BILL NUMBER: AB 1831 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 1, 2014
INTRODUCED BY Assembly Member Conway
FEBRUARY 18, 2014
An act to amend Section 17072 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1831, as amended, Conway. Personal
California Health Insurance Fairness Act: personal income tax:
deduction: medical insurance.
The Personal Income Tax Law provides for various deductions in
computing the income that is subject to the taxes imposed by that law
including in modified conformity with federal tax law, a
deduction for that portion of medical expenses that is more than
10%, or for certain taxpayers 7.5% ,
of adjusted gross income. Self-employed individuals may
deduct health insurance premiums for medical expenses incurred by the
taxpayer in lieu of the itemized deduction for medical expenses.
This bill, for taxable years beginning on or after January 1,
2014, would allow a deduction from gross income under the Personal
Income Tax Law for the amounts paid or incurred by a taxpayer during
the taxable year for medical insurance for medical care, as defined,
and for transportation for and essential to that medical care, as
provided. The bill would not allow as an itemized deduction,
and deduction, an amount allowed as a deduction
from gross income as provided in the bill.
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. This act shall be known, and may be
cited, as the California Health Insurance Fairness Act.
SEC. 2. The Legislature finds and declares all of
the following:
(a) In 2010, Congress passed the Affordable Care Act, commonly
known as "Obamacare," which mandates that individuals obtain health
insurance. This mandate is known as the individual mandate.
(b) Under Obamacare, all Californians are forced to obtain health
insurance by March of 2014.
(c) Under both federal and state tax laws, employer-paid insurance
benefits are excluded from taxation and paid for with pretaxable
income.
(d) According to the Kaiser Family Foundation, four million
Californians do not get their health insurance paid for by their
employers and, in order to meet the federal mandate, they will have
to obtain health insurance or face a penalty imposed by the IRS of up
to 1 percent of their 2014 income, 2 percent of their 2015 income,
and 2.5 percent of their 2016 income. Tax penalties for uninsured
children are one-half of the penalty for an adult.
(e) Individuals and families with an income in 2014 that is
between 138 percent and 400 percent of the poverty level will be able
to purchase health insurance through Covered California and will
receive a tax subsidy to offset all or part of the health insurance
premium. If the individual's or family's income is less than these
percentages, that individual or family may qualify for Medi-Cal.
(f) The Kaiser Family Foundation estimates that 52 percent of
Americans who buy individual insurance today would not be eligible
for subsidies to help offset the cost of health care. The 48 percent
that do receive subsidies would receive an average of $5,548 per
year, which would only cover 66 percent of the cost. Most individuals
will face higher premiums and higher taxes to pay for those
subsidies that others will receive.
(g) Around 1.2 million Californians do not receive employer-paid
health insurance and are not eligible for Medi-Cal or other taxpayer
paid insurance programs and must purchase their health insurance
directly from an insurer. Individuals and families must buy their
health insurance with after-tax dollars if they are ineligible for a
subsidy or the subsidy does not cover the full cost of the insurance,
making their health insurance more expensive.
(h) Under existing California law, a taxpayer is able to deduct
medical expenses, including the cost of purchasing health insurance,
that exceed 7.5 percent of their adjusted gross income. Any medical
expense below 7.5 percent of their income is not tax deductible. Only
taxpayers that itemize their deductions can take the deduction.
Because that threshold is so high, many taxpayers do not get any tax
benefit, thus making the cost of their insurance more expensive.
(i) Bringing the threshold from 7.5 percent down to 0 percent will
level the playing field between those who receive insurance from an
employer and those purchasing it in the individual market. It would
also reduce the number of uninsured and, accordingly, would reduce
the costs associated with providing health care to the uninsured.
SECTION 1. SEC. 3. 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) Section 62(a)(21) of the Internal Revenue Code, relating to
attorneys fees relating to awards to whistleblowers, shall not apply.
(d) Section 62(a) of the Internal Revenue Code is modified to
additionally provide that the amount allowed as a deduction under
Section 213(d)(1)(D) of the Internal Revenue Code shall be allowed as
a deduction for purposes of computing adjusted gross income, except
as otherwise provided.
(1) For purposes of this subdivision, Section 213(d)(1)(D) of the
Internal Revenue Code is modified to provide that the phrases "
(including amounts paid as premiums under part B of title XVIII of
the Social Security Act, relating to supplementary medical insurance
for the aged)" and "or for any qualified long-term care insurance
contract (as defined in section 7702B(b))" shall not apply.
(2) Any amount allowed as a deduction under this subdivision shall
not be allowed as an itemized deduction under Section 63 of the
Internal Revenue Code, relating to taxable income defined, as
applicable, for purposes of this part.
(3) This subdivision shall apply to taxable years beginning on or
after January 1, 2014.
SEC. 2. SEC. 4. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.