I 

108TH CONGRESS 

2D SESSION H. R. 4432

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 20, 2004

Mrs. DAVIS of California (for herself and Mr. PAUL) 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 2004’’. 
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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 inserting after paragraph 

8 (19) the following new item: 

9 ‘‘(20) 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 the threshold amount. For 

17 purposes of the preceding sentence, the term ‘modi18 fied adjusted gross income’ means adjusted gross in19 come increased by any amount excluded from gross 

20 income under section 911, 931, or 933. 

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

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

23 ‘‘(A) $150,000 in the case of a joint re24 turn, and 

25 ‘‘(B) $75,000 in any other case. 
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1 ‘‘(3) INDEXING.—In the case of any taxable 

2 year beginning in a calendar year after 2004, each 

3 dollar amount contained in paragraph (2) shall be 

4 increased by an amount equal to the product of—

5 ‘‘(A) such dollar amount, and 

6 ‘‘(B) the medical care cost adjustment de7 termined under section 213(d)(10)(B)(ii) for 

8 the calendar year in which the taxable year be9 gins, determined by substituting ‘August of 

10 2003’ for ‘August of 1996’ in subclause (II) 

11 thereof. 

12 If any increase determined under the preceding sen13 tence is not a multiple of $50, such increase shall 

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

15 ‘‘(4) APPLICATION WITH OTHER CREDITS.—

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

17 year shall not exceed the excess of—

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

19 (as defined in section 26(b)) plus the tax im20 posed by section 55, over 

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

22 under this subpart (other than this section) and 

23 section 27 for the taxable year. 

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

25 ‘‘(1) APPLICABLE INDIVIDUAL.—
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1 ‘‘(A) IN GENERAL.—The term ‘applicable 

2 individual’ means, with respect to any taxable 

3 year, any individual—

4 ‘‘(i) who has attained age 65, and 

5 ‘‘(ii) who has been certified, before the 

6 due date for filing the return of tax for the 

7 taxable year (without extensions), by a 

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

9 of the Social Security Act) as being an in10 dividual with long-term care needs de11 scribed in subparagraph (B) for a period—

12 ‘‘(I) which is at least 180 con13 secutive days, and 

14 ‘‘(II) a portion of which occurs 

15 within the taxable year. 

16 Such term shall not include any individual oth17 erwise meeting the requirements of the preceding sentence unless within the 391 18 ⁄2 month 

19 period ending on such due date (or such other 

20 period as the Secretary prescribes) a physician 

21 (as so defined) has certified that such indi22 vidual meets such requirements. 

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

24 NEEDS.—An individual is described in this sub25 paragraph if the individual is unable to perform 
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1 (without substantial assistance from another in2 dividual) at least 2 activities of daily living (as 

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

4 loss of functional capacity. 

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

16 credit allowable under subsection (a) exceeds the limita17 tion imposed by subsection (b)(4) for the taxable year, 

18 such excess shall be carried to the succeeding taxable year 

19 and added to the credit allowable under subsection (a) for 

20 such taxable year.’’. 

21 (b) CONFORMING AMENDMENTS.—

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

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

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

25 the end of subparagraph (M) and inserting ‘‘, and’’, 
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1 and by inserting after subparagraph (M) the fol2 lowing new subparagraph: 

3 ‘‘(N) an omission of a correct TIN or phy4 sician identification required under section 

5 25C(d) (relating to credit for taxpayers with 

6 long-term care needs) to be included on a re7 turn.’’. 

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

9 ‘‘this section’’ and inserting ‘‘this section and section 

10 25C’’. 

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

12 ‘‘23 and 25B’’ and inserting ‘‘23, 25B, and 25C’’. 

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

14 ‘‘25C,’’ after ‘‘25B,’’. 

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

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

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

18 25B’’ and inserting ‘‘, 25B, and 25C’’. 

