[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1980 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1980

       To improve the quality of, and access to, long-term care.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 2, 2007

 Mr. Smith (for himself, Mrs. Lincoln, and Ms. Collins) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
       To improve the quality of, and access to, long-term care.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Long-term Care 
Quality and Modernization Act of 2007''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
              TITLE I--MEDICARE AND MEDICAID MODERNIZATION

Sec. 101. Demonstration program for joint training of surveyors and 
                            providers in nursing facilities.
Sec. 102. Resumption of nurse aide training program after correction of 
                            deficiencies.
Sec. 103. Authority to exclude high cost and low probability drugs used 
                            in the treatment of cancer from the 
                            Medicare prospective payment system for 
                            skilled nursing facilities.
Sec. 104. Exclusion of all ambulance services from the Medicare 
                            prospective payment system for skilled 
                            nursing facilities.
Sec. 105. Authority to exclude additional items and services from the 
                            Medicare prospective payment system for 
                            skilled nursing facilities.
Sec. 106. Payment for blood glucose tests administered as part of a 
                            physician, nurse practitioner, or clinical 
                            nurse specialist prescribed protocol of 
                            blood glucose monitoring.
                      TITLE II--WORKFORCE SUPPORT

Sec. 201. Nursing loan repayment program.
Sec. 202. National nursing database.
Sec. 203. Reports on nursing levels.
                       TITLE III--TAX INCENTIVES

Sec. 301. 15-year recovery period for qualified long-term care 
                            improvement property.
Sec. 302. Investment tax credit for long-term care facility information 
                            technology.
Sec. 303. Long-Term Care Trust Accounts.
Sec. 304. Refundable credit for contributions to Long-Term Care Trust 
                            Accounts.

              TITLE I--MEDICARE AND MEDICAID MODERNIZATION

SEC. 101. DEMONSTRATION PROGRAM FOR JOINT TRAINING OF SURVEYORS AND 
              PROVIDERS IN NURSING FACILITIES.

    (a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall conduct a 
demonstration program under which the Secretary, under sections 1819(e) 
and 1919(e) of the Social Security Act (42 U.S.C. 1395i-3(e), 
1396r(e)), shall require a State to establish a process for joint 
training and education of surveyors and providers for skilled nursing 
facilities and nursing facilities at least annually and periodically as 
changes to regulations, guidelines, and policy governing nursing 
facility operations are implemented and used in surveys of 
participating facilities.
    (b) Demonstration States.--The demonstration program under this 
section shall be conducted in 5 States. In selecting the States in 
which to conduct the demonstration program, the Secretary shall ensure 
that the States vary in geographic location.
    (c) Duration.--The Secretary shall conduct the demonstration 
program under this section for a 2-year period.
    (d) Waiver Authority.--The Secretary may waiver such requirements 
of titles XI, XVIII, and XIX of the Social Security Act as may be 
necessary for purposes of carrying out the demonstration program under 
this section.
    (e) Report.--
            (1) In general.--Not later than 6 months after the 
        completion of the demonstration program under this section, the 
        Secretary shall submit a report to Congress on the project.
            (2) Requirements.--The report submitted under paragraph (1) 
        shall include--
                    (A) the results of the demonstration program as 
                they relate to the rate and type of deficiencies in 
                skilled nursing facilities and nursing facilities in 
                the States selected under subsection (b) compared to 
                those States not so selected;
                    (B) an evaluation of added efficiencies or 
                deficiencies in care for patients in skilled nursing 
                facilities and nursing facilities that directly 
                resulted from the demonstration program; and
                    (C) recommendations for such legislation and 
                administrative action as the Secretary determines 
                appropriate.

SEC. 102. RESUMPTION OF NURSE AIDE TRAINING PROGRAM AFTER CORRECTION OF 
              DEFICIENCIES.

