[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4432 Introduced in House (IH)]






108th CONGRESS
  2d Session
                                H. R. 4432

   To amend the Internal Revenue Code of 1986 to allow individuals a 
deduction for qualified long-term care insurance premiums, use of such 
insurance under cafeteria plans and flexible spending arrangements, and 
          a credit for individuals with long-term care needs.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 20, 2004

  Mrs. Davis of California (for herself and Mr. Paul) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to allow individuals a 
deduction for qualified long-term care insurance premiums, use of such 
insurance under cafeteria plans and flexible spending arrangements, and 
          a credit for individuals with long-term care needs.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Long-Term Care Support and Incentive 
Act of 2004''.

SEC. 2. TREATMENT OF PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE 
              CONTRACTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 224 as section 225 and 
by inserting after section 223 the following new section:

``SEC. 224. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount of eligible long-term care premiums (as defined in section 
213(d)(10)) paid during the taxable year for coverage for the taxpayer 
and the spouse and dependents of the taxpayer under a qualified long-
term care insurance contract (as defined in section 7702B(b)).
    ``(b) Applicable Percentage.--For purposes of subsection (a)--
            ``(1) Age 65 or older.--In the case of an individual who 
        has attained age 65 as of the close of the taxable year, the 
        applicable percentage shall be 75 percent.
            ``(2) Under age 65.--In the case of an individual who has 
        not attained age 65 as of the close of the taxable year, the 
        applicable percentage shall be 50 percent.
    ``(c) Coordination With Other Provisions.--Any amount paid by a 
taxpayer for any qualified long-term care insurance contract to which 
subsection (a) applies shall not be taken into account in computing the 
amount allowable to the taxpayer as a deduction under section 162(l) or 
213(a). Premiums paid by the taxpayer shall not be taken into account 
under subsection (a) to the extent that an amount is not includible in 
gross income under section 220(f) or 223(f) with respect to such 
payment.''.
    (b) Long-Term Care Insurance Permitted to Be Offered Under 
Cafeteria Plans and Flexible Spending Arrangements.--
            (1) Cafeteria plans.--Section 125(f) of the Internal 
        Revenue Code of 1986 (defining qualified benefits) is amended 
        by inserting before the period at the end ``; except that such 
        term shall include the payment of premiums for any qualified 
        long-term care insurance contract (as defined in section 7702B) 
        to the extent the amount of such payment does not exceed the 
        eligible long-term care premiums (as defined in section 
        213(d)(10)) for such contract''.
            (2) Flexible spending arrangements.--Section 106 of such 
        Code (relating to contributions by an employer to accident and 
        health plans) is amended by striking subsection (c).
    (c) Conforming Amendments.--
            (1) Section 62(a) of the Internal Revenue Code of 1986 is 
        amended by inserting after paragraph (19) the following new 
        item:
            ``(20) Premiums on qualified long-term care insurance 
        contracts.--The deduction allowed by section 224.''.
            (2) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

