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2024 SESSION

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24100554D
HOUSE BILL NO. 1160 Offered January 10, 2024 Prefiled January 10, 2024 A BILL to amend the Code of Virginia by adding in Chapter 3 of Title 40.1 an article numbered 1.2, consisting of a section numbered 40.1-28.13, and by adding in Article 3 of Chapter 3 of Title 58.1 a section numbered 58.1-339.15, relating to portable benefit accounts; tax credit. ---------- Patrons-- Scott, P.A., Lovejoy and Zehr ---------- Referred to Committee on Finance ----------

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Chapter 3 of Title 40.1 an article numbered 1.2, consisting of a section numbered 40.1-28.13, and by adding in Article 3 of Chapter 3 of Title 58.1 a section numbered 58.1-339.15 as follows:

Article 1.2 Portable Benefit Accounts.

§ 40.1-28.13. Contents and designation of Code.

A. As used in this section:

"Independent contractor" means a person hired or contracted to perform work as an independent contractor as determined by the most recent version of the guidelines published by the Internal Revenue Service, including its interpretation of common law doctrine on independent contractors and any regulations that the Internal Revenue Service has promulgated regarding determining whether an employee is an independent contractor, including 26 C.F.R. § 31.3121(d)-1.

"Portable benefit account" means an account offered through and administered by a bank, credit union, or other depository institution that provides for the payment of (i) health insurance premiums, copays, deductibles, coinsurance, or other costs related to maintaining health insurance coverage; (ii) coverage for or the direct purchase of prescription drugs; (iii) fees or costs related to a health care sharing ministry arrangement; (iv) fees or costs related to a direct primary care agreement; or (v) other health care costs related to insurance coverage, alternative care, or direct-pay or cash-pay services; and is assigned to an individual beneficiary and is not associated with a specific employer or hiring party.

B. An individual who is a resident of the Commonwealth and has worked, been hired, or contracted as an independent contractor during the current tax year may open and contribute to a portable benefit account for the use of the individual, his spouse, and any dependents in the household. Distributions from a portable benefit account shall be limited to the payment of (i) health insurance premiums, copays, deductibles, coinsurance, or other costs related to maintaining health insurance coverage; (ii) coverage for or the direct purchase of prescription drugs; (iii) fees or costs related to a health care sharing ministry arrangement; (iv) fees or costs related to a direct primary care agreement; or (v) other health care costs related to insurance coverage, alternative care, or direct-pay or cash-pay services.

The beneficiary of a portable benefit account shall retain ownership and control of the account in the event that the work or contract has been completed or otherwise terminated. The individual may continue to make contributions to such account and take distributions from such account regardless of his status as an independent contractor.

§ 58.1-339.15. Portable benefit account tax credit.

A. For the purposes of this section:

"Independent contractor" has the same meaning as provided in § 40.1-28.13.

"Portable benefit account" has the same meaning as provided in § 40.1-28.13.

B. For taxable years beginning on or after January 1, 2024, but before January 1, 2029, an individual filing a return or a married person filing a joint return in Virginia who has contributed to a portable benefit account established pursuant to § 40.1-28.13 shall be allowed a nonrefundable credit against any tax levied pursuant to § 58.1-320 equal to the total amount of the contributions made to such account during the taxable year.

C. The amount of the credit that may be claimed in any single taxable year shall not exceed the household's liability for taxes imposed pursuant to § 58.1-320 for that taxable year. If the amount of the credit allowed under this section exceeds the household's liability for the taxable year in which the contributions were made, the amount that exceeds the tax liability may be carried over for credit against the tax liability of the household in the next two years or until the total amount of the credit has been taken, whichever is sooner. No other credit, deduction, or subtraction shall be allowed for the credit amount claimed under this section.

D. The credit permitted by this section shall only be claimed if the individual has worked, been hired, or contracted as an independent contractor during the taxable year for which the credit is being claimed.

E. The Tax Commissioner shall develop guidelines for claiming the credit permitted by this section. Such guidelines shall be exempt from the provisions of the Administrative Process Act (§ 2.2-4000 et seq.).