SB1204 SD1.DOC

SECTION 1. The legislature finds that 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. The rapid growth of the elderly and disabled populations will result in extraordinary demands on the delivery of long-term care services.

Older adults — persons sixty years of age and older — presently account for almost one-fifth of the State's population. By 2020, older adults will constitute more than one-fourth of Hawaii's adult population. Nearly one-third of this segment alone is expected to have functional disabilities.

Entire families are affected by the psychological, financial, and social costs of providing long-term care to those who have difficulty performing daily living activities. To accommodate the demands of caregiving that grow as dependent family members' needs increase, caregivers reduce work hours, adjust or abandon career and personal goals, and retire earlier than intended, lowering their own pension and retirement benefit levels. Caregivers are apt to be in poorer health than members of the general population and often need care in their own advanced years. Caregivers must be assisted by creating a network of support services, including respite care and other support to alleviate the daunting responsibility of providing daily care.

The costs of nursing home care is another problem faced by many working families. For some elderly families, these costs can equal twice their average annual disposable income, threatening impoverishment for those who are otherwise self-sufficient. Financial planners and insurance providers predict that the average annual cost for nursing home care will reach more than $200,000 per person by the year 2050. Thus, it is not surprising that approximately eighty per cent of all nursing home residents are dependent on medicaid, an entitlement program for persons with limited income and assets.

Although families have expressed a preference for home- and community-based care, available services and nursing home beds are insufficient to meet the current demand. Nursing home care is only one component of the array of long-term care services that has been developed, and given the escalating costs of such care, it is likely that home- and community-based services will become more attractive to older adults and caregivers. Home- and community-based services are provided in and outside the home and are appropriate for those who do not require the levels of care provided in nursing home facilities. In fact, an important function of home- and community-based services is to allow older adults to age in place. Home- and community-based services come in a variety of forms, which can be tailored to meet the specific needs of an individual. These services include adult day health services, case management services, environmental modifications, homemaker services, personal care services, personal emergency response systems, respite care services, skilled nursing services, and transportation services.

While home- and community-based services can provide care that is less costly than institutional care, they are still expensive. The legislature finds that the private sector has been unable to develop adequate financing mechanisms that appeal to the general population to promote and support the provision and purchase of home- and community-based services. The insurance industry needs encouragement in providing home- and community-based service options in their long-term care coverage. Purchasers of such insurance need to be informed of home- and community-based service options as an alternative to nursing home care, and the general public must be effectively educated and encouraged to purchase long-term care insurance, possibly by being offered tax incentives in the form of deductions or credits.

One innovative approach involves providing long-term care insurance to small business employees, which would allow for the rapid introduction and dissemination of long-term care insurance because small businesses employ the bulk of all workers.

The purpose of this Act is to create an incentive for small businesses to purchase long-term care insurance for their employees by providing a tax credit for the payment of their long-term care insurance premiums.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Small business long-term care insurance premium tax credit. (a) Each resident taxpayer subject to the tax imposed by this chapter who owns a small business, as defined in this section, and files an income tax return, regardless of adjusted gross income, may claim a small business long-term care insurance premium tax credit against the taxpayer's income tax liability for the taxable year in which the credit is claimed and for which the income tax return is being filed; provided that a taxpayer who has no income taxable under this chapter may claim this credit.

For the purposes of this section:

"Long-term care insurance" shall have the same meaning as defined in section 431:10H‑104.

"Small business" means a for-profit enterprise that is a corporation, partnership, limited liability company, sole proprietorship, or other form of business entity having fewer than one hundred full-time or part-time employees.

(b) The tax credit under this section, when claimed by:

(1) Either an individual resident taxpayer or a husband and wife filing a joint return that own a small business; or

(2) A small business that is a business entity;

may be claimed only once in the taxable year with respect to the small business, regardless of the number of owners under paragraph (1) or the number of shareholders, partners, members, or other owners under paragraph (2); provided that a resident husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled under this section had a joint return been filed.

(1) $500 for each employee; or

(2) Fifty per cent of any long-term care insurance premium payments made for each employee;

for the taxable year in which the payments were made.

(d) 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.

(e) 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 credits made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2008.

THE SENATE	S.B. NO.	1204
TWENTY-FIFTH LEGISLATURE, 2009		S.D. 1
STATE OF HAWAII