Senior Health Planning Account Act

I 116TH CONGRESS 2D SESSION H. R. 5958 To amend the Internal Revenue Code of 1986 to create senior health planning accounts funded by the proceeds of the sale or assignment of life insur- ance contracts. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 25, 2020 Mr. HIGGINS of New York (for himself and Mr. STEUBE) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to create senior health planning accounts funded by the proceeds of the sale or assignment of life insurance contracts. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Senior Health Plan- 4 ning Account Act’’. 5 SEC. 2. SENIOR HEALTH PLANNING ACCOUNT. 6 (a) IN GENERAL.—Part III of subchapter B of chap- 7 ter 1 of the Internal Revenue Code of 1986 is amended 8 by inserting after section 139G the following new section: 9 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 5958 IH ‘‘SEC. 139H. SENIOR HEALTH PLANNING ACCOUNT. 1 ‘‘(a) EXCLUSION OF CONTRIBUTIONS OF GAIN FROM 2 SALES OF LIFE INSURANCE CONTRACTS.—The amount of 3 gain from the sale or assignment of a life insurance con- 4 tract of a taxpayer shall be reduced (but not below zero) 5 by the amount of contributions to a senior health planning 6 account made by such taxpayer during the 30-day period 7 beginning on the date of such sale or assignment. 8 ‘‘(b) TAX TREATMENT OF SENIOR HEALTH PLAN- 9 NING ACCOUNT.— 10 ‘‘(1) IN GENERAL.—A senior health planning 11 account is exempt from taxation under this subtitle 12 unless such account has ceased to be a senior health 13 planning account. Notwithstanding the preceding 14 sentence, any such account is subject to the taxes 15 imposed by section 511 (relating to imposition of tax 16 on unrelated business income of charitable, etc. or- 17 ganizations). 18 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 19 to the rules of paragraphs (2) and (4) of section 20 408(e) shall apply to senior health planning ac- 21 counts, and any amount treated as distributed under 22 such rules shall be treated as not used to pay quali- 23 fied health care expenses. 24 ‘‘(3) TAX TREATMENT OF DISTRIBUTIONS.— 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 5958 IH ‘‘(A) AMOUNTS USED FOR QUALIFIED 1 HEALTH CARE EXPENSES.—Any amount paid 2 or distributed out of a senior health planning 3 account which is used exclusively to pay quali- 4 fied health care expenses of the account bene- 5 ficiary or the account beneficiary’s spouse shall 6 not be includible in gross income. 7 ‘‘(B) INCLUSION OF AMOUNTS NOT USED 8 FOR QUALIFIED HEALTH CARE EXPENSES.— 9 Any amount paid or distributed out of a senior 10 health planning account which is not used to 11 pay the qualified health care expenses of the ac- 12 count beneficiary or the account beneficiary’s 13 spouse shall be included in the gross income of 14 such beneficiary. 15 ‘‘(C) ADDITIONAL TAX ON DISTRIBUTIONS 16 NOT USED FOR QUALIFIED HEALTH CARE EX- 17 PENSES.—The tax imposed by this chapter on 18 the account beneficiary for any taxable year in 19 which there is a payment or distribution from 20 a senior health planning account of such bene- 21 ficiary which is includible in gross income under 22 subparagraph (B) shall be increased by 20 per- 23 cent of the amount which is so includible. This 24 subparagraph shall not apply if the payment or 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 5958 IH distribution is made after the account bene- 1 ficiary— 2 ‘‘(i) dies, 3 ‘‘(ii) becomes a terminally ill indi- 4 vidual (as such term is defined in section 5 101(g)(4)(A)), or 6 ‘‘(iii) becomes a chronically ill indi- 7 vidual (as such term is defined in section 8 101(g)(4)(B)). 9 ‘‘(4) COORDINATION WITH MEDICAL EXPENSE 10 DEDUCTION.—For purposes of determining the 11 amount of the deduction under section 213, any pay- 12 ment or distribution out of a senior health planning 13 account for qualified health care expenses shall not 14 be treated as an expense paid for medical care. 15 ‘‘(5) TRANSFER OF ACCOUNT INCIDENT TO DI- 16 VORCE.—The transfer of an individual’s interest in 17 a senior health planning account to an individual’s 18 spouse or former spouse under a divorce or separa- 19 tion instrument described in subparagraph (A) of 20 section 71(b)(2) shall not be considered a taxable 21 transfer made by such individual notwithstanding 22 any other provision of this subtitle, and such interest 23 shall, after such transfer, be treated as a senior 24 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 5958 IH health planning account with respect to which such 1 spouse is the account beneficiary. 2 ‘‘(6) TREATMENT AFTER DEATH OF ACCOUNT 3 BENEFICIARY.— 4 ‘‘(A) TREATMENT IF DESIGNATED BENE- 5 FICIARY IS SPOUSE.