I
107TH CONGRESS
2D SESSION
H. R. 4002
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
MARCH 19, 2002
Mrs. DAVIS of California 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 indi-
viduals 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Long-Term Care Sup-
port and Incentive Act of 2002’’.
SEC. 2. TREATMENT OF PREMIUMS ON QUALIFIED LONG-
TERM CARE INSURANCE CONTRACTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions) is amended by redesig-
nating section 223 as section 224 and by inserting after
section 222 the following new section:
‘‘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 applicable percentage of the amount of eligible long-
term care premiums (as defined in section 213(d)(10))
paid during the taxable year for coverage for the taxpayer
and the spouse and dependents of the taxpayer under a
qualified long-term care insurance contract (as defined in
section 7702B(b)).
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
subsection (a)—
‘‘(1) AGE 65 OR OLDER.—In the case of an in-
dividual who has attained age 65 as of the close of
the taxable year, the applicable percentage shall be
75 percent.
‘‘(2) UNDER AGE 65.—In the case of an indi-
vidual who has not attained age 65 as of the close
of the taxable year, the applicable percentage shall
be 50 percent.
‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.—
Any amount paid by a taxpayer for any qualified long-
term care insurance contract to which subsection (a) ap-
plies shall not be taken into account in computing the
amount allowable to the taxpayer as a deduction under
section 162(l) or 213(a).’’.
(b) LONG-TERM CARE INSURANCE PERMITTED TO
BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE
SPENDING ARRANGEMENTS.—
(1) CAFETERIA PLANS.—Section 125(f) of the
Internal Revenue Code of 1986 (defining qualified
benefits) is amended by inserting before the period
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 exceed the eligible long-term care premiums
(as defined in section 213(d)(10)) for such con-
tract’’.
(2) FLEXIBLE
SPENDING
ARRANGEMENTS.—
Section 106 of such Code (relating to contributions
by an employer to accident and health plans) is
amended by striking subsection (c).
(c) CONFORMING AMENDMENTS.—
(1) Section 62(a) of the Internal Revenue Code
of 1986 is amended by inserting after paragraph
(17) the following new item:
‘‘(18) PREMIUMS
ON
QUALIFIED
LONG-TERM
CARE
INSURANCE
CONTRACTS.—The deduction al-
lowed by section 223.’’.
(2) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 223. Premiums on qualified long-term care insurance con-
tracts.
‘‘Sec. 224. Cross reference.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE
NEEDS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25B the following new
section:
‘‘SEC. 25C. CREDIT FOR TAXPAYERS WITH LONG-TERM
CARE NEEDS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $4,000 multiplied
by the number of applicable individuals with respect to
whom the taxpayer is an eligible caregiver for the taxable
year.
‘‘(b) LIMITATIONS AND ADJUSTMENTS.—
‘‘(1) IN GENERAL.—The amount of the credit
allowable under subsection (a) shall be reduced (but
not below zero) by $100 for each $1,000 (or fraction
thereof) by which the taxpayer’s modified adjusted
gross income exceeds the threshold amount. For
purposes of the preceding sentence, the term ‘modi-
fied adjusted gross income’ means adjusted gross in-
come increased by any amount excluded from gross
income under section 911, 931, or 933.
‘‘(2) THRESHOLD AMOUNT.—For purposes of
paragraph (1), the term ‘threshold amount’ means—
‘‘(A) $150,000 in the case of a joint re-
turn, and
‘‘(B) $75,000 in any other case.
‘‘(3) INDEXING.—In the case of any taxable
year beginning in a calendar year after 2003, each
dollar amount contained in paragraph (2) shall be
increased by an amount equal to the product of—
‘‘(A) such dollar amount, and
‘‘(B) the medical care cost adjustment de-
termined under section 213(d)(10)(B)(ii) for
the calendar year in which the taxable year be-
gins, determined by substituting ‘August 2002’
for ‘August 1996’ in subclause (II) thereof.
If any increase determined under the preceding sen-
tence is not a multiple of $50, such increase shall
be rounded to the next lowest multiple of $50.
‘‘(4) APPLICATION WITH OTHER CREDITS.—
The credit allowed by subsection (a) for any taxable
year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax im-
posed by section 55, over
‘‘(B) the sum of the credits allowable
under this subpart (other than this section) and
section 27 for the taxable year.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘applicable
individual’ means, with respect to any taxable
year, any individual—
‘‘(i) who has attained age 65, and
‘‘(ii) who has been certified, before the
due date for filing the return of tax for the
taxable year (without extensions), by a
physician (as defined in section 1861(r)(1)
of the Social Security Act) as being an in-
dividual with long-term care needs de-
scribed in subparagraph (B) for a period—
‘‘(I) which is at least 180 con-
secutive days, and
‘‘(II) a portion of which occurs
within the taxable year.
Such term shall not include any individual oth-
erwise meeting the requirements of the pre-
ceding sentence unless within the 391⁄2 month
period ending on such due date (or such other
period as the Secretary prescribes) a physician
(as so defined) has certified that such indi-
vidual meets such requirements.
