IB
Union Calendar No. 342
107TH CONGRESS
2D SESSION
H. R. 4946
[Report No. 107–572]
To amend the Internal Revenue Code to provide health care incentives related
to long-term care.
IN THE HOUSE OF REPRESENTATIVES
JUNE 17, 2002
Mr. HAYWORTH (for himself, Mr. WELLER, Mr. RAMSTAD, Mr. WATKINS of
Oklahoma, Mr. ENGLISH, and Mr. LEWIS of Kentucky) introduced the
following bill; which was referred to the Committee on Ways and Means
JULY 15, 2002
Additional sponsors: Mr. MCINNIS, Mr. BRADY of Texas, and Mr. PORTMAN
JULY 15, 2002
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on June 17, 2002]
A BILL
To amend the Internal Revenue Code to provide health care
incentives related to long-term care.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Im-
proving Access to Long-Term Care Act of 2002’’.
(b) AMENDMENT OF 1986 CODE.—Except as otherwise
expressly provided, whenever in this Act an amendment or
repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
SEC. 2. DEDUCTION FOR PREMIUMS ON QUALIFIED LONG-
TERM CARE INSURANCE CONTRACTS.
(a) IN GENERAL.—Part VII of subchapter B of chapter
1 (relating to additional itemized deductions) is amended
by redesignating section 223 as section 224 and by inserting
after section 222 the following new subsection:
‘‘SEC. 223. PREMIUMS ON QUALIFIED LONG-TERM CARE IN-
SURANCE CONTRACTS.
‘‘(a) IN GENERAL.—In the case of an individual, there
shall be allowed as a deduction an amount equal to the ap-
plicable percentage of eligible long-term care premiums (as
defined in section 213(d)(10)) paid during the taxable year
by the taxpayer for coverage for the taxpayer and the spouse
and dependents of the taxpayer.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of sub-
section (a), the applicable percentage shall be determined
in accordance with the following table:
‘‘For taxable years beginning
The applicable
in calendar year—
percentage is—
2003, 2004, and 2005 ....................................................................
2006 and 2007 ...............................................................................
2008 and 2009 ...............................................................................
2010 and 2011 ...............................................................................
2012 and thereafter ........................................................................
50.
‘‘(c) LIMITATION BASED
ON MODIFIED ADJUSTED
GROSS INCOME.—
‘‘(1) IN
GENERAL.—If the modified adjusted
gross income of the taxpayer for the taxable year ex-
ceeds $20,000 (twice the preceding dollar amount, as
adjusted under paragraph (2), in the case of a joint
return) the amount which would (but for this sub-
section) be allowed as a deduction under subsection
(a) shall be reduced (but not below zero) by the
amount which bears the same ratio to the amount
which would be so allowed as such excess bears to
$20,000 ($40,000 in the case of a joint return).
‘‘(2) ADJUSTMENTS FOR INFLATION.—
‘‘(A) IN GENERAL.—In the case of a taxable
year beginning after December 31, 2003, the first
$20,000 amount contained in paragraph (1)
shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar
year 2002’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not a multiple
of $1,000, such amount shall be rounded to the
nearest multiple of $1,000 (or if such amount is
a multiple of $500, such amount shall be round-
ed to the next highest multiple of $500).
‘‘(3) MODIFIED ADJUSTED GROSS INCOME.—For
purposes of paragraph (1), the term ‘modified ad-
justed gross income’ means adjusted gross income
determined—
‘‘(A) without regard to this section and sec-
tions 911, 931, and 933, and
‘‘(B) after application of sections 86, 135,
137, 219, 221, 222, and 469.
‘‘(d) LIMITATION
BASED
ON
SUBSIDIZED
COV-
ERAGE.—
‘‘(1) IN
GENERAL.—Subsection (a) shall not
apply to premiums paid for coverage of any indi-
vidual for any calendar month if—
‘‘(A) for such month such individual is cov-
ered by any insurance which is advertised, mar-
keted, or offered as long-term care insurance
under any health plan maintained by any em-
ployer of the taxpayer or of the taxpayer’s
spouse, and
‘‘(B) 50 percent or more of the cost of any
such coverage (determined under section 4980B)
for such month is paid or incurred by the em-
ployer.
‘‘(2) PLANS MAINTAINED BY CERTAIN EMPLOY-
ERS.—A health plan which is not otherwise described
in paragraph (1)(A) shall be treated as described in
such paragraph if such plan would be so described if
all health plans of persons treated as a single em-
ployer under subsection (b), (c), (m), or (o) of section
414 were treated as one health plan.
‘‘(e) COORDINATION WITH OTHER DEDUCTIONS.—Any
amount taken into account under subsection (a) shall not
be taken into account in computing the amount allowable
as a deduction under section 162(l) or 213(a).