    (a) Resumption of Nurse Aide Training Program for Skilled Nursing 
Facilities.--Section 1819(f)(2) of the Social Security Act (42 U.S.C. 
1395i-3(f)(2)) is amended--
            (1) in subparagraph (B)(iii), in the matter preceding 
        subclause (I), by striking ``(C) and (D)'' and inserting ``(C), 
        (D), and (E)''; and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Resumption of nurse aide training program 
                after correction of deficiencies.--Clause (iii)(I) of 
                subparagraph (B) shall not apply to a program offered 
                by or in a skilled nursing facility if the facility 
                has--
                            ``(i) corrected any deficiencies that 
                        resulted in the prohibition of approval of such 
                        program; and
                            ``(ii) demonstrated compliance with the 
                        requirements of subsections (b), (c), and (d) 
                        of this section.''.
    (b) Resumption of Nurse Aide Training Program for Nursing 
Facilities.--Section 1919(f)(2) of the Social Security Act (42 U.S.C. 
1396r(f)(2)) is amended--
            (1) in subparagraph (B)(iii), in the matter preceding 
        subclause (I), by striking ``(C) and (D)'' and inserting ``(C), 
        (D), and (E)''; and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Resumption of nurse aide training program 
                after correction of deficiencies.--Clause (iii)(I) of 
                subparagraph (B) shall not apply to a program offered 
                by or in a nursing facility if the facility has--
                            ``(i) corrected any deficiencies that 
                        resulted in the prohibition of approval of such 
                        program; and
                            ``(ii) been determined to be in compliance 
                        with the requirements of subsections (b), (c), 
                        and (d) of this section.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2008.

SEC. 103. AUTHORITY TO EXCLUDE HIGH COST AND LOW PROBABILITY DRUGS USED 
              IN THE TREATMENT OF CANCER FROM THE MEDICARE PROSPECTIVE 
              PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES.

    (a) In General.--Section 1888(e)(2)(A)(iii) of the Social Security 
Act (42 U.S.C. 1395yy(e)(2)(A)(iii)) is amended--
            (1) by redesignating subclauses (IV) and (V) as subclauses 
        (V) and (VI), respectively; and
            (2) by inserting after subclause (III) the following new 
        subclause:
                                    ``(IV) Any drugs (not otherwise 
                                described in subclause (II)) used in 
                                the treatment of cancer, including 
                                antineoplastic drugs, antiemetics, and 
                                supportive medications, that the 
                                Secretary determines to be 
                                appropriate.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to drugs furnished on or after October 1, 2008.

SEC. 104. EXCLUSION OF ALL AMBULANCE SERVICES FROM THE MEDICARE 
              PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING 
              FACILITIES.

    (a) In General.--Section 1888(e)(2)(A)(iii)(I) of the Social 
Security Act (42 U.S.C. 1395yy(e)(2)(A)(iii)(I)) is amended by striking 
``furnished to'' and all that follows before the period.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to services furnished on or after October 1, 2008.

SEC. 105. AUTHORITY TO EXCLUDE ADDITIONAL ITEMS AND SERVICES FROM THE 
              MEDICARE PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING 
              FACILITIES.

    (a) Authority.--Section 1888(e)(2)(A) of the Social Security Act 
(42 U.S.C. 1395yy(e)(2)(A)) is amended--
            (1) in clause (i)(II), by striking ``and (iv)'' and 
        inserting ``(iv), and (v)(I)''; and
            (2) by adding at the end the following new clause:
                            ``(v) Exclusion of additional items and 
                        services determined appropriate by the 
                        secretary.--
                                    ``(I) In general.--Items and 
                                services described in this clause are 
                                any items and services not otherwise 
                                described in clauses (ii), (iii), or 
                                (iv), that the Secretary determines to 
                                be appropriate.
                                    ``(II) Annual update.--The 
                                Secretary shall annually update the 
                                items and services described in 
                                subclause (I) to take into account 
                                changes in the practice of medicine.''.
    (b) Clarification.--Items and services described in section 
1888(e)(2)(A)(v)(I) of the Social Security Act (42 U.S.C. 
1395yy(e)(2)(A)(v)(I)), as added by subsection (a), may include items 
and services furnished in a freestanding clinic to an individual who is 
a resident of a skilled nursing facility.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on October 1, 2008.

