§322. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

Health Insurance Portability and Accountability Act of 1996

TITLE III—TAX-RELATED HEALTH PROVISIONS

(a) General Rule.—Paragraph (1) of section 213(d) (defining medical care) is amended by striking "or" at the end of subparagraph (B), by redesignating subparagraph (C) as subparagraph (D), and by inserting after subparagraph (B) the following new subparagraph:

‘‘(C) for qualified long-term care services (as defined in section 7702B(c)), or’’.

(b) Technical Amendments.—

(b)(1) Subparagraph (D) of section 213(d)(1) (as redesignated by subsection (a)) is amended by inserting before the period ‘‘or for any qualified long-term care insurance contract (as defined in section 7702B(b))’’.

(b)(2)(A) Paragraph (1) of section 213(d) is amended by adding at the end the following new flush sentence:

‘‘In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account under subparagraph (D).’’

(b)(2)(B) Paragraph (2) of section 162(l) is amended by adding at the end the following new subparagraph:

‘‘(C) Long-term care premiums.—In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in section 213(d)(10)) shall be taken into account under paragraph (1).’’

(b)(2)(C) Subsection (d) of section 213 is amended by adding at the end the following new paragraphs:

‘‘(10) Eligible long-term care premiums.—

‘‘(A) In general.—For purposes of this section, the term 'eligible long-term care premiums' means the amount paid during a taxable year for any qualified long-term care insurance contract (as defined in section 7702B(b)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table:

‘‘(B) Indexing.—

‘‘(i) In general.—In the case of any taxable year beginning in a calendar year after 1997, each dollar amount contained in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for such calendar year. If any increase determined under the preceding sentence is not a multiple of $10, such increase shall be rounded to the nearest multiple of $10.

‘‘(ii) Medical care cost adjustment.—For purposes of clause (i), the medical care cost adjustment for any calendar year is the percentage (if any) by which—

‘‘(I) the medical care component of the Consumer Price Index (as defined in section 1(f)(5)) for August of the preceding calendar year, exceeds

‘‘(II) such component for August of 1996.

The Secretary shall, in consultation with the Secretary of Health and Human Services, prescribe an adjustment which the Secretary determines is more appropriate for purposes of this paragraph than the adjustment described in the preceding sentence, and the adjustment so prescribed shall apply in lieu of the adjustment described in the preceding sentence.

‘‘(11) Certain payments to relatives treated as not paid for medical care.—An amount paid for a qualified long-term care service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such service is provided—

‘‘(A) by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional with respect to such service, or

‘‘(B) by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b)) to the individual. For purposes of this paragraph, the term 'relative' means an individual bearing a relationship to the individual which is described in any of paragraphs (1) through (8) of section 152(a).

This paragraph shall not apply for purposes of section 105(b) with respect to reimbursements through insurance.’’.

(b)(3) Paragraph (6) of section 213(d) is amended—

(b)(3)(A) by striking ‘‘subparagraphs (A) and (B)’’ and inserting ‘‘subparagraphs (A), (B), and (C)’’, and

(b)(3)(B) by striking ‘‘paragraph (1)(C)’’ in subparagraph (A) and inserting ‘‘paragraph (1)(D)’’.

(b)(4) Paragraph (7) of section 213(d) is amended by striking ‘‘subparagraphs (A) and (B)’’ and inserting ‘‘subparagraphs (A), (B), and (C)’’.

(c) Effective Date. (26 usc 162)—The amendments made by this section shall apply to taxable years beginning after December 31, 1996.