To amend the Internal Revenue Code of 1986 to provide a credit against tax for certain caregivers, to expand the dependent care credit, and to increase the exclusion limitation for dependent care assistance programs.

Summary: Caregiver Financial Relief Act of 2008 - Amends the Internal Revenue Code to: (1) allow caregivers of family members with long-term care needs a refundable tax credit of $3,000 for up to two such family members each year through 2010; (2) allow in 2009 and 2010 the tax credit for dependent care expenses for parents (or ancestors of such parents) who do not reside with the taxpayer; and (3) allow in 2009 and 2010 an increased exclusion from gross income for employer-provided dependent care assistance.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Caregiver Financial Relief Act of 
2008''.

SEC. 2. REFUNDABLE CREDIT FOR LONG-TERM CARE.

    (a) General Rule.--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 redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. FAMILY CARE CREDIT.

    ``(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 the sum of $3,000 multiplied by the number of applicable 
individuals with respect to whom the taxpayer is an eligible caregiver 
for the taxable year.
    ``(b) Limitation.--
            ``(1) Applicable individuals taken into account.--For 
        purposes of this section, a taxpayer may not take into account 
        more than 2 applicable individuals (4 in the case of a joint 
        return) for any taxable year.
            ``(2) Based on adjusted gross income.--
                    ``(A) 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.
                    ``(B) Threshold amount.--For purposes of this 
                paragraph, the term `threshold amount' means--
                            ``(i) $150,000 in the case of a joint 
                        return, and
                            ``(ii) $100,000 in the case of an 
                        individual who is not married, and
                            ``(iii) $75,000 in the case of a married 
                        individual filing a separate return.
    ``(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 
                who has been certified, before the due date for filing 
                the return of tax for the taxable year (determined 
                without regard to extensions), by a physician (as 
                defined in section 1861(r) 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 meets any of the following requirements:
                            ``(i) The individual is at least 6 years of 
                        age and--
                                    ``(I) is unable to perform (without 
                                substantial assistance from another 
                                individual) at least 3 activities of 
                                daily living (as defined in section 
                                7702B(c)(2)(B)) due to a loss of 
                                functional capacity,
                                    ``(II) requires substantial 
                                supervision to protect such individual 
                                from threats to health and safety due 
                                to severe cognitive impairment and is 
                                unable to perform at least 1 activity 
                                of daily living (as so defined) or to 
                                the extent provided in regulations 
                                prescribed by the Secretary (in 
                                consultation with the Secretary of 
                                Health and Human Services), is unable 
                                to engage in age appropriate 
                                activities, or
                                    ``(III) requires substantial 
                                supervision to protect such individual 
                                from threats to health and safety due 
                                to a severe psychological disability, 
                                mental retardation, or related 
                                developmental disabilities and would 
                                otherwise require residence in a 
                                psychiatric hospital, an intermediate 
                                care facility for the mentally 
                                retarded, or similar residential 
                                facility approved by the Secretary of 
                                Health and Human Services.
                            ``(ii) The individual is at least 2 but not 
                        6 years of age and is unable due to a loss of 
                        functional capacity to perform (without 
                        substantial assistance from another individual) 
                        at least 2 of the following activities: eating, 
                        transferring, or mobility.
                            ``(iii) The individual is under 2 years of 
                        age and requires specific durable medical 
                        equipment by reason of a severe health 
                        condition or requires a skilled practitioner 
                        trained to address the individual's condition 
                        to be available if the individual's parents or 
                        guardians are absent.
                    ``(C) Psychological disability defined.--The term 
                `psychological disability' means any diagnosable 
                clinical condition on Axis I or Axis II of the current 
                edition of the American Psychiatric Association's 
                Diagnostic and Statistical Manual of Mental Disorders 
                which is of a severity that requires substantial 
                supervision or residence in a psychiatric hospital or 
                similar residential facility approved by the Secretary.
                    ``(D) Mental retardation defined.--The term `mental 
                retardation' means any developmental disability (as 
                defined in section 102 of the Developmental 
                Disabilities Assistance and Bill of Rights Act (42 
                U.S.C. 15002)) which is of a severity that requires 
                substantial supervision or residence in an intermediate 
                care facility for the mentally retarded, or similar 
                residential facility approved by the Secretary of 
                Health and Human Services.
            ``(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 
                        152(d)(1)(B) 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 
                                subparagraph (B) are met with respect 
                                to the individual in lieu of the 
                                support test of section 152(c)(1)(D) or 
                                152(d)(1)(C), as the case may be, and
                                    ``(II) in the case of an individual 
                                who is not a qualifying child (as 
                                defined in section 152(d)) for the 
                                taxable year, the requirements of 
                                clause (iv) are met with respect to the 
                                individual.
                    ``(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 for 
                the taxable year 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 to file a written declaration under 
                        clause (i) does not do so, the individual with 
                        the highest modified adjusted gross income (as 
                        defined in subsection (b)(2)) 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 or licensed independent practitioner licensed by the State to 
render relevant diagnosis 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) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2010.''.
    (b) Conforming and Clerical Amendments.--
            (1) Paragraph (2) of section 6213(g) of such Code (relating 
        to mathematical or clerical error) is amended--
                    (A) 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 36(d) (relating 
                to family care credit) to be included on a return.'', 
                and
                    (B) in the matter preceding clause (i) of 
                subparagraph (L), by striking ``or 32'' and inserting 
                ``32, or 36''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the item relating to section 36 and inserting the following:

