[Congressional Record Volume 146, Number 12 (Thursday, February 10, 2000)]
[Senate]
[Pages S624-S625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CLELAND:
  S. 2066. A bill to amend the Internal Revenue Code of 1986 to exclude 
United States savings bond income from gross income if used to pay 
long-term care expenses; to the Committee on Finance.


                 Tax-Exemption Savings Bond Legislation

 Mr. CLELAND. Mr. President, to support Americans faced with 
long-term care needs I am proposing a savings bond tax credit. Many 
people are struggling to pay for the assistive care needs associated 
with conditions such as Alzheimer's and Parkinson's diseases. An 
estimated 5.8 million Americans aged 65 or older need long-term care. 
Nursing home care is only one component of long-term care services that 
includes assisted living, adult day and home care. Medicare and health 
insurance do not cover long-term care. In 1995, federal and state 
spending for nursing home care was approximately $34 billion and an 
additional $21 billion was used for home care. It is projected that 
half of all women and a third of men in this country who are now age 65 
are likely to spend some time in their later years in a nursing home at 
a cost from $40,000 to $90,000 per person. About 40% of all nursing 
home expenses are paid for out-of-pocket by patients and/or family 
members. Liquidating family assets is often the only way for many to 
fund the high costs for care. These staggering statistics and the pleas 
for help from Americans in such situations reinforce the critical need 
for long-term care assistance.
  To qualify for this proposed tax credit, the person receiving care 
must have at least two limitations in activities of daily living or a 
comparable cognitive impairment. Activities of daily living, like 
eating, bathing, and toileting, are basic care needs that must be met. 
Families that claim parents or parents-in law as dependents on their 
tax returns can qualify for this tax credit if

[[Page S625]]

savings bonds are used to pay for long-term care services. ``Sandwich 
generation'' families paying for both college education for their 
children and long-term care services for their parents can use this tax 
credit for either program or a combined credit up to the maximum.
  Mr. President, I ask that this proposed measure to provide long-term 
care cost relief be printed in the Record.
  The bill follows:

                                S. 2066

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

     SECTION 1. EXCLUSION OF UNITED STATES SAVINGS BOND INCOME 
                   FROM GROSS INCOME IF USED TO PAY LONG-TERM CARE 
                   EXPENSES.

       (a) In General.--Subsection (a) of section 135 of the 
     Internal Revenue Code of 1986 (relating to income from United 
     States savings bonds used to pay higher education tuition and 
     fees) is amended to read as follows:
       ``(a) Exclusion.--
       ``(1) General rule.--In the case of an individual who pays 
     qualified expenses during the taxable year, no amount shall 
     be includible in gross income by reason of the redemption 
     during such year of any qualified United States savings bond.
       ``(2) Qualified expenses.--For purposes of this section, 
     the term `qualified expenses' means--
       ``(A) qualified higher education expenses, and
       ``(B) eligible long-term care expenses.''.
       (b) Limitation where redemption proceeds exceed qualified 
     expenses.--Section 135(b)(1) of the Internal Revenue Code of 
     1986 (relating to limitation where redemption proceeds exceed 
     higher education expenses) is amended--
       (1) by striking ``higher education'' in subparagraph 
     (A)(ii), and
       (2) by striking ``higher education'' in the heading 
     thereof.
       (c) Eligible Long-Term Care Expenses.--Section 135(c) of 
     the Internal Revenue Code of 1986 (relating to definitions) 
     is amended by redesignating paragraph (4) as paragraph (5) 
     and by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Eligible long-term care expenses.--The term `eligible 
     long-term care expenses' means qualified long-term care 
     expenses (as defined in section 7702B(c)) and eligible long-
     term care premiums (as defined in section 213(d)(10)) of--
       ``(A) the taxpayer,
       ``(B) the taxpayer's spouse, or
       ``(C) any dependent of the taxpayer with respect to whom 
     the taxpayer is allowed a deduction under section 151.''.
       (d) Adjustments.--Section 135(d) of the Internal Revenue 
     Code of 1986 (relating to special rules) is amended by 
     redesignating paragraphs (3) and (4) as paragraphs (4) and 
     (5), respectively, and by inserting after paragraph (2) the 
     following new paragraph:
       ``(3) Eligible long-term care expense adjustments.--The 
     amount of eligible long-term care expenses otherwise taken 
     into account under subsection (a) with respect to an 
     individual shall be reduced (before the application of 
     subsection (b)) by the sum of--
       ``(A) any amount paid for qualified long-term care services 
     (as defined in section 7702B(c)) provided to such individual 
     and described in section 213(d)(11), plus
       ``(B) any amount received by the taxpayer or the taxpayer's 
     spouse or dependents for the payment of eligible long-term 
     care expenses which is excludable from gross income.''.
       (e) Coordination With Deductions.--
       (1) Section 213 of the Internal Revenue Code of 1986 
     (relating to medical, dental, etc., expenses) is amended by 
     adding at the end the following new subsection:
       ``(f) Coordination With Savings Bond Income Used for 
     Expenses.--Any expense taken into account in determining the 
     exclusion under section 135 shall not be treated as an 
     expense paid for medical care.''.
       (2) Section 162(l) of such Code (relating to special rules 
     for health insurance costs of self-employed individuals) is 
     amended by adding at the end the following new paragraph:
       ``(6) Coordination with savings bond income used for 
     expenses.--Any expense taken into account in determining the 
     exclusion under section 135 shall not be treated as an 
     expense paid for medical care.''.
       (f) Clerical Amendments.--
       (1) The heading for section 135 of the Internal Revenue 
     Code of 1986 is amended by inserting ``AND LONG-TERM CARE 
     EXPENSEST1'' after ``FEES''.
       (2) The item relating to section 135 in the table of 
     sections for part III of subchapter B of chapter 1 of such 
     Code is amended by inserting ``and long-term care expenses'' 
     after ``fees''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
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