SEC. 106. PAYMENT FOR BLOOD GLUCOSE TESTS ADMINISTERED AS PART OF A 
              PHYSICIAN, NURSE PRACTITIONER, OR CLINICAL NURSE 
              SPECIALIST PRESCRIBED PROTOCOL OF BLOOD GLUCOSE 
              MONITORING.

    Section 1835(a) of the Social Security Act (42 U.S.C. 1395n(a)) is 
amended--
            (1) in paragraph (2), in the matter preceding subparagraph 
        (A), by inserting ``, or, as provided in the last 2 sentences 
        of this subsection with respect to blood glucose tests, a 
        physician, a nurse practitioner, or a clinical nurse 
        specialist,'' after ``physician''; and
            (2) by adding at the end the following new sentences: 
        ``With respect to paragraph (2)(B), a physician, or a nurse 
        practitioner or a clinical nurse specialist in accordance with 
        State law, may certify that a prescribed series of blood 
        glucose tests, furnished over a specified and limited period of 
        time to monitor an individual's blood glucose levels, are 
        medically required. For purposes of the preceding sentence, 
        neither a physician's, a nurse practitioner's, or a clinical 
        nurse specialist's order for a prescribed series of blood 
        glucose tests nor a physician's, a nurse practitioner's, or a 
        clinical nurse specialist's certification that such tests are 
        medically required constitutes a standing order.''.

                      TITLE II--WORKFORCE SUPPORT

SEC. 201. NURSING LOAN REPAYMENT PROGRAM.

    Section 846(a) of the Public Health Service Act (42 U.S.C. 297n(a)) 
is amended by striking the last sentence.

SEC. 202. NATIONAL NURSING DATABASE.

    (a) In General.--The Secretary of Health and Human Services shall 
provide for the establishment of a national nursing database (including 
geriatric nursing) to be used to predict future nursing shortages.
    (b) Information in Database.--The database established under 
subsection (a) shall be designed to include nursing workforce data 
across all healthcare provider settings, including nursing educators, 
as determined by the Secretary of Health and Human Services to be 
appropriate for use in the analysis of trends in the supply and demand 
of nurses and to create an educational model to predict future nursing 
workforce needs.
    (c) Funding.--The Secretary of Health and Human Services may 
transfer, from amounts appropriated for the National Center for Health 
Workforce Analysis, such sums as may be necessary to carry out this 
section.

SEC. 203. REPORTS ON NURSING LEVELS.

    Section 806 of the Public Health Service Act (42 U.S.C. 296e) is 
amended by adding at the end the following:
    ``(i) Reports Concerning Nursing Levels.--
            ``(1) In general.--The entities described in paragraph (2) 
        shall annually submit to the Secretary a report concerning how 
        assistance under this title is being used by such entities to 
        increase the number of nurses, nursing educators, and nurse 
        education enrollment slots (including with respect to geriatric 
        nursing).
            ``(2) Entities described.--An entity is described in this 
        paragraph if such entity is--
                    ``(A) an entity that receives a grant or contract 
                under this title;
                    ``(B) a school of nursing that receives student 
                loan funds under this title;
                    ``(C) a school of nursing that receives nurse 
                faculty student loan funds under this title; and
                    ``(D) any other entity that receives assistance 
                under this title.''.

                       TITLE III--TAX INCENTIVES

SEC. 301. 15-YEAR RECOVERY PERIOD FOR QUALIFIED LONG-TERM CARE 
              IMPROVEMENT PROPERTY.

