I 

109TH CONGRESS 

1ST SESSION H. R. 2935 

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 

JUNE 16, 2005 

Mrs. DAVIS of California 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 Sup5 port and Incentive 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 spouse and dependents of the taxpayer under a 

16 qualified long-term care insurance contract (as defined in 

17 section 7702B(b)). 

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

19 subsection (a)— 

20 ‘‘(1) AGE 65 OR OLDER.—In the case of an in21 dividual who has attained age 65 as of the close of 

22 the taxable year, the applicable percentage shall be 

23 75 percent. 

24 ‘‘(2) UNDER AGE 65.—In the case of an indi25 vidual who has not attained age 65 as of the close 
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1 of the taxable year, the applicable percentage shall 

2 be 50 percent. 

3 ‘‘(c) COORDINATION WITH OTHER PROVISIONS.— 

4 Any amount paid by a taxpayer for any qualified long5 term care insurance contract to which subsection (a) ap6 plies shall not be taken into account in computing the 

7 amount allowable to the taxpayer as a deduction under 

8 section 162(l) or 213(a). Premiums paid by the taxpayer 

9 shall not be taken into account under subsection (a) to 

10 the extent that an amount is not includible in gross income 

11 under section 220(f) or 223(f) with respect to such pay12 ment.’’. 

13 (b) LONG-TERM CARE INSURANCE PERMITTED TO

14 BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE

15 SPENDING ARRANGEMENTS.— 

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

17 Internal Revenue Code of 1986 (defining qualified 

18 benefits) is amended by inserting before the period 

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

20 payment of premiums for any qualified long-term 

21 care insurance contract (as defined in section 

22 7702B) to the extent the amount of such payment 

23 does not exceed the eligible long-term care premiums 

24 (as defined in section 213(d)(10)) for such con25 tract’’. 
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1 (2) FLEXIBLE SPENDING ARRANGEMENTS.— 

2 Section 106 of such Code (relating to contributions 

3 by an employer to accident and health plans) is 

4 amended by striking subsection (c). 

5 (c) CONFORMING AMENDMENTS.— 

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

7 of 1986 is amended by adding at the end the fol8 lowing new item: 

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

10 CARE INSURANCE CONTRACTS.—The deduction al11 lowed by section 224.’’. 

12 (2) The table of sections for part VII of sub13 chapter B of chapter 1 of such Code is amended by 

14 striking the last item and inserting the following 

15 new items: 

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

‘‘225. Cross reference.’’. 

16 (d) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 the date of the enactment of this Act. 

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.—There shall be al6 lowed as a credit against the tax imposed by this chapter 

7 for the taxable year an amount equal to $4,000 multiplied 

8 by the number of applicable individuals with respect to 

9 whom the taxpayer is an eligible caregiver for the taxable 

10 year. 

11 ‘‘(b) LIMITATIONS AND ADJUSTMENTS.— 

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

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

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

15 thereof) by which the taxpayer’s modified adjusted 

16 gross income exceeds $75,000 (twice such amount in 

17 the case of a joint return). For purposes of the pre18 ceding sentence, the term ‘modified adjusted gross 

19 income’ means adjusted gross income increased by 

20 any amount excluded from gross income under sec21 tion 911, 931, or 933. 

22 ‘‘(2) INDEXING.—In the case of any taxable 

23 year beginning in a calendar year after 2005, the 

24 $75,000 amount contained in paragraph (1) shall be 

25 increased by an amount equal to the product of— 
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1 ‘‘(A) such dollar amount, and 

2 ‘‘(B) the medical care cost adjustment de3 termined under section 213(d)(10)(B)(ii) for 

4 the calendar year in which the taxable year be5 gins, determined by substituting ‘August of 

6 2004’ for ‘August of 1996’ in subclause (II) 

7 thereof. 