``224. Premiums on qualified long-term care insurance contracts.
``225. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 3. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to $4,000 multiplied by the number of applicable individuals with 
respect to whom the taxpayer is an eligible caregiver for the taxable 
year.
    ``(b) Limitations and Adjustments.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) shall be reduced (but not below zero) by $100 
        for each $1,000 (or fraction thereof) by which the taxpayer's 
        modified adjusted gross income exceeds the threshold amount. 
        For purposes of the preceding sentence, the term `modified 
        adjusted gross income' means adjusted gross income increased by 
        any amount excluded from gross income under section 911, 931, 
        or 933.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $150,000 in the case of a joint return, and
                    ``(B) $75,000 in any other case.
            ``(3) Indexing.--In the case of any taxable year beginning 
        in a calendar year after 2004, each dollar amount contained in 
        paragraph (2) shall be increased by an amount equal to the 
        product of--
                    ``(A) such dollar amount, and
                    ``(B) the medical care cost adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `August of 2003' for `August of 1996' in 
                subclause (II) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $50, such increase shall be rounded to the next 
        lowest multiple of $50.
            ``(4) Application with other credits.--The credit allowed 
        by subsection (a) for any taxable year shall not exceed the 
        excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section) and section 27 for 
                the taxable year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Applicable individual.--
                    ``(A) In general.--The term `applicable individual' 
                means, with respect to any taxable year, any 
                individual--
                            ``(i) who has attained age 65, and
                            ``(ii) who has been certified, before the 
                        due date for filing the return of tax for the 
                        taxable year (without extensions), by a 
                        physician (as defined in section 1861(r)(1) of 
                        the Social Security Act) as being an individual 
                        with long-term care needs described in 
                        subparagraph (B) for a period--
                                    ``(I) which is at least 180 
                                consecutive days, and
                                    ``(II) a portion of which occurs 
                                within the taxable year.
                Such term shall not include any individual otherwise 
                meeting the requirements of the preceding sentence 
                unless within the 39\1/2\ month period ending on such 
                due date (or such other period as the Secretary 
                prescribes) a physician (as so defined) has certified 
                that such individual meets such requirements.
                    ``(B) Individuals with long-term care needs.--An 
                individual is described in this subparagraph if the 
                individual is unable to perform (without substantial 
                assistance from another individual) at least 2 
                activities of daily living (as defined in section 
                7702B(c)(2)(B)) due to a loss of functional capacity.
            ``(2) Eligible caregiver.--
                    ``(A) In general.--A taxpayer shall be treated as 
                an eligible caregiver for any taxable year with respect 
                to the following individuals:
                            ``(i) The taxpayer.
                            ``(ii) The taxpayer's spouse.
                            ``(iii) An individual with respect to whom 
                        the taxpayer is allowed a deduction under 
                        section 151 for the taxable year.
                            ``(iv) An individual who would be described 
                        in clause (iii) for the taxable year if section 
                        151(c)(1)(A) were applied by substituting for 
                        the exemption amount an amount equal to the sum 
                        of the exemption amount, the standard deduction 
                        under section 63(c)(2)(C), and any additional 
                        standard deduction under section 63(c)(3) which 
                        would be applicable to the individual if clause 
                        (iii) applied.
                            ``(v) An individual who would be described 
                        in clause (iii) for the taxable year if--
                                    ``(I) the requirements of clause 
                                (iv) are met with respect to the 
                                individual, and
                                    ``(II) the requirements of 
                                subparagraph (B) are met with respect 
                                to the individual in lieu of the 
                                support test of section 152(a).
                    ``(B) Residency test.--The requirements of this 
                subparagraph are met if an individual has as his 
                principal place of abode the home of the taxpayer and--
                            ``(i) in the case of an individual who is 
                        an ancestor or descendant of the taxpayer or 
                        the taxpayer's spouse, is a member of the 
                        taxpayer's household for over half the taxable 
                        year, or
                            ``(ii) in the case of any other individual, 
                        is a member of the taxpayer's household for the 
                        entire taxable year.
                    ``(C) Special rules where more than 1 eligible 
                caregiver.--
                            ``(i) In general.--If more than 1 
                        individual is an eligible caregiver with 
                        respect to the same applicable individual for 
                        taxable years ending with or within the same 
                        calendar year, a taxpayer shall be treated as 
                        the eligible caregiver if each such individual 
                        (other than the taxpayer) files a written 
                        declaration (in such form and manner as the 
                        Secretary may prescribe) that such individual 
                        will not claim such applicable individual for 
                        the credit under this section.
                            ``(ii) No agreement.--If each individual 
                        required under clause (i) to file a written 
                        declaration under clause (i) does not do so, 
                        the individual with the highest modified 
                        adjusted gross income (as defined in section 
                        32(c)(5)) shall be treated as the eligible 
                        caregiver.
                            ``(iii) Married individuals filing 
                        separately.--In the case of married individuals 
                        filing separately, the determination under this 
                        subparagraph as to whether the husband or wife 
                        is the eligible caregiver shall be made under 
                        the rules of clause (ii) (whether or not one of 
                        them has filed a written declaration under 
                        clause (i)).
    ``(d) Identification Requirement.--No credit shall be allowed under 
this section to a taxpayer with respect to any applicable individual 
unless the taxpayer includes the name and taxpayer identification 
number of such individual, and the identification number of the 
physician certifying such individual, on the return of tax for the 
taxable year.
    ``(e) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.
    ``(f) Carryforward of Unused Credit.--If the credit allowable under 
subsection (a) exceeds the limitation imposed by subsection (b)(4) for 
the taxable year, such excess shall be carried to the succeeding 
taxable year and added to the credit allowable under subsection (a) for 
such taxable year.''.
    (b) Conforming Amendments.--
            (1) Section 6213(g)(2) of the Internal Revenue Code of 1986 
        is amended by striking ``and'' at the end of subparagraph (L), 
        by striking the period at the end of subparagraph (M) and 
        inserting ``, and'', and by inserting after subparagraph (M) 
        the following new subparagraph:
                    ``(N) an omission of a correct TIN or physician 
                identification required under section 25C(d) (relating 
                to credit for taxpayers with long-term care needs) to 
                be included on a return.''.
            (2) Section 23(b)(4) is amended by striking ``this 
        section'' and inserting ``this section and section 25C''.
            (3) Section 24(b)(3)(B) is amended by striking ``23 and 
        25B'' and inserting ``23, 25B, and 25C''.
            (4) Section 25(e)(1)(C) is amended by inserting ``25C,'' 
        after ``25B,''.
            (5) Section 26(a)(1) is amended by striking ``and 25B'' and 
        inserting ``, 25B, and 25C''.
            (6) Section 904(h) is amended by striking ``and 25B'' and 
        inserting ``, 25B, and 25C''.
            (7) Section 1400C(d) is amended by striking ``and 25B'' and 
        inserting ``, 25B, and 25C''.
            (8) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25B the following new item:

``25C. Credit for taxpayers with long-term care needs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 4. ADDITIONAL CONSUMER PROTECTIONS FOR LONG-TERM CARE INSURANCE.

