(1) As our Nation’s seniors live longer lives, the 
United States faces a major challenge in long-term 
health care needs. 
(2) The United States does not have a com-
prehensive system to support long-term care needs. 
(3) Since the late 1980s the proportion of 
households in the United States involved in unpaid 
caregiving activities jumped to over 25 percent. 
(4) Eighty-three percent of people over age 85 
have a functional limitation or chronic health care 
condition requiring care. 
(5) Medicare spending on home health care has 
decreased significantly during the last 10 years and 
long-term care is expected to place a huge burden on 
State Medicaid programs, which are the primary 
source of funding for nursing homes. 
SEC. 3. DEDUCTION FOR QUALIFIED LONG-TERM CARE IN-
SURANCE PREMIUMS. 
(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 224 as section 225 and by inserting after 
section 223 the following new section:
‘‘SEC. 224. 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 
or any member of the family of the taxpayer under a quali-
fied long-term care insurance contract (as defined in sec-
tion 7702B(b)). 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
subsection (a), the applicable percentage shall be deter-
mined in accordance with the following table: 
‘‘For taxable years beginning 
in calendar year— 
The applicable percentage is— 
2005 .................................................................................
2006 .................................................................................
2007 or thereafter ............................................................
100. 
‘‘(c) MEMBER OF THE FAMILY.—For purposes of 
this section, the term ‘member of the family’ means, with 
respect to any individual— 
‘‘(1) the spouse of the individual, 
‘‘(2) an ancestor or lineal descendant of the in-
dividual or the individual’s spouse, 
‘‘(3) a brother or sister of the individual or any 
individual described in paragraph (1) or (2), and 
‘‘(4) the spouse of any individual described in 
paragraph (2) or (3).
‘‘(d) 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 
(19) the following new item: 
‘‘(20) PREMIUMS
ON
QUALIFIED
LONG-TERM 
CARE
INSURANCE
CONTRACTS.—The deduction al-
lowed by section 224.’’. 
(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. 224. Premiums on qualified long-term care insurance con-
tracts. 
‘‘Sec. 225. 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, 2004. 
(2) CAFETERIA PLANS AND FLEXIBLE SPEND-
ING
ARRANGEMENTS.—The amendments made by 
subsection (b) shall apply to taxable years beginning 
after December 31, 2006. 
SEC. 4. 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.— 
‘‘(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 
in calendar year— 
The applicable credit amount 
is— 
2005 .........................................................................................
$1,000
2006 .........................................................................................
1,500
2007 .........................................................................................
2,000
2008 .........................................................................................
2,500
2009 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 2005, 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 2004’ 
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-
tion to be available if the individual’s par-
ents or guardians are absent. 
‘‘(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.’’. 
(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 (K), 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) 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, 2004. 
SEC. 5. INCREASED FUNDING FOR NATIONAL FAMILY 
CAREGIVER SUPPORT PROGRAM. 
(a) IN GENERAL.—Section 303(e)(1) of the Older 
Americans Act of 1965 (42 U.S.C. 3023(e)(1)) is amend-
ed by striking ‘‘$125,000,000 for fiscal year 2001’’ and 
inserting ‘‘$250,000,000 for fiscal year 2005’’. 
(b) NATIVE AMERICANS.—Section 643(2) of the 
Older Americans Act of 1965 (42 U.S.C. 3057n(2)) is 
amended by striking ‘‘$5,000,000 for fiscal year 2001’’ 
and inserting ‘‘$10,000,000 for fiscal year 2005’’. 
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