II

106TH CONGRESS

2D SESSION S. 2066

To amend the Internal Revenue Code of 1986 to exclude United States

savings bond income from gross income if used to pay long-term care

expenses.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 10, 2000

Mr. CLELAND introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to exclude

United States savings bond income from gross income

if used to pay long-term care expenses.

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

3 SECTION 1. EXCLUSION OF UNITED STATES SAVINGS BOND

4 INCOME FROM GROSS INCOME IF USED TO

5 PAY LONG-TERM CARE EXPENSES.

6 (a) IN GENERAL.—Subsection (a) of section 135 of

7 the Internal Revenue Code of 1986 (relating to income

8 from United States savings bonds used to pay higher edu9 cation tuition and fees) is amended to read as follows:
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1 ‘‘(a) EXCLUSION.—

2 ‘‘(1) GENERAL RULE.—In the case of an indi3 vidual who pays qualified expenses during the tax4 able year, no amount shall be includible in gross in5 come by reason of the redemption during such year

6 of any qualified United States savings bond.

7 ‘‘(2) QUALIFIED EXPENSES.—For purposes of

8 this section, the term ‘qualified expenses’ means—

9 ‘‘(A) qualified higher education expenses,

10 and

11 ‘‘(B) eligible long-term care expenses.’’.

12 (b) LIMITATION WHERE REDEMPTION PROCEEDS

13 EXCEED QUALIFIED EXPENSES.—Section 135(b)(1) of

14 the Internal Revenue Code of 1986 (relating to limitation

15 where redemption proceeds exceed higher education ex16 penses) is amended—

17 (1) by striking ‘‘higher education’’ in subpara18 graph (A)(ii), and

19 (2) by striking ‘‘HIGHER EDUCATION’’ in the

20 heading thereof.

21 (c) ELIGIBLE LONG-TERM CARE EXPENSES.—Sec22 tion 135(c) of the Internal Revenue Code of 1986 (relating

23 to definitions) is amended by redesignating paragraph (4)

24 as paragraph (5) and by inserting after paragraph (3) the

25 following new paragraph:
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1 ‘‘(4) ELIGIBLE LONG-TERM CARE EXPENSES.—

2 The term ‘eligible long-term care expenses’ means

3 qualified long-term care expenses (as defined in sec4 tion 7702B(c)) and eligible long-term care premiums

5 (as defined in section 213(d)(10)) of—

6 ‘‘(A) the taxpayer,

7 ‘‘(B) the taxpayer’s spouse, or

8 ‘‘(C) any dependent of the taxpayer with

9 respect to whom the taxpayer is allowed a de10 duction under section 151.’’.

11 (d) ADJUSTMENTS.—Section 135(d) of the Internal

12 Revenue Code of 1986 (relating to special rules) is amend13 ed by redesignating paragraphs (3) and (4) as paragraphs

14 (4) and (5), respectively, and by inserting after paragraph

15 (2) the following new paragraph:

16 ‘‘(3) ELIGIBLE LONG-TERM CARE EXPENSE AD17 JUSTMENTS.—The amount of eligible long-term care

18 expenses otherwise taken into account under sub19 section (a) with respect to an individual shall be re20 duced (before the application of subsection (b)) by

21 the sum of—

22 ‘‘(A) any amount paid for qualified long23 term care services (as defined in section

24 7702B(c)) provided to such individual and de25 scribed in section 213(d)(11), plus
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1 ‘‘(B) any amount received by the taxpayer

2 or the taxpayer’s spouse or dependents for the

3 payment of eligible long-term care expenses

4 which is excludable from gross income.’’.

5 (e) COORDINATION WITH DEDUCTIONS.—

6 (1) Section 213 of the Internal Revenue Code

7 of 1986 (relating to medical, dental, etc., expenses)

8 is amended by adding at the end the following new

9 subsection:

10 ‘‘(f) COORDINATION WITH SAVINGS BOND INCOME

11 USED FOR EXPENSES.—Any expense taken into account

12 in determining the exclusion under section 135 shall not

13 be treated as an expense paid for medical care.’’.

14 (2) Section 162(l) of such Code (relating to

15 special rules for health insurance costs of self-em16 ployed individuals) is amended by adding at the end

17 the following new paragraph:

18 ‘‘(6) COORDINATION WITH SAVINGS BOND IN19 COME USED FOR EXPENSES.—Any expense taken

20 into account in determining the exclusion under sec21 tion 135 shall not be treated as an expense paid for

22 medical care.’’.

23 (f) CLERICAL AMENDMENTS.—

24 (1) The heading for section 135 of the Internal

25 Revenue Code of 1986 is amended by inserting
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1 ‘‘AND LONG-TERM CARE EXPENSES’’ after

2 ‘‘FEES’’.

3 (2) The item relating to section 135 in the table

4 of sections for part III of subchapter B of chapter

5 1 of such Code is amended by inserting ‘‘and long6 term care expenses’’ after ‘‘fees’’.

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

8 this section shall apply to taxable years beginning after

9 December 31, 1999.

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