I 

108TH CONGRESS 

1ST SESSION H. R. 2096

To amend the Internal Revenue Code of 1986 to allow individuals a deduction 

for qualified long-term care insurance premiums, use of such insurance 

under cafeteria plans and flexible spending arrangements, and a credit 

for individuals with long-term care needs. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 14, 2003

Mrs. JOHNSON of Connecticut (for herself, Mr. POMEROY, Mr. BILIRAKIS, Mr. 

SERRANO, Mr. MCINTYRE, Mr. CASE, Mr. DAVIS of Florida, Mr. FARR, 

Mr. SANDERS, Mr. GILCHREST, and Mr. FROST) 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 allow individuals a deduction for qualified long-term care insurance 

premiums, use of such insurance under cafeteria plans 

and flexible spending arrangements, and a credit for 

individuals with long-term care needs.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Long-Term Care and 

5 Retirement Security Act of 2003’’.
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1 SEC. 2. TREATMENT OF PREMIUMS ON QUALIFIED LONG2 TERM CARE INSURANCE CONTRACTS. 

3 (a) IN GENERAL.—Part VII of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to 

5 additional itemized deductions) is amended by redesig6 nating section 223 as section 224 and by inserting after 

7 section 222 the following new section: 

8 ‘‘SEC. 223. PREMIUMS ON QUALIFIED LONG-TERM CARE IN9 SURANCE CONTRACTS. 

10 ‘‘(a) IN GENERAL.—In the case of an individual, 

11 there shall be allowed as a deduction an amount equal to 

12 the applicable percentage of the amount of eligible long13 term care premiums (as defined in section 213(d)(10)) 

14 paid during the taxable year for coverage for the taxpayer, 

15 his spouse, and dependents under a qualified long-term 

16 care insurance contract (as defined in section 7702B(b)). 

17 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

18 subsection (a), the applicable percentage shall be deter19 mined in accordance with the following table:

‘‘For taxable years The applicable 

beginning in calendar year— percentage is—

2003, 2004, or 2005 .................................................... 25

2006 ............................................................................. 35

2007 ............................................................................. 65

2008 or thereafter ........................................................ 100.

20 ‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.—

21 Any amount paid by a taxpayer for any qualified long22 term care insurance contract to which subsection (a) ap-
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1 plies shall not be taken into account in computing the 

2 amount allowable to the taxpayer as a deduction under 

3 section 162(l) or 213(a).’’. 

4 (b) LONG-TERM CARE INSURANCE PERMITTED TO

5 BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE

6 SPENDING ARRANGEMENTS.—

7 (1) CAFETERIA PLANS.—Section 125(f) of the 

8 Internal Revenue Code of 1986 (defining qualified 

9 benefits) is amended by inserting before the period 

10 at the end ‘‘; except that such term shall include the 

11 payment of premiums for any qualified long-term 

12 care insurance contract (as defined in section 

13 7702B) to the extent the amount of such payment 

14 does not exceed the eligible long-term care premiums 

15 (as defined in section 213(d)(10)) for such con16 tract’’. 

17 (2) FLEXIBLE SPENDING ARRANGEMENTS.—

18 Section 106 of such Code (relating to contributions 

19 by an employer to accident and health plans) is 

20 amended by striking subsection (c). 

21 (c) CONFORMING AMENDMENTS.—

22 (1) Section 62(a) of the Internal Revenue Code 

23 of 1986 is amended by inserting after paragraph 

24 (18) the following new item: 
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1 ‘‘(19) PREMIUMS ON QUALIFIED LONG-TERM

2 CARE INSURANCE CONTRACTS.—The deduction al3 lowed by section 223.’’. 

4 (2) The table of sections for part VII of sub5 chapter B of chapter 1 of such Code is amended by 

6 striking the last item and inserting the following 

7 new items:

‘‘Sec. 223. Premiums on qualified long-term care insurance contracts. 

‘‘Sec. 224. Cross reference.’’.

8 (d) EFFECTIVE DATES.—

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the amendments made by this section 

11 shall apply to taxable years beginning after Decem12 ber 31, 2002. 

13 (2) CAFETERIA PLANS AND FLEXIBLE SPEND14 ING ARRANGEMENTS.—The amendments made by 

15 subsection (b) shall apply to taxable years beginning 

16 after December 31, 2004. 