—If the account bene- 6 ficiary’s surviving spouse acquires such bene- 7 ficiary’s interest in a senior health planning ac- 8 count by reason of being the designated bene- 9 ficiary of such account at the death of the ac- 10 count beneficiary, such senior health planning 11 account shall be treated as if the spouse were 12 the account beneficiary. 13 ‘‘(B) OTHER CASES.— 14 ‘‘(i) IN GENERAL.—If, by reason of 15 the death of the account beneficiary, any 16 person acquires the account beneficiary’s 17 interest in a senior health planning ac- 18 count in a case to which subparagraph (A) 19 does not apply— 20 ‘‘(I) such account shall cease to 21 be a senior health planning account as 22 of the date of death, and 23 ‘‘(II) an amount equal to the fair 24 market value of the assets in such ac- 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 5958 IH count on such date shall be includible 1 if such person is not the estate of 2 such beneficiary, in such person’s 3 gross income for the taxable year 4 which includes such date, or if such 5 person is the estate of such bene- 6 ficiary, in such beneficiary’s gross in- 7 come for the last taxable year of such 8 beneficiary. 9 ‘‘(ii) SPECIAL RULES.— 10 ‘‘(I) REDUCTION OF INCLUSION 11 FOR PREDEATH EXPENSES.—The 12 amount includible in gross income 13 under clause (i) by any person (other 14 than the estate) shall be reduced by 15 the amount of qualified health care 16 expenses which were incurred by the 17 decedent before the date of the dece- 18 dent’s death and paid by such person 19 within 1 year after such date. 20 ‘‘(II) DEDUCTION FOR ESTATE 21 TAXES.—An appropriate deduction 22 shall be allowed under section 691(c) 23 to any person (other than the dece- 24 dent or the decedent’s spouse) with 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 5958 IH respect to amounts included in gross 1 income under clause (i) by such per- 2 son. 3 ‘‘(c) DEFINITIONS.—For purposes of this sub- 4 section— 5 ‘‘(1) ACCOUNT BENEFICIARY.—The term ‘ac- 6 count beneficiary’ means, with respect to a senior 7 health planning account, the individual on whose be- 8 half such account was established. 9 ‘‘(2) SENIOR HEALTH PLANNING ACCOUNT.— 10 The term ‘senior health planning account’ means a 11 trust created or organized in the United States as 12 a senior health planning account, but only if the 13 written governing instrument creating the trust 14 meets the following requirements: 15 ‘‘(A) No contribution will be accepted un- 16 less it is in cash and in consideration of the sale 17 or assignment of any portion of the death bene- 18 fits under a life insurance contract on the life 19 of the account beneficiary. 20 ‘‘(B) The trustee is a bank (as defined in 21 section 408(n)), an insurance company (as de- 22 fined in section 816), or another person who 23 demonstrates to the satisfaction of the Sec- 24 retary that the manner in which such person 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 5958 IH will administer the trust will be consistent with 1 the requirements of this section. 2 ‘‘(C) No part of the trust assets will be in- 3 vested in life insurance contracts. 4 ‘‘(D) The assets of the trust will not be 5 commingled with other property except in a 6 common trust fund or common investment 7 fund. 8 ‘‘(E) The interest of an individual in the 9 balance in his account is nonforfeitable. 10 ‘‘(3) QUALIFIED HEALTH CARE EXPENSES.— 11 The term ‘qualified health care expenses’ means, 12 with respect to an account beneficiary, amounts paid 13 by such beneficiary for medical care (as defined in 14 section 213(d)) for such individual and the spouse of 15 such individual, but only to the extent such amounts 16 are not compensated for by insurance or otherwise.’’. 17 (b) CLERICAL AMENDMENT.—The table of sections 18 for part III of subchapter B of chapter 1 of such Code 19 is amended by inserting after the item relating to section 20 139G the following new item: 21 ‘‘Sec. 139H. Senior health planning account.’’. (c) EFFECTIVE DATE.—The amendments made by 22 this subsection shall apply with respect to sales or assign- 23 ments of life insurance contracts after the date of enact- 24 ment of this Act. 25 VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 5958 IH (d) REPORTS.—The Secretary may require the trust- 1 ee of a senior health planning account to make such re- 2 ports regarding such account to the Secretary and to the 3 account beneficiary with respect to contributions, distribu- 4 tions, and such other matters as the Secretary determines 5 appropriate. 6 Æ VerDate Sep 11 2014 02:02 Feb 26, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H5958.IH H5958 kjohnson on DSK79L0C42PROD with BILLS