I 

109TH CONGRESS 

1ST SESSION H. R. 2682 

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 26, 2005 

Mrs. JOHNSON of Connecticut (for herself, Mr. POMEROY, Mr. RAMSTAD, Ms. 

HERSETH, Mr. SIMMONS, Mr. MICHAUD, Mr. SHAYS, Mr. MARKEY, Mr. 

BOOZMAN, and Mr. KING 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 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 2005’’. 
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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 224 as section 225 and by inserting after 

7 section 223 the following new section: 

8 ‘‘SEC. 224. 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 and the taxpayer’s spouse and dependents under a quali16 fied long-term care insurance contract (as defined in sec17 tion 7702B(b)). 

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

19 subsection (a), the applicable percentage shall be deter20 mined in accordance with the following table: 

‘‘For taxable years beginning in calendar year— 

The applicable 

percentage is— 

2005, 2006, or 2007 ....................................................................... 25

2008 ................................................................................................ 35

2009 ................................................................................................ 65

2010 or thereafter .......................................................................... 100. 
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1 ‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.— 

2 Any amount paid by a taxpayer for any qualified long3 term care insurance contract to which subsection (a) ap4 plies shall not be taken into account in computing the 

5 amount allowable to the taxpayer as a deduction under 

6 section 162(l) or 213(a).’’. 

7 (b) LONG-TERM CARE INSURANCE PERMITTED TO

8 BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE

9 SPENDING ARRANGEMENTS.— 

10 (1) CAFETERIA PLANS.—The last sentence of 

11 section 125(f) of such Code (defining qualified bene12 fits) is amended by inserting before the period at the 

13 end ‘‘; except that such term shall include the pay14 ment of premiums for any qualified long-term care 

15 insurance contract (as defined in section 7702B) to 

16 the extent the amount of such payment does not ex17 ceed the eligible long-term care premiums (as de18 fined in section 213(d)(10)) for such contract’’. 

19 (2) FLEXIBLE SPENDING ARRANGEMENTS.— 

20 Section 106 of such Code (relating to contributions 

21 by an employer to accident and health plans) is 

22 amended by striking subsection (c) and redesig23 nating subsection (d) as subsection (c). 

24 (c) CONFORMING AMENDMENTS.— 
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1 (1) Section 62(a) of such Code is amended by 

2 inserting before the last sentence at the end the fol3 lowing new paragraph: 

4 ‘‘(21) PREMIUMS ON QUALIFIED LONG-TERM

5 CARE INSURANCE CONTRACTS.—The deduction al6 lowed by section 224.’’. 

7 (2) Sections 223(b)(4)(B), 223(d)(4)(C), 

8 223(f)(3)(B), 3231(e)(11), 3306(b)(18), 

9 3401(a)(22), 4973(g)(1), and 4973(g)(2)(B)(i) of 

10 such Code are each amended by striking ‘‘section 

11 106(d)’’ and inserting ‘‘section 106(c)’’. 

12 (3) Section 6041 of such Code is amended— 

13 (A) in subsection (f)(1) by striking ‘‘(as 

14 defined in section 106(c)(2))’’, and 

15 (B) by adding at the end the following new 

16 subsection: 

17 ‘‘(h) FLEXIBLE SPENDING ARRANGEMENT DE18 FINED.—For purposes of this section, a flexible spending 

19 arrangement is a benefit program which provides employ20 ees with coverage under which— 

21 ‘‘(1) specified incurred expenses may be reim22 bursed (subject to reimbursement maximums and 

23 other reasonable conditions), and 

24 ‘‘(2) the maximum amount of reimbursement 

25 which is reasonably available to a participant for 
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1 such coverage is less than 500 percent of the value 

2 of such coverage. 

3 In the case of an insured plan, the maximum amount rea4 sonably available shall be determined on the basis of the 

5 underlying coverage.’’. 

6 (4) The table of sections for part VII of sub7 chapter B of chapter 1 of such Code is amended by 

8 striking the last item and inserting the following 

9 new items: 

‘‘Sec. 224. Premiums on qualified long-term care insurance contracts. 

‘‘Sec. 225. Cross reference.’’. 

10 (d) EFFECTIVE DATES.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section 

13 shall apply to taxable years beginning after Decem14 ber 31, 2004. 

15 (2) CAFETERIA PLANS AND FLEXIBLE SPEND16 ING ARRANGEMENTS.—The amendments made by 

17 subsection (b) shall apply to taxable years beginning 

18 after December 31, 2006. 

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

20 NEEDS. 

21 (a) IN GENERAL.—Subpart A of part IV of sub22 chapter A of chapter 1 of the Internal Revenue Code of 

23 1986 (relating to nonrefundable personal credits) is 
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1 amended by inserting after section 25B the following new 

2 section: 

3 ‘‘SEC. 25C. CREDIT FOR TAXPAYERS WITH LONG-TERM 

4 CARE NEEDS. 

5 ‘‘(a) ALLOWANCE OF CREDIT.— 

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

7 credit against the tax imposed by this chapter for 

8 the taxable year an amount equal to the applicable 

9 credit amount multiplied by the number of applica10 ble individuals with respect to whom the taxpayer is 

11 an eligible caregiver for the taxable year. 

