[Congressional Record Volume 147, Number 13 (Wednesday, January 31, 2001)]
[Senate]
[Pages S922-S923]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CLELAND (for himself, Mr. Durbin, Mr. Hagel, Mr. Corzine, 
        and Ms. Landrieu):
  S. 232. A bill to amend the Internal Revenue Code for 1986 to exclude

[[Page S923]]

United States savings bond income from gross income if it is used to 
pay long-term care expenses; to the Committee on Finance.
  Mr. CLELAND. Mr. President, I am very pleased to begin this session 
with re-introduction of a measure to help Americans to better afford 
health care. Last Congress, I introduced S. 2066, which would have 
created a Savings Bond Income Tax-exemption for long-term care 
services. On July 17, 2000, this measure was adopted by the Senate as 
an amendment to S. 2839, the Marriage Penalty Reconciliation bill, but 
unfortunately was not retained in the final version of the legislation. 
As we all know, Congress did not pass any significant tax relief for 
health care coverage last year. Today, I am joined by Senators Durbin, 
Hagel, Corzine and Landrieu in re-submitting this legislation.
  Many have expressed their continuing interest in enacting our 
proposal which would result in a revenue loss of less than $22 million 
over ten years as estimated by the Joint Committee on Taxation while 
offering significant help in the financing of long-term health care 
needs. It is currently forecasted that in the next 30 years, half of 
all women and a third of all men in the United States will spend a 
portion of their life in a nursing home at a cost of $40,000 to $90,000 
per year per person. I believe the proposed legislation would provide 
an excellent opportunity to assist millions of Americans facing the 
financial burdens of long-term care.
  The bill we are re-introducing today would exclude United States 
savings bond income from being taxed if used to pay for long-term 
health care expenses. It will assist individuals struggling to 
accommodate costs associated with many chronic medical conditions and 
the aging process. Families that claim parents or parents-in-law as 
dependents on their tax returns would qualify for this tax credit if 
savings bond income is 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 could use 
the tax credit for either program or a combined credit up to the 
allowable amount.
  The last Congress took an important step in addressing our growing 
long-term care needs by enacting H.R. 4040, the Long-Term Care Security 
Act. H.R. 4040, which was signed into law on September 19, 2000, 
created the largest employer-based long-term care insurance program in 
American history. Additional steps are needed and our proposal will 
make long-term care more obtainable by more Americans. I urge you to 
support this needed tax relief for Americans struggling with the high 
cost of assistive and nursing home care.
  I ask that this proposal to provide tax relief for long-term care 
services be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 232

       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 
     expenses'' 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, 
     2000.
                                 ______