deduction would be
an amount equal to the aggregate amount paid in cash during the
taxable year by, or on behalf of, an eligible individual, as defined,
to a health savings account of that individual, as provided. This
bill would, for taxable years beginning on and after January 1, 2008,
also provide related conformity to that federal law with respect to
treatment of the account as a tax-exempt trust, the allowance of
rollovers from Archer Medical Savings Accounts, health flexible
spending arrangements, or health reimbursement accounts to a health
savings account, and penalties in connection therewith.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 17072 of the Revenue and Taxation Code is
amended to read:
   17072.  (a) Section 62 of the Internal Revenue Code, relating to
adjusted gross income defined, shall apply, except as otherwise
provided.
   (b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to
certain expenses of elementary and secondary school teachers, shall
not apply.
   (c) The deduction allowed by Section 17216, relating to health
savings accounts, is allowed in computing adjusted gross income.
   (d) The amendments made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2008.
  SEC. 2.  Section 17131.4 of the Revenue and Taxation Code is
amended to read:
   17131.4.  (a) Section 106(d) of the Internal Revenue Code,
relating to contributions to health savings accounts, shall not
apply.
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2008. This section shall
remain in effect only until January 1, 2013, and as of that date is
repealed.
  SEC. 3.  Section 17131.5 of the Revenue and Taxation Code is
amended to read:
   17131.5.  (a) Section 125(d)(2)(D) of the Internal Revenue Code,
relating to the exception for health savings accounts, shall not
apply.
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2008. This section shall
remain in effect only until January 1, 2013, and as of that date is
repealed.
  SEC. 4.  Section 17138.5 is added to the Revenue and Taxation Code,
to read:
   17138.5.  For taxable years beginning on or after January 1, 2008,
Section 106 of the Internal Revenue Code, as amended by Section 302
of the Tax Relief and Health Care Act (TRHCA) of 2006 (Public Law
109-432), relating to health savings accounts, shall apply, except as
otherwise provided.
  SEC. 5.  Section 17138.6 is added to the Revenue and Taxation Code,
to read:
   17138.6.  For taxable years beginning on or after January 1, 2008,
Section 125 of the Internal Revenue Code, as amended by Section 1201
of the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (Public Law 108-173), relating to health savings
accounts, shall apply, except as otherwise provided.
  SEC. 6.  Section 17215 of the Revenue and Taxation Code is amended
to read:
   17215.  (a) Section 220(a) of the Internal Revenue Code, relating
to deduction allowed, is modified to provide that the amount allowed
as a deduction shall be an amount equal to the amount allowed to that
individual as a deduction under Section 220 of the Internal Revenue
Code, relating to medical savings accounts, on the federal income tax
return filed for the same taxable year by that individual.
   (b) Section 220(f)(4) of the Internal Revenue Code, relating to
additional tax on distributions not used for qualified medical
expenses, is modified by substituting "10 percent" in lieu of "15
percent."
   (c) Section 220(f)(5) of the Internal Revenue Code, as amended by
Section 1201(c) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to permitted
rollovers from Archer Medical Savings Accounts, shall apply, except
as otherwise provided.
   (d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2008.
  SEC. 7.  Section 17215.1 of the Revenue and Taxation Code is
amended to read:
   17215.1.  (a) Section 220(f)(5) of the Internal Revenue Code,
relating to rollover contributions, shall not apply.
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2008. This section shall
remain in effect only until January 1, 2013, and as of that date is
repealed.
  SEC. 8.  Section 17215.4 of the Revenue and Taxation Code is
amended to read:
   17215.4.  (a) Section 223 of the Internal Revenue Code, relating
to health savings accounts, shall not apply.
   (b) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2008. This section shall
remain in effect only until January 1, 2013, and as of that date is
repealed.
  SEC. 9.  Section 17216 is added to the Revenue and Taxation Code,
to read:
   17216.  For taxable years beginning on or after January 1, 2008,
all of the following apply:
   (a) Section 223 of the Internal Revenue Code, as added by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), and as amended by
Title III of the Tax Relief and Health Care Act (TRHCA) of 2006
(Public Law 109-432), relating to health savings accounts, shall
apply, except as otherwise provided.
   (b) Section 223(e)(1) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting the phrase "Section 17651" for the phrase "Section 511
(relating to imposition of tax of unrelated business income of
charitable, etc., organizations)," contained therein.
   (c) Section 223(f)(4)(A) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting "21/2 percent" for "10 percent," contained therein.
  SEC. 10.  Section 19184 of the Revenue and Taxation Code is amended
to read:
   19184.  (a) A penalty of fifty dollars ($50) shall be imposed for
each failure, unless it is shown that the failure is due to
reasonable cause, by any person required to file who fails to file a
report at the time and in the manner required by any of the following
provisions:
   (1) Subdivision (c) of Section 17507, relating to individual
retirement accounts.
   (2) Section 220(h) of the Internal Revenue Code, relating to
medical savings accounts for taxable years beginning on or after
January 1, 1997.
   (3) Section 233(h) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to health
savings accounts.
   (4) Subdivision (b) of Section 17140.3 or subdivision (b) of
Section 23711 relating to qualified tuition programs.
   (5) Subdivision (e) of Section 23712, relating to Coverdell
education savings accounts.
   (b) (1) Any individual who:
   (A) Is required to furnish information under Section 17508 as to
the amount designated nondeductible contributions made for any
taxable year, and
   (B) Overstates the amount of those contributions made for that
taxable year, shall pay a penalty of one hundred dollars ($100) for
each overstatement  ,  unless it is shown that the
overstatement is due to reasonable cause.
   (2) Any individual who fails to file a form required to be filed
by the Franchise Tax Board under Section 17508 shall pay a penalty of
fifty dollars ($50) for each failure unless it is shown that the
failure is due to reasonable cause.
   (c) Article 3 (commencing with Section 19031) of this chapter
(relating to deficiency assessments) shall not apply in respect of
the assessment or collection of any penalty imposed under this
section.
   (d) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2008.
  SEC. 11.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.