‘‘(f) MARRIED COUPLES MUST FILE JOINT RETURN.—
‘‘(1) IN GENERAL.—If the taxpayer is married at
the close of the taxable year, the deduction shall be al-
lowed under subsection (a) only if the taxpayer and
the taxpayer’s spouse file a joint return for the tax-
able year.
‘‘Sec. 223. Premiums on qualified long-term care insurance con-
tracts.
‘‘Sec. 224. Cross reference.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2002.
SEC. 3. ADDITIONAL PERSONAL EXEMPTION FOR DEPEND-
ENTS WITH LONG-TERM CARE NEEDS IN TAX-
PAYER’S HOME.
(a) IN GENERAL.—Section 151 (relating to allowance
of deductions for personal exemptions) is amended by redes-
ignating subsections (d) and (e) as subsections (e) and (f),
respectively, and by inserting after subsection (c) the fol-
lowing new subsection:
‘‘(d) ADDITIONAL
EXEMPTION
FOR
DEPENDENTS
WITH LONG-TERM CARE NEEDS IN TAXPAYER’S HOME.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), an exemption of the exemption amount for
each qualified family member of the taxpayer.
‘‘(2) PHASE-IN.—In the case of taxable years be-
ginning in calendar years before 2012, the amount of
the exemption provided under paragraph (1) shall not
exceed the applicable limitation amount determined
in accordance with the following table:
‘‘For taxable years beginning
The applicable
in calendar year—
limitation amount is—
2003 and 2004 ...............................................................................
$500
2005 and 2006 ...............................................................................
1,000
2007 and 2008 ...............................................................................
1,500
‘‘For taxable years beginning
The applicable
in calendar year—
limitation amount is—
2009 and 2010 ...............................................................................
2,000
2011 ................................................................................................
2,500.
‘‘(3) QUALIFIED FAMILY MEMBER.—For purposes
of this subsection, the term ‘qualified family member’
means, with respect to any taxable year, any
individual—
‘‘(A) who is—
‘‘(i) the spouse of the taxpayer, or
‘‘(ii) a dependent of the taxpayer with
respect to whom the taxpayer is entitled to
an exemption under subsection (c),
‘‘(B) who is an individual with long-term
care needs during any portion of the taxable
year, and
‘‘(C) other than an individual described in
section 152(a)(9), who, for more than half of
such year, has as such individual’s principal
place of abode the home of the taxpayer and is
a member of the taxpayer’s household.
‘‘(4) 
INDIVIDUALS
WITH
LONG-TERM
CARE
NEEDS.—For purposes of this subsection, the term ‘in-
dividual with long-term care needs’ means, with re-
spect to any taxable year, an individual who has been
certified, during the 391⁄2-month period ending on the
due date (without extensions) for filing the return of
tax for the taxable year (or such other period as the
Secretary prescribes), by a physician (as defined in
section 1861(r)(1) of the Social Security Act) as
being, for a period which is at least 180 consecutive
days—
‘‘(A) an individual who is unable to per-
form (without substantial assistance from an-
other individual) at least 2 activities of daily
living (as defined in section 7702B(c)(2)(B)) due
to a loss of functional capacity, or
‘‘(B) an individual who requires substantial
supervision to protect such individual from
threats to health and safety due to severe cog-
nitive impairment and is unable to perform,
without reminding or cuing assistance, at least
1 activity of daily living (as so defined) or to the
extent provided in regulations prescribed by the
Secretary (in consultation with the Secretary of
Health and Human Services), is unable to en-
gage in age appropriate activities.
‘‘(5) IDENTIFICATION
REQUIREMENT.—No ex-
emption shall be allowed under this subsection to a
taxpayer with respect to any qualified family member
unless the taxpayer includes, on the return of tax for
the taxable year, the name and taxpayer identifica-
tion of the physician certifying such member. In the
case of a failure to provide the information required
under the preceding sentence, the preceding sentence
shall not apply if it is shown that the taxpayer exer-
cised due diligence in attempting to provide the infor-
mation so required.
‘‘(6) SPECIAL RULES.—Rules similar to the rules
of paragraphs (2), (3), and (4) of section 21(e) shall
apply for purposes of this subsection.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1(f)(6)(A) is amended by striking
‘‘151(d)(4)’’ and inserting ‘‘151(e)(4)’’.
(2) Section 1(f)(6)(B) is amended by striking
‘‘151(d)(4)(A)’’ and inserting ‘‘151(e)(4)(A)’’.
(3) Section 3402(f)(1)(A) is amended by striking
‘‘151(d)(2)’’ and inserting ‘‘151(e)(2)’’.
(4) Section 3402(r)(2)(B) is amended by striking
‘‘151(d)’’ and inserting ‘‘151(e)’’.
(5) Section 6012(a)(1)(D)(ii) is amended—
(A) by striking ‘‘151(d)’’ and inserting
‘‘151(e)’’, and
(B) by striking ‘‘151(d)(2)’’ and inserting
‘‘151(e)(2)’’.
