AB926: Bill Text

LRB-4346/1

MES:rs&kmg:pg

2001 - 2002 LEGISLATURE

2001 Assembly BILL 926

March 14, 2002 - Introduced by Representatives Pettis, Musser, Loeffelholz, Krawczyk, Owens, Carpenter, Ladwig, Sykora and Jeskewitz, cosponsored by Senators Kanavas, Rosenzweig and Roessler. Referred to Committee on Ways and Means.

AB926,1,3 An Act to create 71.05 (6) (a) 21., 71.05 (6) (b) 34., 71.07 (5) (a) 9., 71.10 (4) (k) and 71.10 (10) of the statutes; relating to: tax-exempt, long-term care expenses accounts.

Analysis by the Legislative Reference Bureau

Under this bill, an individual may establish a long-term care expenses account (account) for the person and his or her spouse. "Long-term care expenses" is defined as any amount that is paid for care that is provided to an individual in his or her home or in institutional or community-based settings and that is convalescent or custodial care or care for a chronic condition or terminal illness. The account may be established at a financial institution, such as a bank, savings and loan, or credit union, and consists of deposits and any interest or other gain on the deposits.

In determining Wisconsin taxable income each year, the bill authorizes an individual to deduct from his or her federal adjusted gross income up to $2,000 in deposits to the account made on behalf of the individual and up to $2,000 in deposits to the account made on behalf of the individual's spouse if the account is used exclusively to pay the long-term care expenses of the individual or his or her spouse. All gains that accrue to such an account are also tax-exempt if the gains are redeposited into the account. After the value of the account exceeds $100,000, however, no deduction may be claimed for any further contributions to the account.

If any amount is withdrawn from the account and is used for any purpose other than the allowed purposes, the account holder must pay a penalty equal to 10% of any accumulated interest, dividends, or other gain that has accrued to the account from the time that the account was opened, except that this provision does not apply after the death of the account holder. In addition, the account holder must pay taxes on any interest, dividends, or other gain that accrues to the account in the year in which an improper withdrawal occurs, except that this provision also does not apply after the death of the account holder.

This bill will be referred to the joint survey committee on tax exemptions for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB926, s. 1 Section 1. 71.05 (6) (a) 21. of the statutes is created to read:

AB926,2,8 71.05 (6) (a) 21. Any accumulated interest, dividends, or other gain that accrues from an account described under s. 71.10 (10) during the taxable year in which a withdrawal occurs from such an account if any amount of the money or other assets in the account is withdrawn for any reason other than the payment of long-term care expenses, as defined in s. 71.10 (10) (a) 2., for the account holder or his or her spouse, except that this subdivision does not apply after the death of the account holder.

AB926, s. 2 Section 2. 71.05 (6) (b) 34. of the statutes is created to read:

AB926,2,17 71.05 (6) (b) 34. Any amount that is deposited by an individual in an account described under s. 71.10 (10), up to $2,000 each year for the individual and up to $2,000 each year for his or her spouse, and any interest, dividends, or other gain that accrues in the account if the interest, dividends, or other gain is redeposited in the account, if the account is used exclusively to pay the long-term care expenses, as defined in s. 71.10 (10) (a) 2., of the individual or his or her spouse, except that no subtraction may be made under this subdivision for any amounts deposited in the account once the total value of the account exceeds $100,000.

AB926, s. 3 Section 3. 71.07 (5) (a) 9. of the statutes is created to read:

AB926,3,5 71.07 (5) (a) 9. The amount claimed as a deduction for unreimbursed medical expenses under section 213 (a) of the Internal Revenue Code to the extent that the funds used to pay for the unreimbursed expenses for which the deduction was claimed were withdrawn from an account described under s. 71.05 (6) (b) 34.

AB926, s. 4 Section 4. 71.10 (4) (k) of the statutes is created to read:

AB926,3,8 71.10 (4) (k) Any amount of money or other assets computed under sub. (10) (c).

AB926, s. 5 Section 5. 71.10 (10) of the statutes is created to read:

AB926,3,10 71.10 (10) Long-term care expenses. (a) In this subsection:

AB926,3,13 1. "Financial institution" means any bank, savings bank, savings and loan association, or credit union that is authorized to do business under state or federal laws relating to financial institutions.

AB926,3,17 2. "Long-term care expenses" means any amount that is paid for care that is provided to an individual in an individual's home or in institutional or community-based settings and that is convalescent or custodial care or care for a chronic condition or terminal illness.

AB926,3,24 (b) An individual may establish an account for long-term care expenses, for the individual and the individual's spouse, in a financial institution. Amounts deposited into such an account and any interest, dividends, or other gain that accrues on amounts deposited in the account may be used only to pay long-term care expenses of the individual and the individual's spouse, except that this limitation on the uses of the account does not apply after the death of the individual who establishes the account.

AB926,4,6 (c) If an individual is required to add any amount to federal adjusted gross income under s. 71.05 (6) (a) 21., the person shall pay an amount equal to 10% of any accumulated interest, dividends, or other gain that has accrued beginning on the date on which the account was opened and ending on the date on which the withdrawal from the account occurs that results in a person adding an amount under s. 71.05 (6) (a) 21.

AB926, s. 6 Section 6. Initial applicability.

AB926,4,11 (1) This act first applies to taxable years beginning on January 1 of the year in which this subsection takes effect, except that if this subsection takes effect after July 31 this act first applies to taxable years beginning on January 1 of the year following the year in which this subsection takes effect.

AB926,4,12 (End)