    (a) In General.--Subparagraph (E) of section 168(e)(3) of the 
Internal Revenue Code of 1986 (relating to 15-year property) is amended 
by striking ``and'' at the end of clause (vii), by striking the period 
at the end of clause (viii) and inserting ``, and'', and by adding at 
the end the following new clause:
                            ``(ix) any qualified long-term care 
                        improvement property.''.
    (b) Qualified Long-Term Care Improvement Property.--Section 168(e) 
of the Internal Revenue Code of 1986 (relating to classification of 
property) is amended by adding at the end the following new paragraph:
            ``(8) Qualified long-term care improvement property.--The 
        term `qualified long-term care improvement property' means any 
        section 1250 property which is an improvement to a building 
        if--
                    ``(A) such improvement is placed in service more 
                than 3 years after the date such building was first 
                placed in service, and
                    ``(B) such building is, or is a part of, a nursing 
                facility, assisted living facility, residential care 
                facility, intermediate care facility for the mentally 
                retarded, or similar facility designed to provide 
                housing and healthcare for the elderly and disabled.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 302. INVESTMENT TAX CREDIT FOR LONG-TERM CARE FACILITY INFORMATION 
              TECHNOLOGY.

    (a) In General.--Section 46 of the Internal Revenue Code of 1986 
(relating to amount of credit) is amended by striking ``and'' at the 
end of paragraph (3), by striking the period at the end of paragraph 
(4) and inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(5) the qualifying long-term care facility information 
        technology credit.''.
    (b) Amount of Credit.--Subpart E of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating to rules for 
computing investment credit) is amended by inserting after section 48B 
the following new section:

``SEC. 48C. QUALIFYING LONG-TERM CARE FACILITY TECHNOLOGY CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying long-
term care facility technology credit for any taxable year is an amount 
equal to 20 percent of the qualified investment for such taxable year.
    ``(b) Qualified Investment.--
            ``(1) In general.--For purposes of subsection (a), the 
        qualified investment for any taxable year is the basis of 
        property placed in service by the taxpayer during such taxable 
        year which is part of a qualifying long-term care facility 
        technology system--
                    ``(A)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, or
                    ``(ii) which is acquired by the taxpayer if the 
                original use of such property commences with the 
                taxpayer, and
                    ``(B) with respect to which depreciation (or 
                amortization in lieu of depreciation) is allowable.
            ``(2) Applicable rules.--For purposes of this section, 
        rules similar to the rules of subsection (a)(4) and (b) of 
        section 48 shall apply.
    ``(c) Qualifying Long-Term Care Facility Technology System.--For 
purposes of this section, the term `qualifying long-term care facility 
technology system' means any computers, related equipment, and software 
for a healthcare information system of a nursing facility, assisted 
living facility, residential care facility, intermediate care facility 
for the mentally retarded, or similar facility designed to provide 
housing and healthcare for the elderly and disabled.
    ``(d) Denial of Double Benefit.--No deduction or other credit shall 
be allowed with respect to the basis of any property taken into account 
in determining the credit allowed under this section.''.
    (c) Conforming Amendments.--
            (1) Section 49(a)(1)(C) of the Internal Revenue Code of 
        1986 is amended by striking ``and'' at the end of clause (iii), 
        by striking the period at the end of clause (iv) and inserting 
        ``, and'', and by adding after clause (iv) the following new 
        clause:
                            ``(v) the basis of any property which is 
                        part of a qualifying long-term care facility 
                        technology system under section 48C.''.
            (2) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 48B the following new item:

``48C. Qualifying long-term care facility technology credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990).

SEC. 303. LONG-TERM CARE TRUST ACCOUNTS.

    (a) In General.--Subchapter F of chapter 1 of the Internal Revenue 
Code of 1986 (relating to exempt organizations) is amended by adding at 
the end the following new part:

                ``PART IX--LONG-TERM CARE TRUST ACCOUNTS

``SEC. 530A. LONG-TERM CARE TRUST ACCOUNTS.