8 If any increase determined under the preceding sen9 tence is not a multiple of $50, such increase shall 

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

11 ‘‘(3) APPLICATION WITH OTHER CREDITS.— 

12 The credit allowed by subsection (a) for any taxable 

13 year shall not exceed the excess of— 

14 ‘‘(A) the sum of the regular tax liability 

15 (as defined in section 26(b)) plus the tax im16 posed by section 55, over 

17 ‘‘(B) the sum of the credits allowable 

18 under this subpart (other than this section) and 

19 section 27 for the taxable year. 

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

21 ‘‘(1) APPLICABLE INDIVIDUAL.— 

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

23 individual’ means, with respect to any taxable 

24 year, any individual— 

25 ‘‘(i) who has attained age 65, and 
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1 ‘‘(ii) who has been certified, before the 

2 due date for filing the return of tax for the 

3 taxable year (without extensions), by a 

4 physician (as defined in section 1861(r)(1) 

5 of the Social Security Act) as being an in6 dividual with long-term care needs de7 scribed in subparagraph (B) for a period— 

8 ‘‘(I) which is at least 180 con9 secutive days, and 

10 ‘‘(II) a portion of which occurs 

11 within the taxable year. 

12 Such term shall not include any individual oth13 erwise meeting the requirements of the preceding sentence unless within the 391 14 ⁄2 month 

15 period ending on such due date (or such other 

16 period as the Secretary prescribes) a physician 

17 (as so defined) has certified that such indi18 vidual meets such requirements. 

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

20 NEEDS.—An individual is described in this sub21 paragraph if the individual is unable to perform 

22 (without substantial assistance from another in23 dividual) at least 2 activities of daily living (as 

24 defined in section 7702B(c)(2)(B)) due to a 

25 loss of functional capacity. 
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1 ‘‘(2) ELIGIBLE CAREGIVER.—A taxpayer shall 

2 be treated as an eligible caregiver for any taxable 

3 year with respect to the taxpayer and the taxpayer’s 

4 spouse and dependents. A taxpayer shall not be 

5 treated as an eligible caregiver with respect to him6 self for any taxable year beginning in any calendar 

7 year if any other person is an eligible caregiver with 

8 respect to the taxpayer for a taxable year which be9 gins in such calendar year. 

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

11 shall be allowed under this section to a taxpayer with re12 spect to any applicable individual unless the taxpayer in13 cludes the name and taxpayer identification number of 

14 such individual, and the identification number of the phy15 sician certifying such individual, on the return of tax for 

16 the taxable year. 

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

18 YEAR.—Except in the case of a taxable year closed by rea19 son of the death of the taxpayer, no credit shall be allow20 able under this section in the case of a taxable year cov21 ering a period of less than 12 months. 

22 ‘‘(f) CARRYFORWARD OF UNUSED CREDIT.—If the 

23 credit allowable under subsection (a) exceeds the limita24 tion imposed by subsection (b)(4) for the taxable year, 

25 such excess shall be carried to the succeeding taxable year 
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1 and added to the credit allowable under subsection (a) for 

2 such taxable year.’’. 

3 (b) CONFORMING AMENDMENTS.— 

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

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

6 end of subparagraph (L), by striking the period at 

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

8 and by inserting after subparagraph (M) the fol9 lowing new subparagraph: 

10 ‘‘(N) an omission of a correct TIN or phy11 sician identification required under section 

12 25C(d) (relating to credit for taxpayers with 

13 long-term care needs) to be included on a re14 turn.’’. 

15 (2) Section 23(b)(4) is amended by striking 

16 ‘‘this section’’ and inserting ‘‘this section and section 

17 25C’’. 

18 (3) Section 24(b)(3)(B) is amended by striking 

19 ‘‘23 and 25B’’ and inserting ‘‘23, 25B, and 25C’’. 

20 (4) Section 25(e)(1)(C) is amended by inserting 

21 ‘‘25C,’’ after ‘‘25B,’’. 

22 (5) Section 26(a)(1) is amended by striking 

23 ‘‘and 25B’’ and inserting ‘‘, 25B, and 25C’’. 

