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AB-2384 Income tax: health savings accounts.(2019-2020)

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Date Published: 02/18/2020 09:00 PM
AB2384:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2384


Introduced by Assembly Member Choi
(Principal coauthors: Senators Bates, Chang, and Dahle)

February 18, 2020


An act to amend Sections 17072, 17131.4, 17131.5, 17215.1, and 17215.4 of, and to add Section 17217 to, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2384, as introduced, Choi. 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, for taxable years beginning on or after January 1, 2020, and before January 1, 2025, would allow a deduction in computing adjusted gross income 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. The bill, for taxable years beginning on or after January 1, 2020, and before January 1, 2025, would also provide related conformity to that federal law with respect to 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   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) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.
(d) For taxable years beginning on or after January 1, 2020, and before January 1, 2025, Section 62(a)(19) of the Internal Revenue Code, relating to health savings accounts, shall apply, as modified by Section 17217.

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, 2020, and to taxable years beginning on or after January 1, 2025.

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, 2020, and to taxable years beginning on or after January 1, 2025.

SEC. 4.

 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, 2020, and to taxable years beginning on or after January 1, 2025.

SEC. 5.

 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, 2020, and to taxable years beginning on or after January 1, 2025.

SEC. 6.

 Section 17217 is added to the Revenue and Taxation Code, to read:

17217.
 For taxable years beginning on or after January 1, 2020, and before January 1, 2025, all of the following shall apply:
(a) Section 223 of the Internal Revenue Code, relating to health savings accounts, shall apply, except as otherwise provided.
(b) 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 on tax of unrelated business income of charitable, etc. organizations)” contained therein.
(c) Section 223(f)(4)(A) of the Internal Revenue Code shall not apply.

SEC. 7.

 For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares all of the following with respect to the provisions of this act:
(a) The specific goals, purposes, and objectives that this act will achieve are:
(1) To provide a tax incentive to motivate California families to open and contribute to a health savings account, for the purpose of saving for future health expenses, thereby encouraging more Californians to pursue a means of preparing for future health-related expenses.
(2) To reduce the amount of debt related to health care on a dollar-for-dollar basis, thereby increasing a person’s ability to purchase other products that help stimulate economic activity.
(3) To bring California into conformity with federal tax law regarding the treatment of health savings accounts.
(b) Detailed performance indicators for the Legislature to use in determining whether this act meets the goals, purposes, and objectives listed in subdivision (a) are:
(1) The number of deductions allowed by the Franchise Tax Board pursuant to this act with respect to each taxable year for which this act is operative.
(2) The total dollar amount of the deductions described in paragraph (1).
(c) The Franchise Tax Board shall report the information described in subdivision (b) to the Legislature in every odd-numbered year during which the provisions of the act adding this section are operative.

SEC. 8.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.