S.Amdt. 2999

SA 2999. Ms. SNOWE (for herself, Mr. Kerry, and Ms. Landrieu)
submitted an amendment intended to be proposed to amendment SA 2786
proposed by Mr. Reid (for himself, Mr. Baucus, Mr. Dodd, and Mr.
Harkin) to the bill H.R. 3590, to amend the Internal Revenue Code of
1986 to modify the first-time homebuyers credit in the case of members
of the Armed Forces and certain other Federal employees, and for other
purposes; which was ordered to lie on the table; as follows:

On page 2057, between lines 6 and 7, insert the following:

SEC. __. APPLICATION OF CAFETERIA PLANS TO SELF-EMPLOYED
INDIVIDUALS.

(a) In General.--
(1) Application to self-employed individuals.--Section
125(d) of the Internal Revenue Code of 1986 (defining
cafeteria plan) is amended by adding at the end the following
new paragraph:
``(3) Employee to include self-employed.--
``(A) In general.--The term `employee' includes an
individual who is an employee within the meaning of section
401(c)(1) (relating to self-employed individuals).
``(B) Limitations.--
``(i) In general.--The amount which may be excluded under
subsection (a) with respect to a participant in a cafeteria
plan by reason of being an employee under subparagraph (A)
shall not exceed the employee's earned income (within the
meaning of section 401(c)) derived from the trade or business
with respect to which the cafeteria plan is established.
``(ii) Limitations on certain flexible spending
arrangements.--No amount shall be excluded under subsection
(a) with respect to any plan which provides benefits in the
form of a health flexible spending arrangement or a dependent
care flexible spending arrangement and in which an individual
described in subparagraph (A) participates unless such plan
is administered by a person other than the employer.
``(C) Additional tax on unreimbursed amounts.--
``(i) In general.--The tax imposed by this chapter on any
person who is described in subparagraph (A) and who is a
participant in a cafeteria plan which provides benefits in
the form of a health flexible spending arrangement or a
dependent care flexible spending arrangement shall be
increased by an amount equal to 100 percent of the excess (if
any) of--

``(I) the maximum value of the qualified benefit with
respect to such person, over
``(II) the amount of covered expenses both incurred during
the coverage period for the qualified benefit, and any grace
period, and reimbursed during that period or during any
appropriate run-out period.

``(ii) Collection.--The tax imposed by this subparagraph
shall be collected by the person administering the flexible
spending arrangement, and to the extent that such person
fails to collect such tax, the tax shall be paid by such
person.''.
(2) Application to benefits which may be provided under
cafeteria plan.--
(A) Group-term life insurance.--Section 79 of the Internal
Revenue Code of 1986 (relating to group-term life insurance
provided to employees) is amended by adding at the end the
following new subsection:
``(f) Employee Includes Self-Employed.--
``(1) In general.--For purposes of this section, the term
`employee' includes an individual who is an employee within
the meaning of section 401(c)(1) (relating to self-employed
individuals).
``(2) Limitation.--The amount which may be excluded under
the exceptions contained in subsection (a) or (b) with
respect to an individual treated as an employee by reason of
paragraph (1) shall not exceed the employee's earned income
(within the meaning of section 401(c)) derived from the trade
or business with respect to which the individual is so
treated.''.
(B) Accident and health plans.--Subsection (g) of section
105 of such Code (relating to amounts received under accident
and health plans) is amended to read as follows:
``(g) Employee Includes Self-Employed.--
``(1) In general.--For purposes of this section, in the
case of any coverage under an accident or health plan which
is provided through a simple cafeteria plan under section
125(j), the term `employee' includes an individual who is an
employee within the meaning of section 401(c)(1) (relating to
self-employed individuals).
``(2) Limitation.--The amount which may be excluded under
this section by reason of subsection (b) or (c) with respect
to an individual treated as an employee by reason of
paragraph (1) shall not exceed the employee's earned income
(within the meaning of section 401(c)) derived from the trade
or business with respect to which the accident or health
insurance was established.''.
(C) Contributions by employers to accident and health
plans.--
(i) In general.--Section 106 of such Code is amended by
inserting after subsection (e) the following new subsection:
``(f) Special Rule for Benefits Provided Through Simple
Cafeteria Plans.--
``(1) In general.--For purposes of this section, in the
case of any coverage under an accident or health plan which
is provided through a simple cafeteria plan under section
125(j), the term `employee' includes an individual who is an
employee within the meaning of section 401(c)(1) (relating to
self-employed individuals).
``(2) Limitation.--The amount which may be excluded under
subsection (a) with respect to an individual treated as an
employee by reason of paragraph (1) shall not exceed the
employee's earned income (within the meaning of section
401(c)) derived from the trade or business with respect to
which the accident or health insurance was established.''.
(ii) Clarification of limitations on other coverage.--The
first sentence of section 162(l)(2)(B) of such Code is
amended to read as follows: ``Paragraph (1) shall not apply
to any taxpayer for any calendar month for which the taxpayer
participates in any subsidized health plan maintained by any
employer (other than an employer described in section
401(c)(4)) of the taxpayer or the spouse of the taxpayer.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2010.
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