Report Title:
Long-Term Care Tax Credit for Employers
Description:
Provides employers with non-refundable tax credit for the purchase of qualified long-term care insurance premiums paid for their employees. Requires these policies have a minimum level of coverage for home and community based care.
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THE SENATE |
S.B. NO. |
841 |
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TWENTY-THIRD LEGISLATURE, 2005 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO A LONG-TERM CARE TAX CREDIT FOR EMPLOYERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The future of long-term care for Hawaii's senior and adult disabled population is one of the most critical health issues facing Hawaii in the twenty-first century. Persons sixty years of age and older presently account for almost one-fifth of the adult population in the State. By 2020, they will constitute more than one-fourth of Hawaii's adult population.
The rapid growth of the elderly and disabled populations will result in extraordinary demands on the delivery of long-term care services. While the majority of persons receiving long-term care are older adults, entire families are affected by the psychological, financial, and social costs of long-term care provided to those who are limited in the activities of daily living.
Providing long-term care to those in need negatively impacts worker productivity in the workforce. When employees provide long-term care to family members in need, businesses incur costs for lost productivity due to employee absenteeism, for replacing the absent employee, and in supervising temporary replacement workers. According to a 1997 study conducted by the National Alliance for Caregivers and the Metlife Mature Market Institute, the total cost of lost productivity to businesses nationally from these factors exceeded $29 billion annually.
To resolve the impending long-term care crisis, the Department of Health, at the direction of the Governor, established a Long-Term Care Task Force. The Task Force is comprised of individuals from various State agencies, including the Department of Health, Department of Taxation, and the Department of Commerce and Consumer Affairs, and from the long-term care insurance industry and health care sector.
The Long-Term Care Task Force developed this proposed employer long-term care tax credit. The purpose of this Act is to encourage employers to purchase qualified long-term care insurance contracts for their employees and to ensure that such qualified long-term care insurance contracts cover both home and community-based care in addition to coverage for long-term care in intermediate care facilities and skilled nursing facilities.
This Act is also intended to complement the proposed long-term care tax credit for individual taxpayers that was also developed by the Long-term Care Task Force. Another purpose of this Act is to reduce the annual revenue impact of any long-term care tax credit for individual taxpayers.
According to local long-term care insurance brokers, individuals who purchase long-term care insurance through their employers receive discounts of up to five per cent to thirty per cent on their long-term care insurance premiums. Any five to thirty per cent decrease in the annual cost of premiums to individual taxpayers will reduce the annual revenue impact of the individual tax credit.
This Act extends the tax credit for the purchase of qualified long-term care insurance contracts by employer-banks and employer-financial corporations, which are taxed under chapter 241, for their employees. This Act also extends the tax credit for the purchase of qualified long-term care insurance contracts by employer-insurers, which are taxed under chapter 431:7, for their employees.
This Act makes conforming amendments to sections 302 and 304 of the Long-Term Care Insurance Act in chapter 431:10H. Section 302 of the Long-Term Care Insurance Act is amended to clarify that long-term care insurance policies sold are not required to conform to the employer long-term care tax credit; however, if the long-term care insurance policy does not provide coverage in accordance with the employer long-term care tax credit, the policy will not qualify for this state tax incentive.
The disclosure provisions in section 304 of the Long-Term Care Insurance Act are amended to require that insurance companies include on the first page of long-term care insurance policies one of two specific, enumerated statements regarding whether the policy is intended to qualify for state tax incentives under the employer long-term care tax credit.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Employer's tax credit for long-term care premiums paid for employees. (a) Subject to the limitations set forth below, an employer subject to taxation under chapter 235 may claim a non-refundable tax credit for premium payments made by the employer during the taxable year to purchase a qualified long-term care insurance contract for its employees; provided that the maximum credit claimed against the employer's gross income tax liability for a taxable year shall be as follows:
(1) For taxable years beginning after December 31, 2005, the employer may claim a tax credit for each employee for whom it purchases qualified long-term care insurance. The maximum tax credit per employee for whom qualified long-term care insurance is purchased shall be in an amount equal to the lesser of $25 or 50 per cent of the qualified long-term care premiums paid annually for each employee.
(2) For taxable years beginning after December 31, 2006, the employer may claim a tax credit for each employee for whom it purchases qualified long-term care insurance. The maximum tax credit per employee for whom qualified long-term care insurance is purchased shall be in an amount equal to the lesser of $50 or 50 per cent of the qualified long-term care premiums paid annually for each employee.
(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit may be carried forward until exhausted.
(c) For purposes of this section:
"Chronically ill individual" means any individual who has been certified by a licensed health care practitioner as meeting one of the following conditions:
(1) Being unable to perform at least two activities of daily living without substantial assistance from another individual for a period of at least ninety days due to a loss of functional capacity;
(2) Having a level of disability similar to the disability set forth in the preceding paragraph; or
(3) Requiring substantial supervision to protect such individual from threats to health and safety due to a severe cognitive impairment for the preceding twelve-month period.
