text: SECTION 1. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.
  
      (a) In General.--Part VII of subchapter B of chapter 1 of the 
  Internal Revenue Code of 1986 (relating to additional itemized 
  deductions for individuals) is amended by redesignating section 224 as 
  section 225 and by inserting after section 223 the following new 
  section:
  
  ``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.
  
      ``(a) Deduction Allowed.--In the case of an individual, there shall 
  be allowed as a deduction for the taxable year the aggregate amount 
  paid by such individual as premiums under a high deductible health plan 
  with respect to months during such year for which such individual is an 
  eligible individual with respect to such health plan.
      ``(b) Definitions.--For purposes of this section--
              ``(1) Eligible individual.--The term `eligible individual' 
          has the meaning given such term by section 223(c)(1).
              ``(2) High deductible health plan.--The term `high 
          deductible health plan' has the meaning given such term by 
          section 223(c)(2).
      ``(c) Special Rules.--
              ``(1) Deduction limits.--
                      ``(A) Deduction allowable for only 1 plan.--For 
                  purposes of this section, in the case of an individual 
                  covered by more than 1 high deductible health plan for 
                  any month, the individual may only take into account 
                  amounts paid for such month for the plan with the 
                  lowest premium.
                      ``(B) Plans covering ineligible individuals.--If 2 
                  or more individuals are covered by a high deductible 
                  health plan for any month but only 1 of such 
                  individuals is an eligible individual for such month, 
                  only 50 percent of the aggregate amount paid by such 
                  eligible individual as premiums under the plan with 
                  respect to such month shall be taken into account for 
                  purposes of this section.
              ``(2) Group health plan coverage.--
                      ``(A) In general.--No deduction shall be allowed to 
                  an individual under subsection (a) for any amount paid 
                  for coverage under a high deductible health plan for a 
                  month if that individual participates in any coverage 
                  under a group health plan (within the meaning of 
                  section 5000 without regard to section 5000(d)).
                      ``(B) Exception for plans only providing 
                  contributions to health savings accounts.--Subparagraph 
                  (A) shall not apply to an individual if the 
                  individual's only coverage under a group health plan 
                  for a month consists of contributions by an employer to 
                  a health savings account with respect to which the 
                  individual is the account beneficiary.
                      ``(C) Exception for certain permitted coverage.--
                  Subparagraph (A) shall not apply to an individual if 
                  the individual's only coverage under a group health 
                  plan for a month is coverage described in clause (i) or 
                  (ii) of section 223(c)(1)(B).
              ``(3) Medical and health savings accounts.--Subsection (a) 
          shall not apply with respect to any amount which is paid or 
          distributed out of an Archer MSA or a health savings account 
          which is not included in gross income under section 220(f) or 
          223(f), as the case may be.
              ``(4) Coordination with deduction for health insurance of 
          self-employed individuals.--Any amount taken into account by 
          the taxpayer in computing the deduction under section 162(l) 
          shall not be taken into account under this section.
              ``(5) Coordination with medical expense deduction.--Any 
          amount taken into account by the taxpayer in computing the 
          deduction under this section shall not be taken into account 
          under section 213.''.
      (b) Deduction Allowed Whether or Not Individual Itemizes Other 
  Deductions.--Subsection (a) of section 62 of such Code is amended by 
  inserting before the last sentence at the end the following new 
  paragraph:
              ``(21) Premiums for high deductible health plans.--The 
          deduction allowed by section 224.''.
      (c) Coordination With Section 35 Health Insurance Costs Credit.--
  Section 35(g)(2) of such Code is amended by striking ``or 213'' and 
  inserting ``, 213, or 224''.
      (d) Clerical Amendment.--The table of sections for part VII of 
  subchapter B of chapter 1 of such Code is amended by redesignating the 
  item relating to section 224 as an item relating to section 225 and by 
  inserting before such item the following new item:
  
  ``Sec. 224. Premiums for high deductible health plans.''.
      (e) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2006.
  
  SEC. 2. CREDIT FOR CERTAIN EMPLOYMENT TAXES PAID WITH RESPECT TO 
                PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS AND 
                CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.
  
      (a) Allowance of Credit.--Subpart C of part IV of subchapter A of 
  chapter 1 of the Internal Revenue Code of 1986 (relating to refundable 
  credits) is amended by redesignating section 36 as section 37 and by 
  inserting after section 35 the following new section:
  
  ``SEC. 36. EMPLOYMENT TAXES PAID WITH RESPECT TO PREMIUMS FOR HIGH 
                DEDUCTIBLE HEALTH PLANS AND CONTRIBUTIONS TO HEALTH 
                SAVINGS ACCOUNTS.
  