19 (7) Section 1400C(d) is amended by striking 

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

21 (8) The table of sections for subpart A of part 

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

23 amended by inserting after the item relating to sec24 tion 25B the following new item:

‘‘25C. Credit for taxpayers with long-term care needs.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 4. ADDITIONAL CONSUMER PROTECTIONS FOR LONG5 TERM CARE INSURANCE. 

6 (a) ADDITIONAL PROTECTIONS APPLICABLE TO

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

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

9 of 1986 (relating to requirements of model regulation and 

10 Act) are amended to read as follows: 

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

12 this paragraph are met with respect to any con13 tract if such contract meets—

14 ‘‘(i) MODEL REGULATION.—The fol15 lowing requirements of the model regula16 tion: 

17 ‘‘(I) Section 6A (relating to guar18 anteed renewal or noncancellability), 

19 and the requirements of section 6B of 

20 the model Act relating to such section 

21 6A. 

22 ‘‘(II) Section 6B (relating to pro23 hibitions on limitations and exclu24 sions). 
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1 ‘‘(III) Section 6C (relating to ex2 tension of benefits). 

3 ‘‘(IV) Section 6D (relating to 

4 continuation or conversion of cov5 erage). 

6 ‘‘(V) Section 6E (relating to dis7 continuance and replacement of poli8 cies). 

9 ‘‘(VI) Section 7 (relating to unin10 tentional lapse). 

11 ‘‘(VII) Section 8 (relating to dis12 closure), other than section 8F there13 of. 

14 ‘‘(VIII) Section 11 (relating to 

15 prohibitions against post-claims un16 derwriting). 

17 ‘‘(IX) Section 12 (relating to 

18 minimum standards). 

19 ‘‘(X) Section 25 (relating to pro20 hibition against preexisting conditions 

21 and probationary periods in replace22 ment policies or certificates). 

23 ‘‘(XI) The provisions of section 

24 26 relating to contingent nonforfeiture 

25 benefits, if the policyholder declines 
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1 the offer of a nonforfeiture provision 

2 described in paragraph (4). 

3 ‘‘(ii) MODEL ACT.—The following re4 quirements of the model Act: 

5 ‘‘(I) Section 6C (relating to pre6 existing conditions). 

7 ‘‘(II) Section 6D (relating to 

8 prior hospitalization). 

9 ‘‘(III) The provisions of section 8 

10 relating to contingent nonforfeiture 

11 benefits, if the policyholder declines 

12 the offer of a nonforfeiture provision 

13 described in paragraph (4). 

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

15 paragraph—

16 ‘‘(i) MODEL PROVISIONS.—The terms 

17 ‘model regulation’ and ‘model Act’ mean 

18 the long-term care insurance model regula19 tion, and the long-term care insurance 

20 model Act, respectively, promulgated by 

21 the National Association of Insurance 

22 Commissioners (as adopted as of October 

23 2000). 

24 ‘‘(ii) COORDINATION.—Any provision 

25 of the model regulation or model Act listed 
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1 under clause (i) or (ii) of subparagraph 

2 (A) shall be treated as including any other 

3 provision of such regulation or Act nec4 essary to implement the provision. 

5 ‘‘(iii) DETERMINATION.—For pur6 poses of this section and section 4980C, 

7 the determination of whether any require8 ment of a model regulation or the model 

9 Act has been met shall be made by the 

10 Secretary.’’. 

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

12 4980C(c) of such Code (relating to requirements of model 

13 provisions) is amended to read as follows: 

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

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

16 requirements of the model regulation must be 

17 met: 

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

19 disclosure of rating practices to con20 sumer).’’

21 ‘‘(ii) Section 14 (relating to applica22 tion forms and replacement coverage). 

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

24 requirements), except that the issuer shall 

25 also report at least annually the number of 
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1 claims denied during the reporting period 

2 for each class of business (expressed as a 

3 percentage of claims denied), other than 

4 claims denied for failure to meet the wait5 ing period or because of any applicable 

6 preexisting condition. 

