I 

115TH CONGRESS 

2D SESSION H. R. 7203 

To amend the Internal Revenue Code of 1986 to create long-term care 

accounts funded by the proceeds of the sale or assignment of life insurance contracts. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 30, 2018 

Mr. MARCHANT (for himself and Mr. HIGGINS 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 create 

long-term care accounts funded by the proceeds of the 

sale or assignment of life insurance contracts. 

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 Ac5 count Act’’. 

6 SEC. 2. LONG-TERM CARE ACCOUNT. 

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by inserting after section 139G the following new section: 


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1 ‘‘SEC. 139H. LONG-TERM CARE ACCOUNT. 

2 ‘‘(a) EXCLUSION OF CONTRIBUTIONS OF LONG3 TERM GAIN FROM SALES OF LIFE INSURANCE CON4 TRACTS.—The amount of gain from the sale or assign5 ment of a life insurance contract of a taxpayer shall be 

6 reduced (but not below zero) by the amount of contribu7 tions to a long-term care account made by such taxpayer 

8 during the 30-day period beginning on the date of such 

9 sale or assignment. 

10 ‘‘(b) TAX TREATMENT OF LONG-TERM CARE AC11 COUNT.— 

12 ‘‘(1) IN GENERAL.—A long-term account is ex13 empt from taxation under this subtitle unless such 

14 account has ceased to be a long-term care account. 

15 Notwithstanding the preceding sentence, any such 

16 account is subject to the taxes imposed by section 

17 511 (relating to imposition of tax on unrelated busi18 ness income of charitable, etc. organizations). 

19 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 

20 to the rules of paragraphs (2) and (4) of section 

21 408(e) shall apply to health savings accounts, and 

22 any amount treated as distributed under such rules 

23 shall be treated as not used to pay long-term care 

24 expenses. 

25 ‘‘(3) TAX TREATMENT OF DISTRIBUTIONS.— 


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1 ‘‘(A) AMOUNTS USED FOR LONG-TERM

2 CARE EXPENSES.—Any amount paid or distrib3 uted out of a long-term care account which is 

4 used exclusively to pay long-term care expenses 

5 of the account beneficiary or the account bene6 ficiary’s spouse shall not be includible in gross 

7 income. 

8 ‘‘(B) INCLUSION OF AMOUNTS NOT USED

9 FOR LONG-TERM CARE EXPENSES.—Any 

10 amount paid or distributed out of a long-term 

11 care account which is not used to pay the long12 term care expenses of the account beneficiary or 

13 the account beneficiary’s spouse shall be in14 cluded in the gross income of such beneficiary. 

15 ‘‘(C) ADDITIONAL TAX ON DISTRIBUTIONS

16 NOT USED FOR LONG-TERM CARE EXPENSES.— 

17 The tax imposed by this chapter on the account 

18 beneficiary for any taxable year in which there 

19 is a payment or distribution from a long-term 

20 care account of such beneficiary which is in21 cludible in gross income under subparagraph 

22 (B) shall be increased by 20 percent of the 

23 amount which is so includible. This subpara24 graph shall not apply if the payment or disVerDate Sep 11 2014 03:35 Dec 05, 2018 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7203.IH H7203

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1 tribution is made after the account bene2 ficiary— 

3 ‘‘(i) dies, 

4 ‘‘(ii) becomes a terminally ill indi5 vidual (as such term is defined in section 

6 101(g)(4)(A)), or 

7 ‘‘(iii) becomes a chronically ill indi8 vidual (as such term is defined in section 

9 101(g)(4)(B)). 

10 ‘‘(4) COORDINATION WITH MEDICAL EXPENSE

11 DEDUCTION.—For purposes of determining the 

12 amount of the deduction under section 213, any pay13 ment or distribution out of a long-term care account 

14 for long-term care expenses shall not be treated as 

15 an expense paid for medical care. 

16 ‘‘(5) TRANSFER OF ACCOUNT INCIDENT TO DI17 VORCE.—The transfer of an individual’s interest in 

18 a long-term care account to an individual’s spouse or 

19 former spouse under a divorce or separation instru20 ment described in subparagraph (A) of section 

21 71(b)(2) shall not be considered a taxable transfer 

22 made by such individual notwithstanding any other 

23 provision of this subtitle, and such interest shall, 

24 after such transfer, be treated as a long-term care 


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1 account with respect to which such spouse is the ac2 count beneficiary. 

3 ‘‘(6) TREATMENT AFTER DEATH OF ACCOUNT

4 BENEFICIARY.— 

5 ‘‘(A) TREATMENT IF DESIGNATED BENE6 FICIARY IS SPOUSE.—If the account bene7 ficiary’s surviving spouse acquires such bene8 ficiary’s interest in a long-term care account by 

9 reason of being the designated beneficiary of 

10 such account at the death of the account bene11 ficiary, such long-term care account shall be 

12 treated as if the spouse were the account bene13 ficiary. 

14 ‘‘(B) OTHER CASES.— 

15 ‘‘(i) IN GENERAL.—If, by reason of 

16 the death of the account beneficiary, any 

17 person acquires the account beneficiary’s 

18 interest in a long-term care account in a 

19 case to which subparagraph (A) does not 

20 apply— 

21 ‘‘(I) such account shall cease to 

22 be a long-term care account as of the 

23 date of death, and 

24 ‘‘(II) an amount equal to the fair 

25 market value of the assets in such acVerDate Sep 11 2014 03:35 Dec 05, 2018 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7203.IH H7203

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1 count on such date shall be includible 

2 if such person is not the estate of 

3 such beneficiary, in such person’s 

4 gross income for the taxable year 

5 which includes such date, or if such 

6 person is the estate of such bene7 ficiary, in such beneficiary’s gross in8 come for the last taxable year of such 

9 beneficiary. 

