Senior Health Planning Account Act
This bill allows tax-exempt senior health planning accounts that are funded using a taxpayer's gains from the sale or assignment of a life insurance contract. The bill excludes from gross income (1) the gains that are contributed to the accounts, and (2) distributions from the accounts that are used exclusively for the health care expenses of the account beneficiary or the account beneficiary's spouse.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5137 Introduced in House (IH)]
<DOC>
117th CONGRESS
1st Session
H. R. 5137
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
August 31, 2021
Mr. Higgins of New York 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 Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Senior Health Planning Account
Act''.
SEC. 2. SENIOR HEALTH PLANNING ACCOUNT.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139H the following new section:
``SEC. 139I. SENIOR HEALTH PLANNING ACCOUNT.
``(a) Exclusion of Contributions of Gain From Sales of Life
Insurance Contracts.--The amount of gain from the sale or assignment of
a life insurance contract of a taxpayer shall be reduced (but not below
zero) by the amount of contributions to a senior health planning
account made by such taxpayer during the 30-day period beginning on the
date of such sale or assignment.
``(b) Tax Treatment of Senior Health Planning Account.--
``(1) In general.--A senior health planning account is
exempt from taxation under this subtitle unless such account
has ceased to be a senior health planning account.
Notwithstanding the preceding sentence, any such account is
subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable,
etc. organizations).
``(2) Account terminations.--Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to senior
health planning accounts, and any amount treated as distributed
under such rules shall be treated as not used to pay qualified
health care expenses.
``(3) Tax treatment of distributions.--
``(A) Amounts used for qualified health care
expenses.--Any amount paid or distributed out of a
senior health planning account which is used
exclusively to pay qualified health care expenses of
the account beneficiary or the account beneficiary's
spouse shall not be includible in gross income.
``(B) Inclusion of amounts not used for qualified
health care expenses.--Any amount paid or distributed
out of a senior health planning account which is not
used to pay the qualified health care expenses of the
account beneficiary or the account beneficiary's spouse
shall be included in the gross income of such
beneficiary.
``(C) Additional tax on distributions not used for
qualified health care expenses.--The tax imposed by
this chapter on the account beneficiary for any taxable
year in which there is a payment or distribution from a
senior health planning account of such beneficiary
which is includible in gross income under subparagraph
(B) shall be increased by 20 percent of the amount
which is so includible. This subparagraph shall not
apply if the payment or distribution is made after the
account beneficiary--
``(i) dies,
``(ii) becomes a terminally ill individual
(as such term is defined in section
101(g)(4)(A)), or
``(iii) becomes a chronically ill
individual (as such term is defined in section
101(g)(4)(B)).
``(4) Coordination with medical expense deduction.--For
purposes of determining the amount of the deduction under
section 213, any payment or distribution out of a senior health
planning account for qualified health care expenses shall not
be treated as an expense paid for medical care.
``(5) Transfer of account incident to divorce.--The
transfer of an individual's interest in a senior health
planning account to an individual's spouse or former spouse
under a divorce or separation instrument described in
subparagraph (A) of section 71(b)(2) shall not be considered a
taxable transfer made by such individual notwithstanding any
other provision of this subtitle, and such interest shall,
after such transfer, be treated as a senior health planning
account with respect to which such spouse is the account
beneficiary.
``(6) Treatment after death of account beneficiary.--
``(A) Treatment if designated beneficiary is
spouse.--If the account beneficiary's surviving spouse
acquires such beneficiary's interest in a senior health
planning account by reason of being the designated
beneficiary of such account at the death of the account
beneficiary, such senior health planning account shall
be treated as if the spouse were the account
beneficiary.
``(B) Other cases.--
``(i) In general.--If, by reason of the
death of the account beneficiary, any person
acquires the account beneficiary's interest in
a senior health planning account in a case to
which subparagraph (A) does not apply--
``(I) such account shall cease to
be a senior health planning account as
of the date of death, and
``(II) an amount equal to the fair
market value of the assets in such
account on such date shall be
includible if such person is not the
estate of such beneficiary, in such
person's gross income for the taxable
year which includes such date, or if
such person is the estate of such
beneficiary, in such beneficiary's
gross income for the last taxable year
of such beneficiary.
``(ii) Special rules.--
``(I) Reduction of inclusion for
predeath expenses.--The amount
includible in gross income under clause
(i) by any person (other than the
estate) shall be reduced by the amount
of qualified health care expenses which
were incurred by the decedent before
the date of the decedent's death and
paid by such person within 1 year after
such date.
``(II) Deduction for estate
taxes.--An appropriate deduction shall
be allowed under section 691(c) to any
person (other than the decedent or the
decedent's spouse) with respect to
amounts included in gross income under
clause (i) by such person.
``(c) Definitions.--For purposes of this subsection--
``(1) Account beneficiary.--The term `account beneficiary'
means, with respect to a senior health planning account, the
individual on whose behalf such account was established.
``(2) Senior health planning account.--The term `senior
health planning account' means a trust created or organized in
the United States as a senior health planning account, but only
if the written governing instrument creating the trust meets
the following requirements:
``(A) No contribution will be accepted unless it is
in cash and in consideration of the sale or assignment
of any portion of the death benefits under a life
insurance contract on the life of the account
beneficiary.
``(B) The trustee is a bank (as defined in section
408(n)), an insurance company (as defined in section
816), or another person who demonstrates to the
satisfaction of the Secretary that the manner in which
such person will administer the trust will be
consistent with the requirements of this section.
``(C) No part of the trust assets will be invested
in life insurance contracts.
``(D) The assets of the trust will not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) The interest of an individual in the balance
in his account is nonforfeitable.
``(3) Qualified health care expenses.--The term `qualified
health care expenses' means, with respect to an account
beneficiary, amounts paid by such beneficiary for medical care
(as defined in section 213(d)) for such individual and the
spouse of such individual, but only to the extent such amounts
are not compensated for by insurance or otherwise.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139H the following new item:
``Sec. 139I. Senior health planning account.''.
(c) Effective Date.--The amendments made by this subsection shall
apply with respect to sales or assignments of life insurance contracts
after the date of enactment of this Act.
(d) Reports.--The Secretary may require the trustee of a senior
health planning account to make such reports regarding such account to
the Secretary and to the account beneficiary with respect to
contributions, distributions, and such other matters as the Secretary
determines appropriate.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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