"Home and community based care" means care provided under qualified long-term care services that meet or exceed the requirements set forth in section 431:10H-219.
"Licensed health care practitioner" means any licensed physician, and any registered professional nurse, licensed social worker, or any other professional as may be provided by rules adopted by the director of taxation.
"Maintenance or personal care services" means any care the primary purpose of which is the provision of needed assistance with any of the disabilities that render a person to be a chronically ill individual, including the protection from threats to health and safety due to a severe cognitive impairment.
"Qualified long-term care insurance contract" means a contract that:
(1) Provides insurance coverage solely for qualified long-term care services;
(2) Does not pay or reimburse expenses incurred for services or items to the extent that such expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount, unless:
(A) The expenses are reimbursable by medicaid as secondary payor; or
(B) The contract makes qualified per diem or other periodic payments without regard to expenses, as defined below.
(3) Is guaranteed renewable;
(4) Provides that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract shall be used only to reduce future premiums or increase future benefits;
(5) Does not provide for a cash surrender value or any other money that may be paid, assigned, borrowed, or pledged as collateral for a loan; and
(6) Provides coverage for home and community based case services that meets or exceeds fifty percent of the coverage for treatment in an intermediate care facility and skilled nursing facility.
"Qualified long-term care services" means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which are:
(1) Required by a chronically ill individual; and
(2) Provided pursuant to a plan of care prescribed by a licensed health care practitioner.
(d) Each of the following is an "activity of daily living": eating, toileting, transferring, bathing, dressing, and continence.
(e) If a taxpayer claims any other tax credit or deduction under title 14, including a deduction under sections 162 and 213, to which Hawaii law conforms, for premiums paid on a long-term care insurance policy, no credit shall be claimed under this section for the same premium payments.
(f) All claims, including any amended claims, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.
(g) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claims for deductions made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91."
SECTION 3. Chapter 241, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§241- Employer's tax credit for long-term care premiums paid for employees. The employer's tax credit for long-term care premiums paid for employees provided under chapter 235 shall be operative for this chapter for taxable years beginning after December 31, 2005."
SECTION 4. Chapter 431:7, Hawaii Revised Statutes, is amended by adding a new section to appropriately designated and to read as follows:
"§431:7- Employer's tax credit for long-term care premiums paid for employees. The employer's tax credit for long-term care premiums paid for employees provided under chapter 235 shall be operative for this chapter for taxable years beginning after December 31, 2005."
SECTION 5. Section 431:10H-302, Hawaii Revised Statutes, is amended to read as follows:
"§431:10H-302 Individual long-term care insurance policy coverages. (a) Every individual long-term care insurance policy sold after June 30, 2000, shall provide coverage for one or more of the types of care enumerated under section 431:10H-301(c).
(b) An individual long-term care insurance policy sold after June 30, 2000, shall not be required to conform to subtitle C of the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, as amended, and to Section 7702B of the Internal Revenue Code of 1986, as amended; provided that if it does not conform, then it shall not qualify for federal or state income tax benefits.
(c) An individual long-term care insurance policy sold after December 31, 2004, shall not be required to conform to section 235- ; provided that, if it does not conform, then it shall not qualify for any state income tax credit for employers."
SECTION 6. Section 431:10H-304, Hawaii Revised Statutes, is amended to read as follows:
"§431:10H-304 Disclosure of qualification for tax benefits. (a) Every policy that is intended to be a qualified long-term care insurance contract as provided in the federal Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, as amended, shall be identified as such by prominently displaying and printing on page one of the policy form and the outline of coverage and in the application the following words: "This contract for long-term care insurance is intended to be a federally qualified long-term care insurance contract and may qualify you for federal and state tax benefits."
(b) Every policy that is not intended to be a qualified long-term care insurance contract as provided in the federal Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, as amended, shall be identified as such by prominently displaying and printing on page one of the policy form and the outline of coverage and in the application the following words: "This contract for long-term care insurance is not intended to be a federally qualified long-term care insurance contract and is not intended to qualify you for federal and state tax benefits."
(c) Every policy that is intended to be a long-term care insurance contract purchased by an employer for its employees and that is intended to be a qualified long-term care insurance contract for an employer's purchase of long-term care benefits on behalf of its employees as provided in section 235- shall be identified as such by prominently displaying and printing on page one of the policy form and on the outline of coverage and in the application the following words: "This contract for long-term care insurance is intended to be an employer's qualified long-term care insurance contract under section 235- , Hawaii Revised Statutes, and may qualify the employer for state tax income tax credits."
(d) Every policy that is intended to be a long-term care insurance contract purchased by an employer for its employees and that is not intended to be a qualified long-term care insurance contract for an employer's purchase of long-term care benefits on behalf of its employees as provided in section 235- shall be identified as such by prominently displaying and printing on page one of the policy form and on the outline of coverage and in the application the following words: "This employer's contract for long-term care insurance is not intended to be a qualified long-term care insurance contract under section 235- , Hawaii Revised Statutes, and is not intended to qualify the employer for state income tax credits.""
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2005.
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INTRODUCED BY: |
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BY REQUEST |