    ``(a) General Rule.--A Long-Term Care Trust Account shall be exempt 
from taxation under this subtitle. Notwithstanding the preceding 
sentence, such account shall be subject to the taxes imposed by section 
511 (relating to imposition of tax on unrelated business income of 
charitable organizations).
    ``(b) Long-Term Care Trust Account.--For purposes of this section, 
the term `Long-Term Care Trust Account' means a trust created or 
organized in the United States for the exclusive benefit of an 
individual who is the designated beneficiary of the trust and which is 
designated (in such manner as the Secretary shall prescribe) at the 
time of the establishment of the trust as a Long-Term Care Trust 
Account, but only if the written governing instrument creating the 
trust meets the following requirements:
            ``(1) Except in the case of a qualified rollover 
        contribution described in subsection (d)--
                    ``(A) no contribution will be accepted unless it is 
                in cash, and
                    ``(B) contributions will not be accepted for the 
                calendar year in excess of the contribution limit 
                specified in subsection (c)(1).
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        an insurance company (as defined in section 816), or another 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which that person will administer the trust 
        will be consistent with the requirements of this section or who 
        has so demonstrated with respect to any individual retirement 
        plan.
            ``(3) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance of his 
        account is nonforfeitable.
            ``(5) The assets of the trust shall not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(6) Except as provided in subsection (e)(2), no 
        distribution will be allowed if at the time of such 
        distribution the designated beneficiary is not a chronically 
        ill individual (as defined in section 7702B(c)(2)).
    ``(c) Tax Treatment of Contributions.--
            ``(1) Contribution limit.--
                    ``(A) In general.--The aggregate amount of 
                contributions (other than qualified rollover 
                contributions described in subsection (d)) for any 
                taxable year to all Long-Term Care Trust Accounts 
                maintained for the benefit of the designated 
                beneficiary shall not exceed $5,000.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2008, 
                the dollar amount under subparagraph (A) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) 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 `2007' for 
                        `1996' in subclause (II) thereof.
                If any amount as adjusted under the preceding sentence 
                is not a multiple of $10, such amount shall be rounded 
                to the next lowest multiple of $10.
            ``(2) Gift tax treatment of contributions.--For purposes of 
        chapters 12 and 13--
                    ``(A) In general.--Any contribution to a Long-Term 
                Care Trust Account on behalf of any designated 
                beneficiary--
                            ``(i) shall be treated as a completed gift 
                        to such beneficiary which is not a future 
                        interest in property, and
                            ``(ii) shall not be treated as a qualified 
                        transfer under section 2503(e).
                    ``(B) Treatment of excess contributions.--If the 
                aggregate amount of contributions described in 
                subparagraph (A) during the calendar year by a donor 
                exceeds the limitation for such year under section 
                2503(b), such aggregate amount shall, at the election 
                of the donor, be taken into account for purposes of 
                such section ratably over the 5-year period beginning 
                with such calendar year.
    ``(d) Qualified Rollover Contribution.--For purposes of this 
section, the term `qualified rollover contribution' means a 
contribution to a Long-Term Care Trust Account--
            ``(1) from another such account of the same beneficiary, 
        but only if such amount is contributed not later than the 60th 
        day after the distribution from such other account, and
            ``(2) from a Long-Term Care Trust Account of a spouse of 
        the beneficiary of the account to which the contribution is 
        made, but only if such amount is contributed not later than the 
        60th day after the distribution from such other account.
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Any distribution from a Long-Term Care 
        Trust Account shall be includible in the gross income of the 
        distributee in the manner as provided under section 72 to the 
        extent not excluded from gross income under any other provision 
        of this subsection.
            ``(2) Long-term care insurance premiums.--If at the time of 
        any distribution, the designated beneficiary is not a 
        chronically ill individual (as defined in section 7702B(c)(2)), 
        no amount shall be includible in gross income under paragraph 
        (1) if the aggregate premiums for any qualified long-term care 
        insurance contract for such beneficiary during the taxable year 
        are not less than the aggregate distributions during the 
        taxable year.
            ``(3) Distributions for qualified long-term care 
        services.--For purposes of this subsection, if at the time of 
        any distribution, the designated beneficiary is a chronically 
        ill individual (as so defined)--
                    ``(A) In-kind distributions.--No amount shall be 
                includible in gross income under paragraph (1) by 
                reason of a distribution which consists of providing a 
                benefit to the distributee which, if paid for by the 
                distributee, would constitute expenses for any 
                qualified long-term care services (as defined in 
                section 7702B(c)).
                    ``(B) Cash distributions.--In the case of 
                distributions not described in subparagraph (A), if--
                            ``(i) such distributions do not exceed the 
                        expenses for qualified long-term care services 
                        (as so defined), reduced by expenses described 
                        in subparagraph (A), no amount shall be 
                        includible in gross income, and
                            ``(ii) in any other case, the amount 
                        otherwise includible in gross income shall be 
                        reduced by an amount which bears the same ratio 
                        to such amount as such expenses bear to such 
                        distributions.
            ``(4) Change in beneficiaries or accounts.--Paragraph (1) 
        shall not apply to that portion of any distribution which, 