      ``(a) Allowance of Credit.--In the case of an individual, there 
  shall be allowed as a credit against the tax imposed by this subtitle 
  for the taxable year an amount equal to the product of--
              ``(1) the sum of the rates of tax in effect under sections 
          3101(a), 3101(b), 3111(a), and 3111(b) for the calendar year in 
          which the taxable year begins, multiplied by
              ``(2) the sum of--
                      ``(A) the aggregate amount paid by such individual 
                  as premiums under a high deductible health plan which 
                  is allowed as a deduction under section 224 for the 
                  taxable year, and
                      ``(B) the aggregate amount paid to a health savings 
                  account of such individual which is allowed as a 
                  deduction under section 223 for the taxable year.
      ``(b) Credit Limited to Certain Employment Taxes.--
              ``(1) In general.--The credit allowed under subsection (a) 
          with respect to any individual for any taxable year shall not 
          exceed the specified employment taxes with respect to such 
          individual for such taxable year.
              ``(2) Specified employment taxes.--For purposes of this 
          subsection, the term `specified employment taxes' means, with 
          respect to any individual for any taxable year, the sum of--
                      ``(A) the taxes imposed under sections 3101(a), 
                  3101(b), 3111(a), 3111(b), 3201(a), 3211(a), and 
                  3221(a) (taking into account any adjustments or refunds 
                  under section 6413) with respect to wages and 
                  compensation received by such individual during the 
                  calendar year in which such taxable year begins, and
                      ``(B) the taxes imposed under subsections (a) and 
                  (b) of section 1401 with respect to the self-employment 
                  income of such individual for such taxable year.
      ``(c) Special Rule for Employment Compensation in Excess of Social 
  Security Contribution Base.--
              ``(1) In general.--If the aggregate amount of employment 
          compensation received by any individual during the calendar 
          year in which the taxable year begins exceeds the contribution 
          and benefit base (as determined under section 230 of the Social 
          Security Act), the amount of the credit determined under 
          subsection (a) (determined before application of subsection 
          (b)) shall be equal to the sum of--
                      ``(A) the amount determined under subsection (a) by 
                  only taking into account so much of the amount 
                  determined under subsection (a)(2) as does not exceed 
                  such excess and by only taking into account the rates 
                  of tax in effect under section 3101(b) and 3111(b), and
                      ``(B) the amount determined under subsection (a) by 
                  only taking into account so much of the amount 
                  determined under subsection (a)(2) as is not taken into 
                  account under subparagraph (A) and by taking into 
                  account each of the rates of tax referred to in 
                  subsection (a)(1).
              ``(2) Employment compensation.--For purposes of this 
          subsection, the term `employment compensation' means, with 
          respect to any individual for any taxable year, the sum of--
                      ``(A) the wages (as defined in section 3121(a)) and 
                  compensation (as defined in section 3231(e)) received 
                  by such individual during the calendar year in which 
                  such taxable year begins, and
                      ``(B) the self-employment income (as defined in 
                  section 1402(b)) of such individual for such taxable 
                  year.''.
      (b) Increase in Additional Tax on Distributions Not Used for 
  Qualified Medical Expenses.--Paragraph (4) of section 223(f) of such 
  Code (relating to additional tax on distributions not used for 
  qualified medical expenses) is amended to read as follows:
              ``(4) Additional tax on distributions not used for 
          qualified medical expenses.--
                      ``(A) In general.--The tax imposed by this chapter 
                  on the account beneficiary for any taxable year in 
                  which there is a payment or distribution from a health 
                  savings account of such beneficiary which is includible 
                  in gross income under paragraph (2) shall be increased 
                  by 30 percent of the amount which is so includible.
                      ``(B) Exception for disability or death.--In the 
                  case of payments or distributions made after the 
                  account beneficiary becomes disabled within the meaning 
                  of section 72(m)(7) or dies, subparagraph (A) shall be 
                  applied by substituting `15 percent' for `30 percent'.
                      ``(C) Exception for distributions after medicare 
                  eligibility.--In the case of payments or distributions 
                  made after the date on which the account beneficiary 
                  attains the age specified in section 1811 of the Social 
                  Security Act, subparagraph (A) shall be applied by 
                  substituting `15 percent' for `30 percent'.''.
      (c) Conforming Amendments.--
              (1) Paragraph (2) of section 1324(b) of title 31, United 
          States Code, is amended by inserting ``or section 36'' after 
          ``section 35''.
              (2) The table of sections for subpart C of part IV of 
          subchapter A of chapter 1 of the Internal Revenue Code of 1986 
          is amended by striking the item relating to section 36 and by 
          inserting after the item relating to section 35 the following 
          new items:
  
          ``Sec. 36. Employment taxes paid with respect to premiums for 
                              high deductible health plans and 
                              contributions to health savings accounts.
          ``Sec. 37. Overpayments of tax.''.
      (d) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2006.
target: Amends the Internal Revenue Code to allow: (1) a tax deduction from gross income (available to taxpayers who do not itemize deductions) for insurance premiums for high deductible health plans; and (2) a tax credit for certain employment taxes related to premiums for high deductible health plans and contributions to health savings accounts.
feat_title: A bill to amend the Internal Revenue Code of 1986 to allow a deduction for the payment of premiums for high deductible health plans, to allow a credit for certain employment taxes paid with respect to premiums for high deductible health plans and contributions to health savings accounts, and for other purposes.