24 (6) Section 904(h) is amended by striking ‘‘and 

25 25B’’ and inserting ‘‘, 25B, and 25C’’. 
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1 (7) Section 1400C(d) is amended by striking 

2 ‘‘and 25B’’ and inserting ‘‘, 25B, and 25C’’. 

3 (8) 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: 

‘‘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 the date of the enactment of this Act. 

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 and the requirements of section 6B of 
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1 the model Act relating to such section 

2 6A. 

3 ‘‘(II) Section 6B (relating to pro4 hibitions on limitations and exclu5 sions). 

6 ‘‘(III) Section 6C (relating to ex7 tension of benefits). 

8 ‘‘(IV) Section 6D (relating to 

9 continuation or conversion of cov10 erage). 

11 ‘‘(V) Section 6E (relating to dis12 continuance and replacement of poli13 cies). 

14 ‘‘(VI) Section 7 (relating to unin15 tentional lapse). 

16 ‘‘(VII) Section 8 (relating to dis17 closure), other than section 8F there18 of. 

19 ‘‘(VIII) Section 11 (relating to 

20 prohibitions against post-claims un21 derwriting). 

22 ‘‘(IX) Section 12 (relating to 

23 minimum standards). 

24 ‘‘(X) Section 25 (relating to pro25 hibition against preexisting conditions 
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1 and probationary periods in replace2 ment policies or certificates). 

3 ‘‘(XI) The provisions of section 

4 26 relating to contingent nonforfeiture 

5 benefits, if the policyholder declines 

6 the offer of a nonforfeiture provision 

7 described in paragraph (4). 

8 ‘‘(ii) MODEL ACT.—The following re9 quirements of the model Act: 

10 ‘‘(I) Section 6C (relating to pre11 existing conditions). 

12 ‘‘(II) Section 6D (relating to 

13 prior hospitalization). 

14 ‘‘(III) The provisions of section 8 

15 relating to contingent nonforfeiture 

16 benefits, if the policyholder declines 

17 the offer of a nonforfeiture provision 

18 described in paragraph (4). 

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

20 paragraph— 

21 ‘‘(i) MODEL PROVISIONS.—The terms 

22 ‘model regulation’ and ‘model Act’ mean 

23 the long-term care insurance model regula24 tion, and the long-term care insurance 

25 model Act, respectively, promulgated by 
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1 the National Association of Insurance 

2 Commissioners (as adopted as of October 

3 2000). 

4 ‘‘(ii) COORDINATION.—Any provision 

5 of the model regulation or model Act listed 

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

7 (A) shall be treated as including any other 

8 provision of such regulation or Act nec9 essary to implement the provision. 

10 ‘‘(iii) DETERMINATION.—For pur11 poses of this section and section 4980C, 

12 the determination of whether any require13 ment of a model regulation or the model 

14 Act has been met shall be made by the 

15 Secretary.’’. 

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

17 4980C(c) of such Code (relating to requirements of model 

18 provisions) is amended to read as follows: 

19 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.— 

20 ‘‘(A) MODEL REGULATION.—The following 

21 requirements of the model regulation must be 

22 met: 

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

24 disclosure of rating practices to con25 sumer).’’ 
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1 ‘‘(ii) Section 14 (relating to applica2 tion forms and replacement coverage). 

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

4 requirements), except that the issuer shall 

5 also report at least annually the number of 

6 claims denied during the reporting period 

7 for each class of business (expressed as a 

8 percentage of claims denied), other than 

9 claims denied for failure to meet the wait10 ing period or because of any applicable 

11 preexisting condition. 

12 ‘‘(iv) Section 22 (relating to filing re13 quirements for advertising). 

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

15 for marketing), including inaccurate com16 pletion of medical histories, other than 

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

18 23C, except that— 

19 ‘‘(I) in addition to such require20 ments, no person shall, in selling or 

21 offering to sell a qualified long-term 

22 care insurance contract, misrepresent 

23 a material fact; and 

24 ‘‘(II) no such requirements shall 

25 include a requirement to inquire or 
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1 identify whether a prospective appli2 cant or enrollee for long-term care in3 surance has accident and sickness in4 surance. 