``Sec. 36. Family care credit.
``Sec. 37 Overpayments of tax.''.
    (c) Appropriations for Refund.--Section 1324(b)(2) of title 31, 
United States Code, is amended by striking ``or 53(e)'' and inserting 
``, 53(e), or 36''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 3. MODIFICATION OF DEPENDENT CARE CREDIT.

    (a) Credit Allowed for Costs Incurred To Care for Parent and 
Grandparents Who Do Not Live With Taxpayer.--Paragraph (1) of section 
21(b) of the Internal Revenue Code of 1986 (defining qualifying 
individual) is amended by striking ``or'' at the end of subparagraph 
(B), by striking the period at the end of subparagraph (C) and 
inserting ``, or'', and by adding at the end the following new 
subparagraph:
                    ``(D) in the case of taxable years beginning in 
                2009 and 2010, an individual described in subparagraph 
                (B) (determined without regard to whether such person 
                has the same principal place of abode as the taxpayer 
                for any part of such taxable year) who is the 
                taxpayer's mother or father (or an ancestor of 
                either).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 4. DEPENDENT CARE ASSISTANCE PROGRAM EXCLUSION LIMITATION TO BE 
              APPLIED WITH RESPECT TO EACH QUALIFYING INDIVIDUAL.

    (a) In General.--Subsection (e) of section 129 of the Internal 
Revenue Code of 1986 (relating to definitions and special rules) is 
amended by adding at the end the following new paragraph:
            ``(10) Increased exclusion limitation for 2009 and 2010.--
                    ``(A) In general.--In the case of taxable years 
                beginning in 2009 and 2010, subsection (a)(2)(A) shall 
                be applied by substituting `provided during a taxable 
                year for each qualifying individual with respect to the 
                taxpayer' for `provided during a taxable year'. For 
                purposes of the preceding sentence, not more than 4 
                individuals may be treated as qualifying individuals at 
                any one time.
                    ``(B) Identifying information required with respect 
                to qualifying individuals.--No amount paid or incurred 
                by an employer for dependent care assistance provided 
                to an employee with respect to a qualifying individual 
                shall be excluded from the gross income of such 
                employee by application of subparagraph (A) unless the 
                TIN of such individual is included on the return 
                claiming the credit.''.
    (b) Conforming Amendment.--Subsection (c) of section 21 of such 
Code (relating to dollar limit on amount creditable) is amended by 
inserting ``(but not below zero)'' after ``shall be reduced''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.