        within 60 days of such distribution, is transferred--
                    ``(A) to another Long-Term Care Trust Account for 
                the benefit of the designated beneficiary, or
                    ``(B) to the credit of another designated 
                beneficiary under a Long-Term Care Trust Account who is 
                a spouse of the designated beneficiary with respect to 
                which the distribution was made.
            ``(5) Operating rules.--For purposes of applying section 
        72--
                    ``(A) to the extent provided by the Secretary, all 
                Long-Term Care Trust Accounts of which an individual is 
                a designated beneficiary shall be treated as one 
                account,
                    ``(B) except to the extent provided by the 
                Secretary, all distributions during a taxable year 
                shall be treated as one distribution, and
                    ``(C) except to the extent provided by the 
                Secretary, the value of the contract, income on the 
                contract, and investment in the contract shall be 
                computed as of the close of the calendar year in which 
                the taxable year begins.
            ``(6) Special rules for death and divorce.--
                    ``(A) In general.--Rules similar to the rules of 
                paragraphs (7) and (8) of section 220(f) shall apply.
                    ``(B) Amounts includible in estate of donor making 
                excess contributions.--In the case of a donor who makes 
                the election described in subsection (c)(2)(B) and who 
                dies before the close of the 5-year period referred to 
                in such subsection, the gross estate of the donor shall 
                include the portion of such contributions properly 
                allocable to periods after the date of death of the 
                donor.
            ``(7) Additional tax.--The tax imposed by this chapter for 
        any taxable year on any taxpayer who receives a payment or 
        distribution from a Long-Term Care Trust Account which is 
        includible in gross income shall be increased by 25 percent of 
        the amount which is so includible under rules similar to the 
        rules of section 530(d)(4).
            ``(8) Denial of double benefit.--For purposes of 
        determining the amount of any deduction under this chapter, any 
        payment or distribution out of a Long-Term Care Trust Account 
        shall not be treated as an expense paid for medical care.
    ``(f) Designated Beneficiary.--For purposes of this section, the 
term `designated beneficiary' means the individual designated at the 
commencement of participation in the Long-Term Care Trust Account as 
the beneficiary of amounts paid (or to be paid) to the account.
    ``(g) Loss of Taxation Exemption of Account Where Beneficiary 
Engages in Prohibited Transaction.--Rules similar to the rules of 
paragraph (2) of section 408(e) shall apply to any Long-Term Care Trust 
Account.
    ``(h) Custodial Accounts.--For purposes of this section, a 
custodial account or an annuity contract issued by an insurance company 
qualified to do business in a State shall be treated as a trust under 
this section if--
            ``(1) the custodial account or annuity contract would, 
        except for the fact that it is not a trust, constitute a trust 
        which meets the requirements of subsection (b), and
            ``(2) in the case of a custodial account, the assets of 
        such account are held by a bank (as defined in section 408(n)) 
        or another person who demonstrates, to the satisfaction of the 
        Secretary, that the manner in which he will administer the 
        account will be consistent with the requirements of this 
        section.
For purposes of this title, in the case of a custodial account or 
annuity contract treated as a trust by reason of the preceding 
sentence, the person holding the assets of such account or holding such 
annuity contract shall be treated as the trustee thereof.
    ``(i) Reports.--The trustee of a Long-Term Care Trust Account shall 
make such reports regarding such account to the Secretary and to the 
beneficiary of the account with respect to contributions, 
distributions, and such other matters as the Secretary may require. The 
reports required by this subsection shall be filed at such time and in 
such manner and furnished to such individuals at such time and in such 
manner as may be required.''.
    (b) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of the 
        Internal Revenue Code of 1986 (relating to tax on excess 
        contributions to certain tax-favored accounts and annuities) is 
        amended by striking ``or'' at the end of paragraph (4), by 
        inserting ``or'' at the end of paragraph (5), and by inserting 
        after paragraph (5) the following new paragraph:
            ``(6) a Long-Term Care Trust Account (as defined in section 
        530A),''.
            (2) Excess contribution.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(h) Excess Contributions to Long-Term Care Trust Accounts.--For 
purposes of this section--
            ``(1) In general.--In the case of Long-Term Care Trust 
        Accounts (within the meaning of section 530A), the term `excess 
        contributions' means the sum of--
                    ``(A) the amount by which the amount contributed 
                for the calendar year to such accounts (other than 
                qualified rollover contributions (as defined in section 
                530A(d))) exceeds the contribution limit under section 
                530A(c)(1), and
                    ``(B) the amount determined under this subsection 
                for the preceding calendar year, reduced by the excess 
                (if any) of the maximum amount allowable as a 
                contribution under section 530A(c)(1) for the calendar 
                year over the amount contributed to the accounts for 
                the calendar year.
            ``(2) Special rule.--A contribution shall not be taken into 
        account under paragraph (1) if such contribution (together with 
        the amount of net income attributable to such contribution) is 
        returned to the beneficiary before June 1 of the year following 
        the year in which the contribution is made.''.
    (c) Failure To Provide Reports on Long-Term Care Trust Accounts.--
Paragraph (2) of section 6693(a) of the Internal Revenue Code of 1986 
(relating to failure to provide reports on individual retirement 
accounts or annuities) is amended by striking ``and'' at the end of 
subparagraph (D), by striking the period at the end of subparagraph (E) 
and inserting ``, and'', and by adding at the end the following new 
subparagraph:
                    ``(F) section 530A(i) (relating to Long-Term Care 
                Trust Accounts).''.
    (d) Conforming Amendment.--The table of parts for subchapter F of 
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

