(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 222.’’.
(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. 222. Premiums on qualified long-term care insurance con-
tracts.
‘‘Sec. 223. Cross reference.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 2000.
(2) CAFETERIA PLANS AND FLEXIBLE SPEND-
ING
ARRANGEMENTS.—The amendments made by
subsection (b) shall apply to taxable years beginning
after December 31, 2002.
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 25A the following new
section:
‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH LONG-TERM
CARE NEEDS.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—There shall be allowed as a
credit against the tax imposed by this chapter for
the taxable year an amount equal to the applicable
credit amount multiplied by the number of applica-
ble individuals with respect to whom the taxpayer is
an eligible caregiver for the taxable year.
‘‘(2) APPLICABLE CREDIT AMOUNT.—For pur-
poses of paragraph (1), the applicable credit amount
shall be determined in accordance with the following
table:
‘‘For taxable years beginning
The applicable
in calendar year—
credit amount is—
2001 .....................................................................................$1,000
2002 ..................................................................................... 1,500
2003 ..................................................................................... 2,000
2004 ..................................................................................... 2,500
2005 or thereafter ................................................................ 3,000.
‘‘(b) LIMITATION BASED ON ADJUSTED GROSS IN-
COME.—
‘‘(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 2001, 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 2000’
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.
‘‘(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 who has been certified, be-
fore the due date for filing the return of tax for
the taxable year (without extensions), by a phy-
sician (as defined in section 1861(r)(1) of the
Social Security Act) as being an individual with
long-term care needs described in subparagraph
(B) 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 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 meets any of the fol-
lowing requirements:
‘‘(i) The individual is at least 6 years
of age and—
‘‘(I) is unable to perform (with-
out substantial assistance from an-
other individual) at least 3 activities
of daily living (as defined in section
7702B(c)(2)(B)) due to a loss of
functional capacity, or
‘‘(II) requires substantial super-
vision to protect such individual from
threats to health and safety due to se-
vere cognitive impairment and is un-
able to preform, without reminding or
cuing assistance, at least 1 activity of
daily living (as so defined) or to the
extent provided in regulations pre-
scribed by the Secretary (in consulta-
tion with the Secretary of Health and
Human Services), is unable to engage
in age appropriate activities.
‘‘(ii) The individual is at least 2 but
not 6 years of age and is unable due to a
loss of functional capacity to perform
(without substantial assistance from an-
other individual) at least 2 of the following
activities: eating, transferring, or mobility.
‘‘(iii) The individual is under 2 years
of age and requires specific durable med-
ical equipment by reason of a severe health
condition or requires a skilled practitioner
trained to address the individual’s condi-