12 ‘‘(2) APPLICABLE CREDIT AMOUNT.—For pur13 poses of paragraph (1), the applicable credit amount 

14 shall be determined in accordance with the following 

15 table: 

‘‘For taxable years beginning in calender 

year—

The applicable 

credit 

amount 

is—

2005 ....................................................................................... $1,000

2006 ....................................................................................... 1,500

2007 ....................................................................................... 2,000

2008 ....................................................................................... 2,500

2009 or thereafter ................................................................. 3,000. 

16 ‘‘(b) LIMITATION BASED ON ADJUSTED GROSS IN17 COME.— 

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

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

20 not below zero) by $100 for each $1,000 (or fraction 
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1 thereof) by which the taxpayer’s modified adjusted 

2 gross income exceeds the threshold amount. For 

3 purposes of the preceding sentence, the term ‘modi4 fied adjusted gross income’ means adjusted gross in5 come increased by any amount excluded from gross 

6 income under section 911, 931, or 933. 

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

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

9 ‘‘(A) $150,000 in the case of a joint re10 turn, and 

11 ‘‘(B) $75,000 in any other case. 

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

13 year beginning in a calendar year after 2005, each 

14 dollar amount contained in paragraph (2) shall be 

15 increased by an amount equal to the product of— 

16 ‘‘(A) such dollar amount, and 

17 ‘‘(B) the medical care cost adjustment de18 termined under section 213(d)(10)(B)(ii) for 

19 the calendar year in which the taxable year be20 gins, determined by substituting ‘August 2004’ 

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

22 If any increase determined under the preceding sen23 tence is not a multiple of $50, such increase shall 

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

25 ‘‘(c) DEFINITIONS.—For purposes of this section— 
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1 ‘‘(1) APPLICABLE INDIVIDUAL.— 

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

3 individual’ means, with respect to any taxable 

4 year, any individual who has been certified, be5 fore the due date for filing the return of tax for 

6 the taxable year (without extensions), by a phy7 sician (as defined in section 1861(r)(1) of the 

8 Social Security Act) as being an individual with 

9 long-term care needs described in subparagraph 

10 (B) for a period— 

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

12 days, and 

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

14 the taxable year. 

15 Notwithstanding the preceding sentence, a cer16 tification shall not be treated as valid unless it 

is made within the 391 17 ⁄2 month period ending 

18 on such due date (or such other period as the 

19 Secretary prescribes). 

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

21 NEEDS.—An individual is described in this sub22 paragraph if the individual meets any of the fol23 lowing requirements: 

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

25 of age and— 
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1 ‘‘(I) is unable to perform (with2 out substantial assistance from an3 other individual) at least 3 activities 

4 of daily living (as defined in section 

5 7702B(c)(2)(B)) due to a loss of 

6 functional capacity, or 

7 ‘‘(II) requires substantial super8 vision to protect such individual from 

9 threats to health and safety due to se10 vere cognitive impairment and is un11 able to preform, without reminding or 

12 cuing assistance, at least 1 activity of 

13 daily living (as so defined) or to the 

14 extent provided in regulations pre15 scribed by the Secretary (in consulta16 tion with the Secretary of Health and 

17 Human Services), is unable to engage 

18 in age appropriate activities. 

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

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

21 loss of functional capacity to perform 

22 (without substantial assistance from an23 other individual) at least 2 of the following 

24 activities: eating, transferring, or mobility. 
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1 ‘‘(iii) The individual is under 2 years 

2 of age and requires specific durable med3 ical equipment by reason of a severe health 

4 condition or requires a skilled practitioner 

5 trained to address the individual’s condi6 tion to be available if the individual’s par7 ents or guardians are absent. 

8 ‘‘(2) ELIGIBLE CAREGIVER.— 

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

10 treated as an eligible caregiver for any taxable 

11 year with respect to the following individuals: 

12 ‘‘(i) The taxpayer. 

13 ‘‘(ii) The taxpayer’s spouse. 

14 ‘‘(iii) An individual with respect to 

15 whom the taxpayer is allowed a deduction 

16 under section 151(c) for the taxable year. 

17 ‘‘(iv) An individual who would be de18 scribed in clause (iii) for the taxable year 

19 if section 151(c) were applied by sub20 stituting for the exemption amount an 

21 amount equal to the sum of the exemption 

22 amount, the standard deduction under sec23 tion 63(c)(2)(C), and any additional stand24 ard deduction under section 63(c)(3) which 
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1 would be applicable to the individual if 

2 clause (iii) applied. 