17 SEC. 3. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE 

18 NEEDS. 

19 (a) IN GENERAL.—Subpart A of part IV of sub20 chapter A of chapter 1 of the Internal Revenue Code of 

21 1986 (relating to nonrefundable personal credits) is 

22 amended by inserting after section 25B the following new 

23 section: 
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1 ‘‘SEC. 25C. CREDIT FOR TAXPAYERS WITH LONG-TERM 

2 CARE NEEDS. 

3 ‘‘(a) ALLOWANCE OF CREDIT.—

4 ‘‘(1) IN GENERAL.—There shall be allowed as a 

5 credit against the tax imposed by this chapter for 

6 the taxable year an amount equal to the applicable 

7 credit amount multiplied by the number of applica8 ble individuals with respect to whom the taxpayer is 

9 an eligible caregiver for the taxable year. 

10 ‘‘(2) APPLICABLE CREDIT AMOUNT.—For pur11 poses of paragraph (1), the applicable credit amount 

12 shall be determined in accordance with the following 

13 table:

‘‘For taxable years beginning The applicable 

in calendar year— credit amount is—

2003 .....................................................................................$1,000

2004 ..................................................................................... 1,500

2005 ..................................................................................... 2,000

2006 ..................................................................................... 2,500

2007 or thereafter ................................................................ 3,000.

14 ‘‘(b) LIMITATION BASED ON ADJUSTED GROSS IN15 COME.—

16 ‘‘(1) IN GENERAL.—The amount of the credit 

17 allowable under subsection (a) shall be reduced (but 

18 not below zero) by $100 for each $1,000 (or fraction 

19 thereof) by which the taxpayer’s modified adjusted 

20 gross income exceeds the threshold amount. For

21 purposes of the preceding sentence, the term ‘modi22 fied adjusted gross income’ means adjusted gross in-
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1 come increased by any amount excluded from gross 

2 income under section 911, 931, or 933. 

3 ‘‘(2) THRESHOLD AMOUNT.—For purposes of 

4 paragraph (1), the term ‘threshold amount’ means—

5 ‘‘(A) $150,000 in the case of a joint re6 turn, and 

7 ‘‘(B) $75,000 in any other case. 

8 ‘‘(3) INDEXING.—In the case of any taxable 

9 year beginning in a calendar year after 2003, each 

10 dollar amount contained in paragraph (2) shall be 

11 increased by an amount equal to the product of—

12 ‘‘(A) such dollar amount, and 

13 ‘‘(B) the medical care cost adjustment de14 termined under section 213(d)(10)(B)(ii) for 

15 the calendar year in which the taxable year be16 gins, determined by substituting ‘August 2002’ 

17 for ‘August 1996’ in subclause (II) thereof. 

18 If any increase determined under the preceding sen19 tence is not a multiple of $50, such increase shall 

20 be rounded to the next lowest multiple of $50. 

21 ‘‘(c) DEFINITIONS.—For purposes of this section—

22 ‘‘(1) APPLICABLE INDIVIDUAL.—

23 ‘‘(A) IN GENERAL.—The term ‘applicable 

24 individual’ means, with respect to any taxable 

25 year, any individual who has been certified, be-
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1 fore the due date for filing the return of tax for 

2 the taxable year (without extensions), by a phy3 sician (as defined in section 1861(r)(1) of the 

4 Social Security Act) as being an individual with 

5 long-term care needs described in subparagraph 

6 (B) for a period—

7 ‘‘(i) which is at least 180 consecutive 

8 days, and 

9 ‘‘(ii) a portion of which occurs within 

10 the taxable year. 

11 Such term shall not include any individual oth12 erwise meeting the requirements of the preceding sentence unless within the 391 13 ⁄2 month 

14 period ending on such due date (or such other 

15 period as the Secretary prescribes) a physician 

16 (as so defined) has certified that such indi17 vidual meets such requirements. 

