Enhances tax incentives for the purchase of long-term care insurance policies; provides a credit of 75% of premium paid for the first year, 50% for the second year and 25% in the third year.

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S2559-2011 Actions

• Jan 4, 2012: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
• Jan 25, 2011: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

S2559-2011 Memo

BILL NUMBER:S2559

TITLE OF BILL:

An act
to amend the tax law, in relation to long-term care insurance tax
credits

PURPOSE OR GENERAL IDEA OF BILL:

This legislation would enhance the tax incentives for the purchase of
long-term care insurance policies.

SUMMARY OF PROVISIONS:

This legislation amends subdivision 1 of section 190 of the tax law,
paragraph 1 of subsection aa of section 606 of the tax law,
subdivision 1 of subdivision k of section 1456 of the tax law,
paragraph 1 of subsection m of section 1511 of the tax law, and
paragraph a of subdivision 25-a of section 210 of the tax law, to
provide a tax credit equal to 75% of the premium paid during the
first taxable year in which the long-term care insurance was
purchased, 50% of the premium paid in the following year, and 25% of
the premium in the third year. In order to qualify for a credit, the
premium payment must be for the purchase of or for continuing
coverage under a long-term care insurance policy that qualifies for
such credit pursuant to section 1117 of the insurance law.

JUSTIFICATION:

Long-term care insurance policies are purchased with the intent of
covering basic activities of daily living and are typically
associated with individuals over the age of 65 years. However,
studies have shown that fewer individuals are purchasing policies
each year and even fewer at an earlier age. As a result, individuals
are relying more on Medicaid for their long-term care needs.
In 2006, New York State spent approximately $19 billion on long-term
care while California spent an estimated $12 billion, according to
a study conducted by the Rockefeller Institute of Government. The
enhanced tax credit proposed by this legislation would encourage more
individuals to purchase policies at a younger age and minimize the
burden on the State's Medicaid system.

Currently, a credit of 20% of the premium paid is given for every year
the policy is maintained.
While this current credit certainly provides a valuable benefit to the
consumer, studies conducted by the New York State Insurance
Department indicate fewer policies have been purchased over the past
several years. (on average, 20,000 long-term care insurance policies
sold annually from 2001-2004 to nearly 12,500 annually from
2005-2008.) This legislation offers a tax credit of 75% of the

premium paid during the first year of purchase, 50% of the premium
during the
following year, and 25% of the premium during the third year with the
intent to encourage individuals to purchase long-term care policies
and lessen the burden on the Medicaid system.

Historically, individuals who purchase long-term care insurance and
keep it for three years, are less likely to lapse in payments or
cancel the policy, signifying less of a need for the current 20% tax
credit schedule; in fact, with the proposed credit schedule, the
state could save millions of dollars.

LEGISLATIVE HISTORY:

S.3201-A of 2009-10

FISCAL IMPLICATIONS:

To be determined.

EFFECTIVE DATE:

This act shall take effect immediately and shall apply to long-term
insurance contracts purchased or entered into on and after
January 1st, 2012.

S2559-2011 Text

                      S T A T E   O F   N E W   Y O R K
  ________________________________________________________________________

                                    2559

                         2011-2012 Regular Sessions

                              I N  SENATE

                              January 25, 2011
                                 ___________

  Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
    printed to be committed to the Committee on Investigations and Govern-
    ment Operations

  AN ACT to amend the tax law, in relation to long-term care insurance tax
    credits

    THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
  BLY, DO ENACT AS FOLLOWS:


    Section  1. Subdivision 1 of section 190 of the tax law, as amended by
  section 17 of part B of chapter 58 of the laws of 2004,  is  amended  to
  read as follows:

    1.  General.  A  taxpayer  shall  be  allowed a credit against the tax
  imposed by this article, other  than  the  taxes  and  fees  imposed  by
  sections  one hundred eighty and one hundred eighty-one of this article,
  equal to [twenty] SEVENTY-FIVE percent of the premium  paid  during  the
  taxable  year [for] IN WHICH THE long-term care insurance WAS PURCHASED,
  FIFTY PERCENT OF THE PREMIUM PAID IN THE FOLLOWING YEAR AND  TWENTY-FIVE
  PERCENT  OF  THE PREMIUM PAID IN THE THIRD YEAR. In order to qualify for
  such credit, the taxpayer's premium payment must be for the purchase  of
  or  for continuing coverage under a long-term care insurance policy that
  qualifies for such credit pursuant to section one thousand  one  hundred
  seventeen of the insurance law.
    S  2. Paragraph 1 of subsection (aa) of section 606 of the tax law, as
  amended by section 1 of part P of chapter 61 of the  laws  of  2005,  is
  amended to read as follows:

