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‘‘(iv) chapter 89 of title 5, United
States Code, or
‘‘(v) the Indian Health Care Improve-
ment Act.
‘‘(B) EXCEPTIONS.—
‘‘(i) QUALIFIED
LONG-TERM
CARE.—
Subparagraph (A) shall not apply to
amounts paid for coverage under a qualified
long-term care insurance contract.
‘‘(ii) CONTINUATION
COVERAGE
OF
FEHBP.—Subparagraph (A)(iv) shall not
apply to coverage which is comparable to
continuation coverage under section 4980B.
‘‘(d) LONG-TERM CARE DEDUCTION LIMITED
TO
QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.—
In the case of a qualified long-term care insurance contract,
only eligible long-term care premiums (as defined in section
213(d)(10)) may be taken into account under subsection (a).
‘‘(e) DEDUCTION NOT AVAILABLE FOR PAYMENT OF
ANCILLARY COVERAGE PREMIUMS.—Any amount paid as
a premium for insurance which provides for—
‘‘(1) coverage for accidents, disability, dental
care, vision care, or a specified illness, or
‘‘(2) making payments of a fixed amount per
day (or other period) by reason of being hospitalized,
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shall not be taken into account under subsection (a).
‘‘(f) SPECIAL RULES.—
‘‘(1) COORDINATION
WITH
DEDUCTION
FOR
HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDI-
VIDUALS.—The amount taken into account by the tax-
payer in computing the deduction under section
162(l) shall not be taken into account under this sec-
tion.
‘‘(2) COORDINATION
WITH
MEDICAL
EXPENSE
DEDUCTION.—The amount taken into account by the
taxpayer in computing the deduction under this sec-
tion shall not be taken into account under section
213.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out this
section, including regulations requiring employers to report
to their employees and the Secretary such information as
the Secretary determines to be appropriate.’’.
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of
section 62 of such Code is amended by inserting after para-
graph (17) the following new item:
‘‘(18) HEALTH
AND
LONG-TERM
CARE
INSUR-
ANCE
COSTS.—The deduction allowed by section
222.’’.
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(c) CLERICAL AMENDMENT.—The table of sections for
part VII of subchapter B of chapter 1 of such Code is
amended by striking the last item and inserting the fol-
lowing new items:
‘‘Sec. 222. Health and long-term care insurance costs.
‘‘Sec. 223. Cross reference.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 2102. DEDUCTION FOR 100 PERCENT OF HEALTH IN-
SURANCE COSTS OF SELF-EMPLOYED INDI-
VIDUALS.
(a) IN GENERAL.—Paragraph (1) of section 162(l) of
the Internal Revenue Code of 1986 is amended to read as
follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of
an individual who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a
deduction under this section an amount equal to 100
percent of the amount paid during the taxable year
for insurance which constitutes medical care for the
taxpayer and the taxpayer’s spouse and dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) of such
Code is amended to read as follows: ‘‘Paragraph (1) shall
not apply to any taxpayer for any calendar month for
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which the taxpayer participates in any subsidized health
plan maintained by any employer (other than an employer
described in section 401(c)(4)) of the taxpayer or the spouse
of the taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 2103. LONG-TERM CARE INSURANCE PERMITTED TO BE
OFFERED UNDER CAFETERIA PLANS AND
FLEXIBLE SPENDING ARRANGEMENTS.
(a) CAFETERIA PLANS.—
(1) IN GENERAL.—Subsection (f) of section 125
of the Internal Revenue Code of 1986 (defining quali-
fied benefits) is amended by inserting before the pe-
riod at the end ‘‘; except that such term shall include
the payment of premiums for any qualified long-term
care insurance contract (as defined in section 7702B)
to the extent the amount of such payment does not ex-
ceed the eligible long-term care premiums (as defined
in section 213(d)(10)) for such contract’’.
(b) FLEXIBLE SPENDING ARRANGEMENTS.—Section
106 of such Code (relating to contributions by employer to
accident and health plans) is amended by striking sub-
section (c).
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 2104. ADDITIONAL PERSONAL EXEMPTION FOR TAX-
PAYER CARING FOR ELDERLY FAMILY MEM-
BER IN TAXPAYER’S HOME.
(a) IN GENERAL.—Section 151 of the Internal Revenue
Code of 1986 (relating to allowance of deductions for per-
sonal exemptions) is amended by redesignating subsection
(e) as subsection (f) and by inserting after subsection (d)
the following new subsection:
‘‘(e) ADDITIONAL EXEMPTION FOR CERTAIN ELDERLY
FAMILY MEMBERS RESIDING WITH TAXPAYER.—
‘‘(1) IN GENERAL.—An exemption of the exemp-
tion amount for each qualified family member of the
taxpayer.
‘‘(2) 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 an ancestor of the taxpayer or
of the taxpayer’s spouse or who is the spouse of
any such ancestor,
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‘‘(B) who is a member for the entire taxable
year of a household maintained by the taxpayer,
and
‘‘(C) who has been certified, before the due
date for filing the return of tax for the taxable
year (without extensions), by a physician (as de-
fined in section 1861(r)(1) of the Social Security
Act) as being an individual with long-term care
needs described in paragraph (3) for a period—
‘‘(i) which is at least 180 consecutive
days, and
‘‘(ii) a portion of which occurs within
the taxable year.
Such term shall not include any individual otherwise
meeting the requirements of the preceding sentence
unless within the 391⁄2 month period ending on such
due date (or such other period as the Secretary pre-
scribes) a physician (as so defined) has certified that
such individual meets such requirements.
‘‘(3) 
INDIVIDUALS
WITH
LONG-TERM
CARE
NEEDS.—An individual is described in this para-
graph if the individual—
‘‘(A) is unable to perform (without substan-
tial assistance from another individual) at least
two activities of daily living (as defined in sec-