7 ‘‘(iv) Section 22 (relating to filing re8 quirements for advertising). 

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

10 for marketing), including inaccurate com11 pletion of medical histories, other than 

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

13 23C, except that—

14 ‘‘(I) in addition to such require15 ments, no person shall, in selling or 

16 offering to sell a qualified long-term 

17 care insurance contract, misrepresent 

18 a material fact; and 

19 ‘‘(II) no such requirements shall 

20 include a requirement to inquire or 

21 identify whether a prospective appli22 cant or enrollee for long-term care in23 surance has accident and sickness in24 surance. 
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1 ‘‘(vi) Section 24 (relating to suit2 ability). 

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

4 format outline of coverage). 

5 ‘‘(viii) Section 30 (relating to require6 ment to deliver shopper’s guide). 

7 The requirements referred to in clause (vi) shall not in8 clude those portions of the personal worksheet described 

9 in Appendix B relating to consumer protection require10 ments not imposed by section 4980C or 7702B. 

11 ‘‘(B) MODEL ACT.—The following require12 ments of the model Act must be met: 

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

14 return), except that such section shall also 

15 apply to denials of applications and any re16 fund shall be made within 30 days of the 

17 return or denial. 

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

19 coverage). 

20 ‘‘(iii) Section 6H (relating to require21 ments for certificates under group plans). 

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

23 summary). 

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

25 reports on accelerated death benefits). 
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1 ‘‘(vi) Section 7 (relating to incontest2 ability period). 

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

4 paragraph, the terms ‘model regulation’ and 

5 ‘model Act’ have the meanings given such terms 

6 by section 7702B(g)(2)(B).’’. 

7 (c) ADDITIONAL PROTECTIONS.—

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

9 7702B(g) of such Code (relating to consumer pro10 tection provisions) is amended by striking ‘‘and’’ at 

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

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

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

14 subparagraphs: 

15 ‘‘(D) the inflation protection requirement 

16 of paragraph (5), 

17 ‘‘(E) the lifetime deductible requirement of 

18 paragraph (6), 

19 ‘‘(F) the interchangeability requirement of 

20 paragraph (7), and 

21 ‘‘(G) the care management/care coordina22 tion requirement of paragraph (8).’’

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

24 7702B of such Code is amended by redesignating 
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1 paragraph (5) as paragraph (9) and by inserting 

2 after paragraph (4) the following new paragraphs: 

3 ‘‘(5) INFLATION PROTECTION REQUIREMENT.—

4 The requirement of this paragraph is met if the con5 tract provides for benefit levels to rise at a rate 

6 which is meaningful to account for reasonably antici7 pated increases in the cost of long-term care services 

8 covered by the contract. 

9 ‘‘(6) LIFETIME DEDUCTIBLE REQUIREMENT.—

10 The requirement of this paragraph is met if the con11 tract requires that no more than 1 deductible 

12 amount applies for all benefits provided during the 

13 entire lifetime of the covered individual. 

14 ‘‘(7) INTERCHANGEABILITY REQUIREMENT.—

15 The requirement of this paragraph is met if the pol16 icyholder has the sole discretion to designate how 

17 any maximum benefit amount under the contract is 

18 allocated among the benefits provided under the con19 tract. 

20 ‘‘(8) CARE MANAGEMENT/CARE COORDINATION

21 REQUIREMENT.—

22 ‘‘(A) IN GENERAL.—The requirement of 

23 this paragraph is met if the contract requires 

24 that the covered individual is assigned a care 

25 manager/coordinator. 
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1 ‘‘(B) CARE MANAGER/COORDINATOR.—For 

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

3 manager/coordinator’ means an individual who, 

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

5 for performing assessments and reassessments, 

6 developing plans of care, coordinating the provi7 sion of care, and monitoring the delivery of 

8 services.’’

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

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

11 after the date of the enactment of this Act.

Æ