    (1)  Residents.  A  taxpayer shall be allowed a credit against the tax
  imposed by this article equal to [twenty] SEVENTY-FIVE  percent  of  the
  premium  paid  during the taxable year [for] IN WHICH THE long-term care
  insurance WAS PURCHASED, FIFTY  PERCENT  OF  THE  PREMIUM  PAID  IN  THE
  FOLLOWING  YEAR AND TWENTY-FIVE PERCENT OF THE PREMIUM PAID IN THE THIRD
  YEAR.   In order to qualify for  such  credit,  the  taxpayer's  premium
  payment  must  be for the purchase of or for continuing coverage under a

   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD05408-01-1

 S. 2559                             2

  long-term care insurance policy that qualifies for such credit  pursuant
  to  section  one thousand one hundred seventeen of the insurance law. If
  the amount of the credit allowable under this subsection for any taxable
  year  shall  exceed  the taxpayer's tax for such year, the excess may be
  carried over to the following year or years and may be deducted from the
  taxpayer's tax for such year or years.
    S 3. Paragraph 1 of subsection (k) of section 1456 of the tax law,  as
  amended  by  section  20 of part B of chapter 58 of the laws of 2004, is
  amended to read as follows:

    (1) A taxpayer shall be allowed a credit against the  tax  imposed  by
  this  article equal to [twenty] SEVENTY-FIVE percent of the premium paid
  during the taxable year [for] IN WHICH THE long-term care insurance  WAS
  PURCHASED,  FIFTY  PERCENT OF THE PREMIUM PAID IN THE FOLLOWING YEAR AND
  TWENTY-FIVE PERCENT OF THE PREMIUM PAID IN THE THIRD YEAR.  In order  to
  qualify  for such credit, the taxpayer's premium payment must be for the
  purchase of or for continuing coverage under a long-term care  insurance
  policy  that  qualifies for such credit pursuant to section one thousand
  one hundred seventeen of the insurance law.
    S 4. Paragraph 1 of subdivision (m) of section 1511 of the tax law, as
  amended by section 21 of part B of chapter 58 of the laws  of  2004,  is
  amended to read as follows:

    (1)  A  taxpayer  shall be allowed a credit against the tax imposed by
  this article equal to [twenty] SEVENTY-FIVE percent of the premium  paid
  during  the taxable year [for] IN WHICH THE long-term care insurance WAS
  PURCHASED, FIFTY PERCENT OF THE PREMIUM PAID IN THE FOLLOWING  YEAR  AND
  TWENTY-FIVE  PERCENT OF THE PREMIUM PAID IN THE THIRD YEAR.  In order to
  qualify for such credit, the taxpayer's premium payment must be for  the
  purchase  of or for continuing coverage under a long-term care insurance
  policy that qualifies for such credit pursuant to section  one  thousand
  one hundred seventeen of the insurance law.
    S  5. Paragraph (a) of subdivision 25-a of section 210 of the tax law,
  as amended by section 18 of part B of chapter 58 of the laws of 2004, is
  amended to read as follows:

    (a) A taxpayer shall be allowed a credit against the  tax  imposed  by
  this  article equal to [twenty] SEVENTY-FIVE percent of the premium paid
  during the taxable year [for] IN WHICH THE long-term care insurance  WAS
  PURCHASED,  FIFTY  PERCENT OF THE PREMIUM PAID IN THE FOLLOWING YEAR AND
  TWENTY-FIVE PERCENT OF THE PREMIUM PAID IN THE THIRD YEAR.  In order  to
  qualify  for such credit, the taxpayer's premium payment must be for the
  purchase of or for continuing coverage under a long-term care  insurance
  policy  that  qualifies for such credit pursuant to section one thousand
  one hundred seventeen of the insurance law.
    S 6. This act shall take effect immediately and shall apply  to  long-
  term  care  insurance  contracts  purchased or entered into on and after
  January 1, 2012.