18 ‘‘(B) INDIVIDUALS WITH LONG-TERM CARE

19 NEEDS.—An individual is described in this sub20 paragraph if the individual meets any of the fol21 lowing requirements: 

22 ‘‘(i) The individual is at least 6 years 

23 of age and—

24 ‘‘(I) is unable to perform (with25 out substantial assistance from an-
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1 other individual) at least 3 activities 

2 of daily living (as defined in section 

3 7702B(c)(2)(B)) due to a loss of 

4 functional capacity, or 

5 ‘‘(II) requires substantial super6 vision to protect such individual from 

7 threats to health and safety due to se8 vere cognitive impairment and is un9 able to preform, without reminding or 

10 cuing assistance, at least 1 activity of 

11 daily living (as so defined) or to the 

12 extent provided in regulations pre13 scribed by the Secretary (in consulta14 tion with the Secretary of Health and 

15 Human Services), is unable to engage 

16 in age appropriate activities. 

17 ‘‘(ii) The individual is at least 2 but 

18 not 6 years of age and is unable due to a 

19 loss of functional capacity to perform 

20 (without substantial assistance from an21 other individual) at least 2 of the following 

22 activities: eating, transferring, or mobility. 

23 ‘‘(iii) The individual is under 2 years 

24 of age and requires specific durable med25 ical equipment by reason of a severe health 
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1 condition or requires a skilled practitioner 

2 trained to address the individual’s condi3 tion to be available if the individual’s par4 ents or guardians are absent. 

5 ‘‘(2) ELIGIBLE CAREGIVER.—

6 ‘‘(A) IN GENERAL.—A taxpayer shall be 

7 treated as an eligible caregiver for any taxable 

8 year with respect to the following individuals: 

9 ‘‘(i) The taxpayer. 

10 ‘‘(ii) The taxpayer’s spouse. 

11 ‘‘(iii) An individual with respect to 

12 whom the taxpayer is allowed a deduction 

13 under section 151 for the taxable year. 

14 ‘‘(iv) An individual who would be de15 scribed in clause (iii) for the taxable year 

16 if section 151(c)(1)(A) were applied by 

17 substituting for the exemption amount an 

18 amount equal to the sum of the exemption 

19 amount, the standard deduction under sec20 tion 63(c)(2)(C), and any additional stand21 ard deduction under section 63(c)(3) which 

22 would be applicable to the individual if 

23 clause (iii) applied. 
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1 ‘‘(v) An individual who would be de2 scribed in clause (iii) for the taxable year 

3 if—

4 ‘‘(I) the requirements of clause 

5 (iv) are met with respect to the indi6 vidual, and 

7 ‘‘(II) the requirements of sub8 paragraph (B) are met with respect to 

9 the individual in lieu of the support 

10 test of section 152(a). 

11 ‘‘(B) RESIDENCY TEST.—The require12 ments of this subparagraph are met if an indi13 vidual has as his principal place of abode the 

14 home of the taxpayer and—

15 ‘‘(i) in the case of an individual who 

16 is an ancestor or descendant of the tax17 payer or the taxpayer’s spouse, is a mem18 ber of the taxpayer’s household for over 

19 half the taxable year, or 

20 ‘‘(ii) in the case of any other indi21 vidual, is a member of the taxpayer’s 

22 household for the entire taxable year.

23 ‘‘(C) SPECIAL RULES WHERE MORE THAN

24 1 ELIGIBLE CAREGIVER.—
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1 ‘‘(i) IN GENERAL.—If more than 1 in2 dividual is an eligible caregiver with re3 spect to the same applicable individual for 

4 taxable years ending with or within the 

5 same calendar year, a taxpayer shall be 

6 treated as the eligible caregiver if each 

7 such individual (other than the taxpayer) 

8 files a written declaration (in such form 

9 and manner as the Secretary may pre10 scribe) that such individual will not claim 

11 such applicable individual for the credit 

12 under this section. 

13 ‘‘(ii) NO AGREEMENT.—If each indi14 vidual required under clause (i) to file a 

15 written declaration under clause (i) does 

16 not do so, the individual with the highest 

17 modified adjusted gross income (as defined 

18 in section 32(c)(5)) shall be treated as the 

19 eligible caregiver. 

20 ‘‘(iii) MARRIED INDIVIDUALS FILING

21 SEPARATELY.—In the case of married indi22 viduals filing separately, the determination 

23 under this subparagraph as to whether the 

24 husband or wife is the eligible caregiver 

25 shall be made under the rules of clause (ii) 
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1 (whether or not one of them has filed a 

2 written declaration under clause (i)). 