              ``Part IX. Long-Term Care Trust Accounts''.

    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 304. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO LONG-TERM CARE TRUST 
              ACCOUNTS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by inserting after section 35 the following new section:

``SEC. 35A. CONTRIBUTIONS TO LONG-TERM CARE TRUST ACCOUNTS.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle for the 
taxable year an amount equal to 10 percent of the contributions to any 
Long-Term Care Trust Account allowed under section 530A for such 
taxable year.
    ``(b) Reduction Based on Adjusted Gross Income.--
            ``(1) In general.--The percentage which would (but for this 
        subsection) be taken into account under subsection (a) for the 
        taxable year shall be reduced (but not below zero) by the 
        percentage determined under paragraph (2).
            ``(2) Amount of reduction.--The percentage determined under 
        this paragraph is the percentage which bears the same ratio to 
        the percentage which would be so taken into account as--
                    ``(A) the excess of--
                            ``(i) the taxpayer's adjusted gross income 
                        for such taxable year, over
                            ``(ii) $95,000 ($190,000 in the case of a 
                        joint return), bears to
                    ``(B) $10,000 ($20,000 in the case of a joint 
                return).
            ``(3) Adjusted gross income.--For purposes of this 
        subsection, adjusted gross income shall be determined without 
        regard to sections 911, 931, and 933.
    ``(c) Denial of Double Benefit.--No deduction shall be allowed 
under this chapter for any amount taken into account in determining the 
credit under this section.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35A of such Code''.
            (2) The table of sections of subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 35 
        the following new item:

``Sec. 35A. Contributions to Long-Term Care Trust Accounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2007.
                                 <all>