10 ‘‘(ii) SPECIAL RULES.— 

11 ‘‘(I) REDUCTION OF INCLUSION

12 FOR PREDEATH EXPENSES.—The 

13 amount includible in gross income 

14 under clause (i) by any person (other 

15 than the estate) shall be reduced by 

16 the amount of qualified long-term care 

17 expenses which were incurred by the 

18 decedent before the date of the dece19 dent’s death and paid by such person 

20 within 1 year after such date. 

21 ‘‘(II) DEDUCTION FOR ESTATE

22 TAXES.—An appropriate deduction 

23 shall be allowed under section 691(c) 

24 to any person (other than the dece25 dent or the decedent’s spouse) with 


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1 respect to amounts included in gross 

2 income under clause (i) by such per3 son. 

4 ‘‘(c) DEFINITIONS.—For purposes of this sub5 section— 

6 ‘‘(1) ACCOUNT BENEFICIARY.—The term ‘ac7 count beneficiary’ means, with respect to a long8 term care account, the individual on whose behalf 

9 such account was established. 

10 ‘‘(2) LONG-TERM CARE ACCOUNT.—The term 

11 ‘long-term care account’ means a trust created or 

12 organized in the United States as a long-term care 

13 account, but only if the written governing instru14 ment creating the trust meets the following require15 ments: 

16 ‘‘(A) No contribution will be accepted un17 less it is in cash and in consideration of the sale 

18 or assignment of any portion of the death bene19 fits under a life insurance contract on the life 

20 of the account beneficiary. 

21 ‘‘(B) The trustee is a bank (as defined in 

22 section 408(n)), an insurance company (as de23 fined in section 816), or another person who 

24 demonstrates to the satisfaction of the Sec25 retary that the manner in which such person 


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1 will administer the trust will be consistent with 

2 the requirements of this section. 

3 ‘‘(C) No part of the trust assets will be in4 vested in life insurance contracts. 

5 ‘‘(D) The assets of the trust will not be 

6 commingled with other property except in a 

7 common trust fund or common investment 

8 fund. 

9 ‘‘(E) The interest of an individual in the 

10 balance in his account is nonforfeitable. 

11 ‘‘(3) LONG-TERM CARE EXPENSES.—The term 

12 ‘long-term care expenses’ means amounts paid or in13 curred— 

14 ‘‘(A) as premiums for a qualified long-term 

15 care insurance contract (as such term is defined 

16 in section 7702B(b)), 

17 ‘‘(B) for qualified long-term care services 

18 (as such term is defined in section 7702B(c)), 

19 or 

20 ‘‘(C) for qualified health services. 

21 ‘‘(4) QUALIFIED HEALTH SERVICES.—The term 

22 ‘qualified health services’ means— 

23 ‘‘(A) diagnostic, preventive, therapeutic, 

24 curing, treating, mitigating, and rehabilitative 


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1 services, and maintenance or personal care serv2 ices, which are— 

3 ‘‘(i) required by an instrumentally im4 paired individual, and 

5 ‘‘(ii) provided pursuant to a plan of 

6 care prescribed by a licensed health care 

7 practitioner, or 

8 ‘‘(B) items or services that a licensed 

9 health care practitioner determines are reason10 able and necessary to reduce the likelihood of 

11 an individual becoming an instrumentally im12 paired individual. 

13 ‘‘(5) INSTRUMENTALLY IMPAIRED INDI14 VIDUAL.—The term ‘instrumentally impaired indi15 vidual’ means an individual who has been certified 

16 by a licensed health care practitioner as being un17 able to perform (without substantial assistance from 

18 another individual) at least 2 instrumental activities 

19 of daily living for a period of at least 90 days due 

20 to a loss of functional capacity. 

21 ‘‘(6) INSTRUMENTAL ACTIVITIES OF DAILY LIV22 ING.—The term ‘instrumental activities of daily liv23 ing’ means activities related to living independently 

24 in the community, including— 

25 ‘‘(A) meal planning and preparation, 


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1 ‘‘(B) managing finances, 

2 ‘‘(C) shopping for food, clothing, and other 

3 essential items, 

4 ‘‘(D) performing essential household 

5 chores, 

6 ‘‘(E) communicating by phone or other 

7 media, or 

8 ‘‘(F) traveling in and participating in the 

9 community.’’. 

10 (b) CLERICAL AMENDMENT.—The table of sections 

11 for part III of subchapter B of chapter 1 of such Code 

12 is amended by inserting after the item relating to section 

13 139G the following new item: 

‘‘Sec. 139G. Long-term care account.’’. 

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

15 this subsection shall apply with respect to sales or assign16 ments of life insurance contracts after the date of enact17 ment of this Act. 

18 (d) REPORTS.—The Secretary may require the trust19 ee of a long-term care account to make such reports re20 garding such account to the Secretary and to the account 

21 beneficiary with respect to contributions, distributions, 

22 and such other matters as the Secretary determines appro23 priate. 

Æ 


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