3 ‘‘(d) IDENTIFICATION REQUIREMENT.—No credit 

4 shall be allowed under this section to a taxpayer with re5 spect to any applicable individual unless the taxpayer in6 cludes the name and taxpayer identification number of 

7 such individual, and the identification number of the phy8 sician certifying such individual, on the return of tax for 

9 the taxable year. 

10 ‘‘(e) TAXABLE YEAR MUST BE FULL TAXABLE

11 YEAR.—Except in the case of a taxable year closed by rea12 son of the death of the taxpayer, no credit shall be allow13 able under this section in the case of a taxable year cov14 ering a period of less than 12 months.’’. 

15 (b) CONFORMING AMENDMENTS.—

16 (1) Section 6213(g)(2) of the Internal Revenue 

17 Code of 1986 is amended by striking ‘‘and’’ at the 

18 end of subparagraph (K), by striking the period at 

19 the end of subparagraph (M) and inserting ‘‘, and’’, 

20 and by inserting after subparagraph (M) the fol21 lowing new subparagraph: 

22 ‘‘(N) an omission of a correct TIN or phy23 sician identification required under section 

24 25C(d) (relating to credit for taxpayers with 
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1 long-term care needs) to be included on a re2 turn.’’. 

3 (2) The table of sections for subpart A of part 

4 IV of subchapter A of chapter 1 of such Code is 

5 amended by inserting after the item relating to sec6 tion 25B the following new item:

‘‘Sec. 25C. Credit for taxpayers with long-term care needs.’’.

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 2002. 

10 SEC. 4. ADDITIONAL CONSUMER PROTECTIONS FOR LONG11 TERM CARE INSURANCE. 

12 (a) ADDITIONAL PROTECTIONS APPLICABLE TO

13 LONG-TERM CARE INSURANCE.—Subparagraphs (A) and 

14 (B) of section 7702B(g)(2) of the Internal Revenue Code 

15 of 1986 (relating to requirements of model regulation and 

16 Act) are amended to read as follows: 

17 ‘‘(A) IN GENERAL.—The requirements of 

18 this paragraph are met with respect to any con19 tract if such contract meets—

20 ‘‘(i) MODEL REGULATION.—The fol21 lowing requirements of the model regula22 tion: 

23 ‘‘(I) Section 6A (relating to guar24 anteed renewal or noncancellability), 

25 other than paragraph (5) thereof, and 
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1 the requirements of section 6B of the 

2 model Act relating to such section 6A. 

3 ‘‘(II) Section 6B (relating to pro4 hibitions on limitations and exclu5 sions) other than paragraph (7) there6 of. 

7 ‘‘(III) Section 6C (relating to ex8 tension of benefits). 

9 ‘‘(IV) Section 6D (relating to 

10 continuation or conversion of cov11 erage). 

12 ‘‘(V) Section 6E (relating to dis13 continuance and replacement of poli14 cies). 

15 ‘‘(VI) Section 7 (relating to unin16 tentional lapse). 

17 ‘‘(VII) Section 8 (relating to dis18 closure), other than sections 8F, 8G, 

19 8H, and 8I thereof. 

20 ‘‘(VIII) Section 11 (relating to 

21 prohibitions against post-claims un22 derwriting). 

23 ‘‘(IX) Section 12 (relating to 

24 minimum standards). 
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1 ‘‘(X) Section 13 (relating to re2 quirement to offer inflation protec3 tion). 

4 ‘‘(XI) Section 25 (relating to pro5 hibition against preexisting conditions 

6 and probationary periods in replace7 ment policies or certificates). 

8 ‘‘(XII) The provisions of section 

9 26 relating to contingent nonforfeiture 

10 benefits, if the policyholder declines 

11 the offer of a nonforfeiture provision 

12 described in paragraph (4). 

13 ‘‘(ii) MODEL ACT.—The following re14 quirements of the model Act: 

15 ‘‘(I) Section 6C (relating to pre16 existing conditions). 

17 ‘‘(II) Section 6D (relating to 

18 prior hospitalization). 

19 ‘‘(III) The provisions of section 8 

20 relating to contingent nonforfeiture 

21 benefits, if the policyholder declines 

22 the offer of a nonforfeiture provision 

23 described in paragraph (4). 