(6) Section 6013(b)(3)(A) is amended by striking
‘‘151(d)’’ and inserting ‘‘151(e)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2002.
SEC. 4. EXPANSION OF HUMAN CLINICAL TRIALS QUALI-
FYING FOR ORPHAN DRUG CREDIT.
(a) IN GENERAL.—Paragraph (2) of section 45C(b) of
the Internal Revenue Code of 1986 is amended by adding
at the end the following new subparagraph:
‘‘(C) TREATMENT
OF
CERTAIN
EXPENSES
INCURRED BEFORE DESIGNATION.—For purposes
of subparagraph (A)(ii)(I), if a drug is des-
ignated under section 526 of the Federal Food,
Drug, and Cosmetic Act not later than the due
date (including extensions) for filing the return
of tax under this subtitle for the taxable year in
which the application for such designation of
such drug was filed, such drug shall be treated
as having been designated on the date that such
application was filed.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to expenses incurred after the date
of the enactment of this Act.
SEC. 5. VACCINE TAX TO APPLY TO HEPATITIS A VACCINE.
(a) IN GENERAL.—Paragraph (1) of section 4132(a)
(defining taxable vaccine) is amended by redesignating sub-
paragraphs (I), (J), (K), and (L) as subparagraphs (J),
(K), (L), and (M), respectively, and by inserting after sub-
paragraph (H) the following new subparagraph:
‘‘(I) Any vaccine against hepatitis A.’’
(b) EFFECTIVE DATE.—
(1) SALES, ETC.—The amendments made by sub-
section (a) shall apply to sales and uses on or after
the first day of the first month which begins more
than 4 weeks after the date of the enactment of this
Act.
(2) DELIVERIES.—For purposes of paragraph
(1) and section 4131 of the Internal Revenue Code of
1986, in the case of sales on or before the effective date
described in such paragraph for which delivery is
made after such date, the delivery date shall be con-
sidered the sale date.
SEC. 6. ADJUSTMENT OF EMPLOYER CONTRIBUTIONS TO
COMBINED 
BENEFIT 
FUND 
TO 
REFLECT
MEDICARE PRESCRIPTION DRUG SUBSIDY
PAYMENTS.
(a) IN GENERAL.—Section 9704(b) of the Internal
Revenue Code of 1986 (relating to health benefit premium)
is amended by adding at the end the following new para-
graph:
‘‘(4) ADJUSTMENTS
FOR
MEDICARE
PRESCRIP-
TION DRUG SUBSIDIES.—The trustees of the Combined
Fund shall decrease the per beneficiary premium for
each plan year in which a subsidy payment is pro-
vided to it under section 1860H of the Social Security
Act by the amount which would place the Combined
Fund in the same financial position as if such sub-
sidy payment had not been received.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to plan years beginning after the
date of the enactment of the Medicare Modernization and
Prescription Drug Act of 2002.
SEC. 7. ELIGIBILITY FOR ARCHER MSA’S EXTENDED TO AC-
COUNT 
HOLDERS 
OF 
MEDICARE+CHOICE
MSA’S.
(a) IN
GENERAL.—Subparagraph (B) of section
220(c)(2) of the Internal Revenue Code of 1986 is amended
by adding at the end the following new clause:
‘‘(iii) MEDICARE+CHOICE MSA’S.—In
the case of an individual who is covered
under an MSA plan (as defined in section
1859(b)(3) of the Social Security Act) which
such 
individual 
elected 
under 
section
1851(a)(2)(B) of such Act—
‘‘(I) such plan shall be treated as
a high deductible health plan for pur-
poses of this section,
‘‘(II) subsection (b)(2)(A) shall be
applied by substituting ‘100 percent’
for ‘65 percent’ with respect to such in-
dividual,
‘‘(III) with respect to such indi-
vidual, the limitation under subsection
(d)(1)(A)(ii) shall be 100 percent of the
highest annual deductible limitation
under section 1859(b)(3)(B) of the So-
cial Security Act,
‘‘(IV) paragraphs (4), (5), and (7)
of 
subsection 
(b) 
and 
paragraph
(1)(A)(iii) of this subsection shall not
apply with respect to such individual,
and
‘‘(V) the limitation which would
(but for this subclause) apply under
subsection (b)(1) with respect to such
individual for any taxable year shall
be reduced (but not below zero) by the
amount which would (but for sub-
section 106(b)) be includible in such
individual’s gross income for the tax-
able year.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2002.
Union Calendar No. 342
107TH CONGRESS
2D SESSION
H. R. 4946
[Report No. 107–572]
A BILL
To amend the Internal Revenue Code to provide
health care incentives related to long-term care.
JULY 15, 2002
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union,
and ordered to be printed