[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7203 Introduced in House (IH)]
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115th CONGRESS
2d Session
H. R. 7203
To amend the Internal Revenue Code of 1986 to create long-term care
accounts funded by the proceeds of the sale or assignment of life
insurance contracts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 30, 2018
Mr. Marchant (for himself and Mr. Higgins of New York) 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 create long-term care
accounts funded by the proceeds of the sale or assignment of life
insurance contracts.
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 Account Act''.
SEC. 2. LONG-TERM CARE ACCOUNT.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139G the following new section:
``SEC. 139H. LONG-TERM CARE ACCOUNT.
``(a) Exclusion of Contributions of Long-Term Gain From Sales of
Life Insurance Contracts.--The amount of gain from the sale or
assignment of a life insurance contract of a taxpayer shall be reduced
(but not below zero) by the amount of contributions to a long-term care
account made by such taxpayer during the 30-day period beginning on the
date of such sale or assignment.
``(b) Tax Treatment of Long-Term Care Account.--
``(1) In general.--A long-term account is exempt from
taxation under this subtitle unless such account has ceased to
be a long-term care account. Notwithstanding the preceding
sentence, any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unrelated
business income of charitable, etc. organizations).
``(2) Account terminations.--Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to health
savings accounts, and any amount treated as distributed under
such rules shall be treated as not used to pay long-term care
expenses.
``(3) Tax treatment of distributions.--
``(A) Amounts used for long-term care expenses.--
Any amount paid or distributed out of a long-term care
account which is used exclusively to pay long-term care
expenses of the account beneficiary or the account
beneficiary's spouse shall not be includible in gross
income.
``(B) Inclusion of amounts not used for long-term
care expenses.--Any amount paid or distributed out of a
long-term care account which is not used to pay the
long-term care expenses of the account beneficiary or
the account beneficiary's spouse shall be included in
the gross income of such beneficiary.
``(C) Additional tax on distributions not used for
long-term care expenses.--The tax imposed by this
chapter on the account beneficiary for any taxable year
in which there is a payment or distribution from a
long-term care account of such beneficiary which is
includible in gross income under subparagraph (B) shall
be increased by 20 percent of the amount which is so
includible. This subparagraph shall not apply if the
payment or distribution is made after the account
beneficiary--
``(i) dies,
``(ii) becomes a terminally ill individual
(as such term is defined in section
101(g)(4)(A)), or
``(iii) becomes a chronically ill
individual (as such term is defined in section
101(g)(4)(B)).
``(4) Coordination with medical expense deduction.--For
purposes of determining the amount of the deduction under
section 213, any payment or distribution out of a long-term
care account for long-term care expenses shall not be treated
as an expense paid for medical care.
``(5) Transfer of account incident to divorce.--The
transfer of an individual's interest in a long-term care
account to an individual's spouse or former spouse under a
divorce or separation instrument described in subparagraph (A)
of section 71(b)(2) shall not be considered a taxable transfer
made by such individual notwithstanding any other provision of
this subtitle, and such interest shall, after such transfer, be
treated as a long-term care account with respect to which such
spouse is the account beneficiary.
``(6) Treatment after death of account beneficiary.--
``(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving spouse
acquires such beneficiary's interest in a long-term
care account by reason of being the designated
beneficiary of such account at the death of the account
beneficiary, such long-term care account shall be
treated as if the spouse were the account beneficiary.
``(B) Other cases.--
``(i) In general.--If, by reason of the
death of the account beneficiary, any person
acquires the account beneficiary's interest in
a long-term care account in a case to which
subparagraph (A) does not apply--
``(I) such account shall cease to
be a long-term care account as of the
date of death, and
``(II) an amount equal to the fair
market value of the assets in such
account on such date shall be
includible if such person is not the
estate of such beneficiary, in such
person's gross income for the taxable
year which includes such date, or if
such person is the estate of such
beneficiary, in such beneficiary's
gross income for the last taxable year
of such beneficiary.
``(ii) Special rules.--
``(I) Reduction of inclusion for
predeath expenses.--The amount
includible in gross income under clause
(i) by any person (other than the
estate) shall be reduced by the amount
of qualified long-term care expenses
which were incurred by the decedent
before the date of the decedent's death
and paid by such person within 1 year
after such date.
``(II) Deduction for estate
taxes.--An appropriate deduction shall
be allowed under section 691(c) to any
person (other than the decedent or the
decedent's spouse) with respect to
amounts included in gross income under
clause (i) by such person.
``(c) Definitions.--For purposes of this subsection--
``(1) Account beneficiary.--The term `account beneficiary'
means, with respect to a long-term care account, the individual
on whose behalf such account was established.
``(2) Long-term care account.--The term `long-term care
account' means a trust created or organized in the United
States as a long-term care account, but only if the written
governing instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted unless it is
in cash and in consideration of the sale or assignment
of any portion of the death benefits under a life
insurance contract on the life of the account
beneficiary.
``(B) 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
such person will administer the trust will be
consistent with the requirements of this section.
``(C) No part of the trust assets will be invested
in life insurance contracts.
``(D) The assets of the trust will not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) The interest of an individual in the balance
in his account is nonforfeitable.
``(3) Long-term care expenses.--The term `long-term care
expenses' means amounts paid or incurred--
``(A) as premiums for a qualified long-term care
insurance contract (as such term is defined in section
7702B(b)),
``(B) for qualified long-term care services (as
such term is defined in section 7702B(c)), or
``(C) for qualified health services.
``(4) Qualified health services.--The term `qualified
health services' means--
``(A) diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services, and
maintenance or personal care services, which are--
``(i) required by an instrumentally
impaired individual, and
``(ii) provided pursuant to a plan of care
prescribed by a licensed health care
practitioner, or
``(B) items or services that a licensed health care
practitioner determines are reasonable and necessary to
reduce the likelihood of an individual becoming an
instrumentally impaired individual.
``(5) Instrumentally impaired individual.--The term
`instrumentally impaired individual' means an individual who
has been certified by a licensed health care practitioner as
being unable to perform (without substantial assistance from
another individual) at least 2 instrumental activities of daily
living for a period of at least 90 days due to a loss of
functional capacity.
``(6) Instrumental activities of daily living.--The term
`instrumental activities of daily living' means activities
related to living independently in the community, including--
``(A) meal planning and preparation,
``(B) managing finances,
``(C) shopping for food, clothing, and other
essential items,
``(D) performing essential household chores,
``(E) communicating by phone or other media, or
``(F) traveling in and participating in the
community.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139G the following new item:
``Sec. 139G. Long-term care account.''.
(c) Effective Date.--The amendments made by this subsection shall
apply with respect to sales or assignments of life insurance contracts
after the date of enactment of this Act.
(d) Reports.--The Secretary may require the trustee of a long-term
care account to make such reports regarding such account to the
Secretary and to the account beneficiary with respect to contributions,
distributions, and such other matters as the Secretary determines
appropriate.
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