    (a) Additional Protections Applicable to Long-Term Care 
Insurance.--Subparagraphs (A) and (B) of section 7702B(g)(2) of the 
Internal Revenue Code of 1986 (relating to requirements of model 
regulation and Act) are amended to read as follows:
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any contract if such 
                contract meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 6A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 6A.
                                    ``(II) Section 6B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 6C (relating to 
                                extension of benefits).
                                    ``(IV) Section 6D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 6E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 7 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 8 (relating to 
                                disclosure), other than section 8F 
                                thereof.
                                    ``(VIII) Section 11 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 12 (relating to 
                                minimum standards).
                                    ``(X) Section 25 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                                    ``(XI) The provisions of section 26 
                                relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                                    ``(III) The provisions of section 8 
                                relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted as of 
                        October 2000).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) of subparagraph (A) shall be 
                        treated as including any other provision of 
                        such regulation or Act necessary to implement 
                        the provision.
                            ``(iii) Determination.--For purposes of 
                        this section and section 4980C, the 
                        determination of whether any requirement of a 
                        model regulation or the model Act has been met 
                        shall be made by the Secretary.''.
    (b) Excise Tax.--Paragraph (1) of section 4980C(c) of such Code 
(relating to requirements of model provisions) is amended to read as 
follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 9 (relating to required 
                        disclosure of rating practices to consumer).''
                            ``(ii) Section 14 (relating to application 
                        forms and replacement coverage).
                            ``(iii) Section 15 (relating to reporting 
                        requirements), except that the issuer shall 
                        also report at least annually the number of 
                        claims denied during the reporting period for 
                        each class of business (expressed as a 
                        percentage of claims denied), other than claims 
                        denied for failure to meet the waiting period 
                        or because of any applicable preexisting 
                        condition.
                            ``(iv) Section 22 (relating to filing 
                        requirements for advertising).
                            ``(v) Section 23 (relating to standards for 
                        marketing), including inaccurate completion of 
                        medical histories, other than paragraphs (1), 
                        (6), and (9) of section 23C, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a qualified 
                                long-term care insurance contract, 
                                misrepresent a material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for long-term 
                                care insurance has accident and 
                                sickness insurance.
                            ``(vi) Section 24 (relating to 
                        suitability).
                            ``(vii) Section 29 (relating to standard 
                        format outline of coverage).
                            ``(viii) Section 30 (relating to 
                        requirement to deliver shopper's guide).
The requirements referred to in clause (vi) shall not include those 
portions of the personal worksheet described in Appendix B relating to 
consumer protection requirements not imposed by section 4980C or 7702B.
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6J (relating to policy 
                        summary).
                            ``(v) Section 6K (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(g)(2)(B).''.
    (c) Additional Protections.--
            (1) In general.--Paragraph (1) of section 7702B(g) of such 
        Code (relating to consumer protection provisions) is amended by 
        striking ``and'' at the end of subparagraph (B), by striking 
        the period at the end of subparagraph (C) and inserting a 
        comma, and by adding at the end the following new 
        subparagraphs:
                    ``(D) the inflation protection requirement of 
                paragraph (5),
                    ``(E) the lifetime deductible requirement of 
                paragraph (6),
                    ``(F) the interchangeability requirement of 
                paragraph (7), and
                    ``(G) the care management/care coordination 
                requirement of paragraph (8).''
            (2) Requirements.--Subsection (g) of section 7702B of such 
        Code is amended by redesignating paragraph (5) as paragraph (9) 
        and by inserting after paragraph (4) the following new 
        paragraphs:
            ``(5) Inflation protection requirement.--The requirement of 
        this paragraph is met if the contract provides for benefit 
        levels to rise at a rate which is meaningful to account for 
        reasonably anticipated increases in the cost of long-term care 
        services covered by the contract.
            ``(6) Lifetime deductible requirement.--The requirement of 
        this paragraph is met if the contract requires that no more 
        than 1 deductible amount applies for all benefits provided 
        during the entire lifetime of the covered individual.
            ``(7) Interchangeability requirement.--The requirement of 
        this paragraph is met if the policyholder has the sole 
        discretion to designate how any maximum benefit amount under 
        the contract is allocated among the benefits provided under the 
        contract.
            ``(8) Care management/care coordination requirement.--
                    ``(A) In general.--The requirement of this 
                paragraph is met if the contract requires that the 
                covered individual is assigned a care manager/
                coordinator.
                    ``(B) Care manager/coordinator.--For purposes of 
                subparagraph (A), the term `care manager/coordinator' 
                means an individual who, either alone or as part of a 
                team, is responsible for performing assessments and 
                reassessments, developing plans of care, coordinating 
                the provision of care, and monitoring the delivery of 
                services.''
    (d) Effective Date.--The amendments made by this section shall 
apply to policies issued more than 1 year after the date of the 
enactment of this Act.
                                 <all>