SecondHB1163_H_FIN.001 RegularNOT SessionAMENDED Seventy-thirdHOUSE GeneralCOMMITTEE AssemblyOF STATEREFERENCE OFREPORT COLORADO_______________________________ INTRODUCEDApril LLS7, NO.2022 Chair of Committee Date Committee on Finance .

22-0527.01After Edconsideration DeCeccoon x4216the HOUSEmerits, BILLthe 22-1163Committee HOUSErecommends SPONSORSHIPthe Soper,following: SENATE SPONSORSHIP Smallwood, House Committees Senate Committees Finance A BILL FOR AN ACT CONCERNINGTHECREATIONOFASTATEINCOMETAXDEDUCTIONFOR OUT -OF-POCKET MEDICAL EXPENSES .

BillHB22-1163 Summarybe (Note:postponed indefinitely.

This** summary*** applies** to*** this** bill as introduced and does notreflectanyamendmentsthatmaybesubsequentlyadopted.Ifthisbill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.) The starting point for determining state income tax liability is federal taxable income.

Federal taxable income is adjusted for additions andsubtractions(deductions)thatareusedtodetermineColoradotaxable income, which amount is multiplied by the state's income tax rate of 4.55%.

For the next 7 income tax years, the bill allows an individual to Shading denotes HOUSE amendment.

Double underlining denotes SENATE amendment.

Capital letters or bold & italic numbers indicate new material to be added to existing statute.

Dashes through the words indicate deletions from existing statute.

claim a deduction for qualifying out-of-pocket medical expenses, if the expenses are not:

! Claimed as a deduction on the taxpayer's federal income tax return;

! Paid or reimbursed from a medical savings account;

or ! Paid or reimbursed by the taxpayer's insurance company.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.

In Colorado Revised Statutes, 39-22-104, add (4)(bb) as follows:

39-22-104.

Income tax imposed on individuals, estates, and trusts - single rate - report - legislative declaration - definitions - repeal.

(4) There shall be subtracted from federal taxable income:

(bb) (I) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1,2023BUTPRIORTO JANUARY 1,2030,ANAMOUNTEQUALTO A QUALIFYING MEDICAL EXPENSE PAID BY THE TAXPAYER DURING THE TAXABLEYEARFORMEDICALCAREOFTHETAXPAYERORTHETAXPAYER S SPOUSE OR A DEPENDENT,IF THE EXPENSE IS N:T (A) C LAIMED AS A DEDUCTION ON THE TAXPAYER 'S FEDERAL INCOME TAX RETURN ;

(B) PAID OR REIMBURSED FROM A MEDICALSAVINGS ACCOUNT IN ACCORDANCE WITH SECTION 39-22-504.7 (3)(b)(OR;

(C) P AID OR REIMBURSED BY THE TAXPAYER S INSURANCE COMPANY .

(II) TEGENERALASSEMBLYHEREBYFINDSANDDECLARESTHAT :

(A) C OLORADANS SPEND MILLIONS OF DOLLARS EACH YEAR ON OUT OF POCKET HEALTH CARE COSTS ;

(B) T HESE TYPES OF EXPENSES ARE EXPECTED TO ANNUALLY GROW BY ALMOST TEN PERCENT PER YEAR OVER THE NEXT FIVE YEARS, -2- HB22-1163 THEREBY CONSUMING A GREATER PERCENTAGE OF INDIVIDUALS 'OR FAMILIES'BUDGETS;

(C) IT IS EXPECTED THAT UP TO FIVE HUNDRED THOUSAND C OLORADANSMAYLOSETHEIRCOVERAGEUNDERMEDICAIDINTHENEAR FUTURE , AND THOSE PERSONS MAY HAVE SUBSTANTIALLY MORE OUT OF-POCKET MEDICAL EXPENSES AS A RESUL;AND (D) THE STATE CAN ALLEVIATE SOME OF THE BURDEN OF INCREASING OUT OF POCKET MEDICAL EXPENDITURES BY ALLOWING INDIVIDUALSTOCLAIMSUCHEXPENDITURESASINCOMETAXDEDUCTIONS .

(III) (A) I ACCORDANCE WITH SECTION 39-21-304 (1),THE PURPOSEOFTHETAXEXPENDITURECREATEDINTHISSUBSECTION (4)(bb) IS TO PROVIDE TAX RELIEF FOR TAXPAYERS WHO HAVE QUALIFYING MEDICAL EXPENSES DURING AN INCOME TAX YEAR.

(B) T HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL MEASURE THE EFFECTIVENESS OF THE EXEMPTION IN ACHIEVING THE PURPOSESPECIFIEDINSUBSECTION (4)(bb)(III)OFTHISSECTIONBASED ON THE NUMBER OF TAXPAYERS WHO CLAIM THE EXEMPTION .

(IV) ASUSEDINTHISSUBSECTION (4)(bb),QUALIFYINGMEDICAL EXPENSE "MEANS A MEDICAL EXPENSE ,INCLUDING A DENTAL EXPENSE, THATMEETSTHEREQUIREMENTSFORADEDUCTIONSETFORTHINSECTION 213 OF THE INTERNAL REVENUE CODE ,EXCLUDING THE REQUIREMENT THATTHEMEDICALEXPENSESEXCEEDSEVENANDONE -HALFPERCENTOF THE TAXPAYER S FEDERAL ADJUSTED GROSS INCOME.

(V) T HIS SUBSECTION(4)(bb)IS REPEALE,EFFECTIVE JULY 1, 2031.

SECTION 2.

Act subject to petition - effective date.

This act takes effect at 12:01 a.m.

on the day following the expiration of the -3- HB22-1163 ninety-dayperiodafterfinaladjournmentofthegeneralassembly;except that, if a referendumpetition is filed pursuanttosection 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved bythe people at the general election to be held in November 2022 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.

-4- HB22-1163