24 ‘‘(B) DEFINITIONS.—For purposes of this 

25 paragraph—
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1 ‘‘(i) MODEL PROVISIONS.—The terms 

2 ‘model regulation’ and ‘model Act’ mean 

3 the long-term care insurance model regula4 tion, and the long-term care insurance 

5 model Act, respectively, promulgated by 

6 the National Association of Insurance 

7 Commissioners (as adopted as of October 

8 2000). 

9 ‘‘(ii) COORDINATION.—Any provision 

10 of the model regulation or model Act listed 

11 under clause (i) or (ii) of subparagraph 

12 (A) shall be treated as including any other 

13 provision of such regulation or Act nec14 essary to implement the provision. 

15 ‘‘(iii) DETERMINATION.—For pur16 poses of this section and section 4980C, 

17 the determination of whether any require18 ment of a model regulation or the model 

19 Act has been met shall be made by the 

20 Secretary.’’. 

21 (b) EXCISE TAX.—Paragraph (1) of section 

22 4980C(c) of the Internal Revenue Code of 1986 (relating 

23 to requirements of model provisions) is amended to read 

24 as follows: 

25 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—
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1 ‘‘(A) MODEL REGULATION.—The following 

2 requirements of the model regulation must be 

3 met: 

4 ‘‘(i) Section 9 (relating to required 

5 disclosure of rating practices to con6 sumer).’’

7 ‘‘(ii) Section 14 (relating to applica8 tion forms and replacement coverage). 

9 ‘‘(iii) Section 15 (relating to reporting 

10 requirements). 

11 ‘‘(iv) Section 22 (relating to filing re12 quirements for marketing). 

13 ‘‘(v) Section 23 (relating to standards 

14 for marketing), including inaccurate com15 pletion of medical histories, other than 

16 paragraphs (1), (6), and (9) of section 

17 23C. 

18 ‘‘(vi) Section 24 (relating to suit19 ability). 

20 ‘‘(vii) Section 29 (relating to standard 

21 format outline of coverage). 

22 ‘‘(viii) Section 30 (relating to require23 ment to deliver shopper’s guide). 

24 The requirements referred to in clause (vi) shall 

25 not include those portions of the personal work-
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1 sheet described in Appendix B relating to con2 sumer protection requirements not imposed by 

3 section 4980C or 7702B. 

4 ‘‘(B) MODEL ACT.—The following require5 ments of the model Act must be met: 

6 ‘‘(i) Section 6F (relating to right to 

7 return). 

8 ‘‘(ii) Section 6G (relating to outline of 

9 coverage). 

10 ‘‘(iii) Section 6H (relating to require11 ments for certificates under group plans). 

12 ‘‘(iv) Section 6J (relating to policy 

13 summary). 

14 ‘‘(v) Section 6K (relating to monthly 

15 reports on accelerated death benefits). 

16 ‘‘(vi) Section 7 (relating to incontest17 ability period). 

18 ‘‘(C) DEFINITIONS.—For purposes of this 

19 paragraph, the terms ‘model regulation’ and 

20 ‘model Act’ have the meanings given such terms 

21 by section 7702B(g)(2)(B).’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to policies issued more than 1 year 

24 after the date of the enactment of this Act. 
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1 SEC. 5. TREATMENT OF EXCHANGES OF LONG-TERM CARE 

2 INSURANCE CONTRACTS. 

3 (a) IN GENERAL.—Subsection (a) of section 1035 of 

4 the Internal Revenue Code of 1986 (relating to exchanges 

5 of insurance policies) is amended by striking the period 

6 at the end of paragraph (3) and inserting ‘‘; or’’ and by 

7 adding at the end the following new paragraph: 

8 ‘‘(4) a qualified long-term care insurance con9 tract for another qualified long-term care insurance 

10 contract.’’

11 (b) QUALIFIED LONG-TERM CARE INSURANCE CON12 TRACT.—Subsection (b) of section 1035 of such Code (re13 lating to definitions) is amended by adding at the end the 

14 following new paragraph: 

15 ‘‘(4) QUALIFIED LONG-TERM CARE INSURANCE

16 CONTRACT.—The term ‘qualified long-term care in17 surance contract’ means—

18 ‘‘(A) any qualified long-term care insur19 ance contract (as defined in section 7702B), 

20 and 

21 ‘‘(B) any contract which is treated as such 

22 by section 321(f)(2) of the Health Insurance 

23 Portability and Accountability Act of 1996).’’
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to exchanges after December 31, 

3 1997.

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