AB 1178 Summary

• Adopts specified provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 into California's Personal Income Tax Law and Corporation Tax Law for federal conformity purposes.

• Establishes gross income exclusions for reimbursements for medical care expenses, Indian health care benefits, free choice vouchers, National Health Service Corps loan repayments, student loan repayments, adoption assistance, and therapeutic discovery project credits.

• Modifies tax treatment of health flexible spending arrangements (capped at $2,500 for taxable years beginning January 1, 2013) and cafeteria plans for small businesses (effective January 1, 2011).

• Changes the additional tax rate on distributions from medical savings accounts not used for qualified medical expenses from 15 percent to 10 percent (and 20 percent to 12.5 percent for certain years beginning January 1, 2011).

• Prohibits deductions for fees imposed on manufacturers or importers of branded prescription drugs (effective January 1, 2011) and takes effect immediately as a tax levy.