BILL NUMBER: AB 2041 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 11, 2010
AMENDED IN ASSEMBLY MARCH 10, 2010
INTRODUCED BY Assembly Members Villines and Smyth
FEBRUARY 17, 2010
An act to amend Sections 17072 and 17215
19184 of, to amend and repeal Sections 17131.4, 17131.5,
17215, 17215.1, and 17215.4 of, and to add Sections 17138.5,
17138.6, 17215.2, and 17216 to, the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2041, as amended, Villines. 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, 2010, 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, 2010,
also provide related conformity to that federal law with respect to
treatment of the account as a tax-exempt trust and the allowance of
rollovers from Archer Medical Savings Accounts, health flexible
spending arrangements, or health reimbursement accounts to a health
savings account.
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, 2010.
SEC. 2. Section 17138.5 is added to the Revenue
and Taxation Code, to read:
17138.5. For taxable years beginning on or after January 1, 2010,
Section 106 of the Internal Revenue Code, as amended by Section 302
of the Tax Relief and Health Care Act of 2006 (Public Law 109-432),
relating to health savings accounts, shall apply, except as otherwise
provided.
SEC. 3. Section 17138.6 is added to the Revenue
and Taxation Code, to read:
17138.6. For taxable years beginning on or after January 1, 2010,
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. 4. 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, 2010.
SEC. 5. Section 17216 is added to the Revenue
and Taxation Code, to read:
17216. For taxable years beginning on or after January 1, 2010,
both 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 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.
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, 2010.
(c) This section shall remain in effect only until January 1,
2015, 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, 2010.
(c) This section shall remain in effect only until January 1,
2015, and as of that date is repealed.
SEC. 4. Section 17138. 5 is added to
the Revenue and Taxation Code , to read:
17138.5. (a) For taxable years beginning on or after January 1,
2010, Section 106 of the Internal Revenue Code, as amended by Section
302 of the Tax Relief and Health Care Act of 2006 (Public Law
109-432), relating to health savings accounts, shall apply, except as
otherwise provided.
(b) For taxable years beginning on or after January 1, 2011,
Section 106 of the Internal Revenue Code, as amended by Section 9003
of the Patient Protection and Affordable Care Act (Public Law
111-148), relating to health savings accounts, shall apply, except as
otherwise provided.
(c) The Franchise Tax Board shall prescribe those regulations as
may be necessary to carry out the purposes of this section.
SEC. 5. Section 17138.6 is added to the
Revenue and Taxation Code , to read:
17138.6. (a) For taxable years beginning on or after January 1,
2010, Section 125 of the Internal Revenue Code, as amended by Section
11 of the Tax Technical Corrections Act of 2007 (Public Law
110-172), and as amended by Section 114 of the Heroes Earnings
Assistance and Relief Tax Act of 2008 (Public Law 110-245), relating
to health savings accounts, shall apply, except as otherwise
provided.
(b) For taxable years beginning on or after January 1, 2011,
Section 125 of the Internal Revenue Code, as amended by Sections
1515, 9005, and 10902 of the Patient Protection and Affordable Care
Act (Public Law 111-148), and as amended by Section 1403 of the
Health Care and Education Reconciliation Act of 2010 (Public Law
111-152), relating to health savings accounts, shall apply, except as
otherwise provided.
(c) The Franchise Tax Board shall prescribe those regulations as
may be necessary to carry out the purposes of this section.
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) This section shall apply to taxable years beginning on or
after January 1, 2005, and before January 1, 2010.
(d) This section shall remain in effect only until January 1,
2015, and as of that date is repealed.
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, 2010.
(c) This section shall remain in effect only until January 1,
2015, and as of that date is repealed.
SEC. 8. Section 17215.2 is added to the
Revenue and Taxation Code , to read:
17215.2. (a) For taxable years beginning on or after January 1,
2010, Section 220 of the Internal Revenue Code, as amended by Title
III of the Tax Relief and Health Care Act of 2006 (Public Law
109-432), relating to health savings accounts, shall apply, except as
otherwise provided.
(b) For taxable years beginning on or after January 1, 2011,
Section 220 of the Internal Revenue Code, as amended by Sections 9003
and 9004 of the Patient Protection and Affordable Care Act (Public
Law 111-148), relating to health savings accounts, shall apply,
except as otherwise provided.
(c) 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.
(d) The Franchise Tax Board shall prescribe those regulations as
may be necessary to carry out the purposes of this section.
SEC. 9. 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, 2010.
(c) This section shall remain in effect only until January 1,
2015, and as of that date is repealed.
SEC. 10. Section 17216 is added to the
Revenue and Taxation Code , to read:
17216. (a) For taxable years beginning on or after January 1,
2010, Section 223 of the Internal Revenue Code, as amended by Section
404(c) of the Gulf Opportunity Zone Act of 2005 (Public Law
109-135), and as amended by Title III of the Tax Relief and Health
Care Act of 2006 (Public Law 109-432), relating to health savings
accounts, shall apply, except as following:
(1) Section 223(e)(1) of the Internal Revenue Code 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.
(2) Section 223(f)(4)(A) of the Internal Revenue Code shall be
modified by substituting "21/2 percent" for "10 percent," contained
therein.
(b) (1) For taxable years beginning on or after January 1, 2011,
Section 223 of the Internal Revenue Code, as amended by Sections 9003
and 9004 of the Patient Protection and Affordable Care Act (Public
Law 111-148), relating to health savings accounts, shall apply.
(2) For taxable years beginning on or after January 1, 2011, the
modification in paragraph (2) of subdivision (a) shall not apply.
(c) The Franchise Tax Board shall prescribe those regulations as
may be necessary to carry out the purposes of this section.
SEC. 11. 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 223(h) of the Internal Revenue Code.
(3)
(4) Subdivision (b) of Section 17140.3 or subdivision
(b) of Section 23711 relating to qualified tuition programs
.
(4)
(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 only to taxable years beginning on or after
January 1, 2010.
SEC. 6. SEC. 12. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.