5 ‘‘(vi) Section 24 (relating to suit6 ability). 

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

8 format outline of coverage). 

9 ‘‘(viii) Section 30 (relating to require10 ment to deliver shopper’s guide). 

11 The requirements referred to in clause (vi) shall not in12 clude those portions of the personal worksheet described 

13 in Appendix B relating to consumer protection require14 ments not imposed by section 4980C or 7702B. 

15 ‘‘(B) MODEL ACT.—The following require16 ments of the model Act must be met: 

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

18 return), except that such section shall also 

19 apply to denials of applications and any re20 fund shall be made within 30 days of the 

21 return or denial. 

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

23 coverage). 

24 ‘‘(iii) Section 6H (relating to require25 ments for certificates under group plans). 
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1 ‘‘(iv) Section 6J (relating to policy 

2 summary). 

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

4 reports on accelerated death benefits). 

5 ‘‘(vi) Section 7 (relating to incontest6 ability period). 

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

8 paragraph, the terms ‘model regulation’ and 

9 ‘model Act’ have the meanings given such terms 

10 by section 7702B(g)(2)(B).’’. 

11 (c) ADDITIONAL PROTECTIONS.— 

12 (1) IN GENERAL.—Paragraph (1) of section 

13 7702B(g) of such Code (relating to consumer pro14 tection provisions) is amended by striking ‘‘and’’ at 

15 the end of subparagraph (B), by striking the period 

16 at the end of subparagraph (C) and inserting a 

17 comma, and by adding at the end the following new 

18 subparagraphs: 

19 ‘‘(D) the inflation protection requirement 

20 of paragraph (5), 

21 ‘‘(E) the lifetime deductible requirement of 

22 paragraph (6), 

23 ‘‘(F) the interchangeability requirement of 

24 paragraph (7), and 
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1 ‘‘(G) the care management/care coordina2 tion requirement of paragraph (8).’’ 

3 (2) REQUIREMENTS.—Subsection (g) of section 

4 7702B of such Code is amended by redesignating 

5 paragraph (5) as paragraph (9) and by inserting 

6 after paragraph (4) the following new paragraphs: 

7 ‘‘(5) INFLATION PROTECTION REQUIREMENT.— 

8 The requirement of this paragraph is met if the con9 tract provides for benefit levels to rise at a rate 

10 which is meaningful to account for reasonably antici11 pated increases in the cost of long-term care services 

12 covered by the contract. 

13 ‘‘(6) LIFETIME DEDUCTIBLE REQUIREMENT.— 

14 The requirement of this paragraph is met if the con15 tract requires that no more than 1 deductible 

16 amount applies for all benefits provided during the 

17 entire lifetime of the covered individual. 

18 ‘‘(7) INTERCHANGEABILITY REQUIREMENT.— 

19 The requirement of this paragraph is met if the pol20 icyholder has the sole discretion to designate how 

21 any maximum benefit amount under the contract is 

22 allocated among the benefits provided under the con23 tract. 

24 ‘‘(8) CARE MANAGEMENT/CARE COORDINATION

25 REQUIREMENT.— 
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1 ‘‘(A) IN GENERAL.—The requirement of 

2 this paragraph is met if the contract requires 

3 that the covered individual is assigned a care 

4 manager/coordinator. 

5 ‘‘(B) CARE MANAGER/COORDINATOR.—For 

6 purposes of subparagraph (A), the term ‘care 

7 manager/coordinator’ means an individual who, 

8 either alone or as part of a team, is responsible 

9 for performing assessments and reassessments, 

10 developing plans of care, coordinating the provi11 sion of care, and monitoring the delivery of 

12 services.’’ 

13 (d) EFFECTIVE DATE.—The amendments made by 

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

15 after the date of the enactment of this Act. 

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