‘‘(B) INDIVIDUALS WITH LONG-TERM CARE
NEEDS.—An individual is described in this sub-
paragraph if the individual is unable to perform
(without substantial assistance from another in-
dividual) at least 2 activities of daily living (as
defined in section 7702B(c)(2)(B)) due to a
loss of functional capacity.
‘‘(2) ELIGIBLE CAREGIVER.—
‘‘(A) IN GENERAL.—A taxpayer shall be
treated as an eligible caregiver for any taxable
year with respect to the following individuals:
‘‘(i) The taxpayer.
‘‘(ii) The taxpayer’s spouse.
‘‘(iii) An individual with respect to
whom the taxpayer is allowed a deduction
under section 151 for the taxable year.
‘‘(iv) An individual who would be de-
scribed in clause (iii) for the taxable year
if section 151(c)(1)(A) were applied by
substituting for the exemption amount an
amount equal to the sum of the exemption
amount, the standard deduction under sec-
tion 63(c)(2)(C), and any additional stand-
ard deduction under section 63(c)(3) which
would be applicable to the individual if
clause (iii) applied.
‘‘(v) An individual who would be de-
scribed in clause (iii) for the taxable year
if—
‘‘(I) the requirements of clause
(iv) are met with respect to the indi-
vidual, and
‘‘(II) the requirements of sub-
paragraph (B) are met with respect to
the individual in lieu of the support
test of section 152(a).
‘‘(B) RESIDENCY
TEST.—The require-
ments of this subparagraph are met if an indi-
vidual has as his principal place of abode the
home of the taxpayer and—
‘‘(i) in the case of an individual who
is an ancestor or descendant of the tax-
payer or the taxpayer’s spouse, is a mem-
ber of the taxpayer’s household for over
half the taxable year, or
‘‘(ii) in the case of any other indi-
vidual, is a member of the taxpayer’s
household for the entire taxable year.
‘‘(C) SPECIAL RULES WHERE MORE THAN
1 ELIGIBLE CAREGIVER.—
‘‘(i) IN GENERAL.—If more than 1 in-
dividual is an eligible caregiver with re-
spect to the same applicable individual for
taxable years ending with or within the
same calendar year, a taxpayer shall be
treated as the eligible caregiver if each
such individual (other than the taxpayer)
files a written declaration (in such form
and manner as the Secretary may pre-
scribe) that such individual will not claim
such applicable individual for the credit
under this section.
‘‘(ii) NO AGREEMENT.—If each indi-
vidual required under clause (i) to file a
written declaration under clause (i) does
not do so, the individual with the highest
modified adjusted gross income (as defined
in section 32(c)(5)) shall be treated as the
eligible caregiver.
‘‘(iii) MARRIED
INDIVIDUALS
FILING
SEPARATELY.—In the case of married indi-
viduals filing separately, the determination
under this subparagraph as to whether the
husband or wife is the eligible caregiver
shall be made under the rules of clause (ii)
(whether or not one of them has filed a
written declaration under clause (i)).
‘‘(d) IDENTIFICATION
REQUIREMENT.—No credit
shall be allowed under this section to a taxpayer with re-
spect to any applicable individual unless the taxpayer in-
cludes the name and taxpayer identification number of
such individual, and the identification number of the phy-
sician certifying such individual, on the return of tax for
the taxable year.
‘‘(e) TAXABLE YEAR MUST BE FULL TAXABLE
YEAR.—Except in the case of a taxable year closed by rea-
son of the death of the taxpayer, no credit shall be allow-
able under this section in the case of a taxable year cov-
ering a period of less than 12 months.
‘‘(f) CARRYFORWARD OF UNUSED CREDIT.—If the
credit allowable under subsection (a) exceeds the limita-
tion imposed by subsection (b)(4) for the taxable year,
such excess shall be carried to the succeeding taxable year
and added to the credit allowable under subsection (a) for
such taxable year.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 6213(g)(2) of the Internal Revenue
Code of 1986 is amended by striking ‘‘and’’ at the
end of subparagraph (L), by striking the period at
the end of subparagraph (M) and inserting ‘‘, and’’,
and by inserting after subparagraph (M) the fol-
lowing new subparagraph:
‘‘(N) an omission of a correct TIN or phy-
sician identification required under section
25C(d) (relating to credit for taxpayers with
long-term care needs) to be included on a re-
turn.’’.
(2) Section 23(b)(4) is amended by striking
‘‘this section’’ and inserting ‘‘this section and section
25C’’.
(3) Section 24(b)(3)(B) is amended by striking
‘‘23 and 25B’’ and inserting ‘‘23, 25B, and 25C’’.
(4) Section 25(e)(1)(C) is amended by inserting
‘‘25C,’’ after ‘‘25B,’’.
(5) Section 26(a)(1) is amended by striking
‘‘and 25B’’ and inserting ‘‘, 25B, and 25C’’.
(6) Section 904(h) is amended by striking ‘‘and
25B’’ and inserting ‘‘, 25B, and 25C’’.
(7) Section 1400C(d) is amended by striking
‘‘and 25B’’ and inserting ‘‘, 25B, and 25C’’.
(8) The table of sections for subpart A of part
IV of subchapter A of chapter 1 of such Code is
amended by inserting after the item relating to sec-
tion 25B the following new item:
‘‘Sec. 25C. Credit for taxpayers with long-term care needs.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2002.