Bill S2559-2011

Enhances tax incentives for the purchase of long-term care insurance policies

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.

Details

Actions

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

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.


Text

STATE OF NEW YORK ________________________________________________________________________ 2559 2011-2012 Regular Sessions IN 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
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.

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