3 ‘‘(v) An individual who would be de4 scribed in clause (iii) for the taxable year 

5 if— 

6 ‘‘(I) the requirements of clause 

7 (iv) are met with respect to the indi8 vidual, and 

9 ‘‘(II) the requirements of sub10 paragraph (B) are met with respect to 

11 the individual in lieu of the support 

12 test under subsection (c)(1)(D) or 

13 (d)(1)(C) of section 152. 

14 ‘‘(B) RESIDENCY TEST.—The require15 ments of this subparagraph are met if an indi16 vidual has as his principal place of abode the 

17 home of the taxpayer and— 

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

19 is an ancestor or descendant of the tax20 payer or the taxpayer’s spouse, is a mem21 ber of the taxpayer’s household for over 

22 half the taxable year, or 

23 ‘‘(ii) in the case of any other indi24 vidual, is a member of the taxpayer’s 

25 household for the entire taxable year. 
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1 ‘‘(C) SPECIAL RULES WHERE MORE THAN

2 1 ELIGIBLE CAREGIVER.— 

3 ‘‘(i) IN GENERAL.—If more than 1 in4 dividual is an eligible caregiver with re5 spect to the same applicable individual for 

6 taxable years ending with or within the 

7 same calendar year, a taxpayer shall be 

8 treated as the eligible caregiver if each 

9 such individual (other than the taxpayer) 

10 files a written declaration (in such form 

11 and manner as the Secretary may pre12 scribe) that such individual will not claim 

13 such applicable individual for the credit 

14 under this section. 

15 ‘‘(ii) NO AGREEMENT.—If each indi16 vidual required under clause (i) to file a 

17 written declaration under clause (i) does 

18 not do so, the individual with the highest 

19 adjusted gross income shall be treated as 

20 the eligible caregiver. 

21 ‘‘(iii) MARRIED INDIVIDUALS FILING

22 SEPARATELY.—In the case of married indi23 viduals filing separately, the determination 

24 under this subparagraph as to whether the 

25 husband or wife is the eligible caregiver 
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1 shall be made under the rules of clause (ii) 

2 (whether or not one of them has filed a 

3 written declaration under clause (i)). 

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

5 shall be allowed under this section to a taxpayer with re6 spect to any applicable individual unless the taxpayer in7 cludes the name and taxpayer identification number of 

8 such individual, and the identification number of the phy9 sician certifying such individual, on the return of tax for 

10 the taxable year. 

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

12 YEAR.—Except in the case of a taxable year closed by rea13 son of the death of the taxpayer, no credit shall be allow14 able under this section in the case of a taxable year cov15 ering a period of less than 12 months.’’. 

16 (b) CONFORMING AMENDMENTS.— 

17 (1) Section 6213(g)(2) of such Code is amend18 ed by striking ‘‘and’’ at the end of subparagraph 

19 (L), by striking the period at the end of subpara20 graph (M) and inserting ‘‘, and’’, and by inserting 

21 after subparagraph (M) the following new subpara22 graph: 

23 ‘‘(N) an omission of a correct TIN or phy24 sician identification required under section 

25 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, 2004. 

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 consumer). 

6 ‘‘(ii) Section 14 (relating to applica7 tion forms and replacement coverage). 

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

9 requirements). 

10 ‘‘(iv) Section 22 (relating to filing re11 quirements for marketing). 

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

13 for marketing), including inaccurate com14 pletion of medical histories, other than 

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

16 23C. 

17 ‘‘(vi) Section 24 (relating to suit18 ability). 

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

20 format outline of coverage). 

21 ‘‘(viii) Section 30 (relating to require22 ment to deliver shopper’s guide). 

23 The requirements referred to in clause (vi) shall 

24 not include those portions of the personal work25 sheet described in Appendix B relating to con-
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1 sumer protection requirements not imposed by 

2 section 4980C or 7702B. 

3 ‘‘(B) MODEL ACT.—The following require4 ments of the model Act must be met: 

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

6 return). 

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

8 coverage). 

9 ‘‘(iii) Section 6H (relating to require10 ments for certificates under group plans). 

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

12 summary). 

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

14 reports on accelerated death benefits). 

15 ‘‘(vi) Section 7 (relating to incontest16 ability period). 

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

18 paragraph, the terms ‘model regulation’ and 

19 ‘model Act’ have the meanings given such terms 

20 by section 7702B(g)(2)(B).’’. 

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

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

23 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.’’. 

24 (c) EFFECTIVE DATE.— 
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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to exchanges after December 

3 31, 1997. 

4 (2) WAIVER OF LIMITATIONS.—If the credit or 

5 refund of any overpayment of tax with respect to a 

6 taxable year ending before the date of the enactment 

7 of this Act resulting from the application of section 

8 1035(a)(4) of the Internal Revenue Code of 1986, as 

9 added by this section, is prevented at any time by 

10 the operation of any law or rule of law (including res 

11 judicata), such credit or refund may nevertheless be 

12 allowed or made if the claim therefor is filed before 

13 the close of the 1-year period beginning on the date 

14 of the enactment of this Act. 

Æ