HF 1085

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:43am

A bill for an act
relating to long-term care; creating the long-term care benefits trust fund;
establishing the long-term care financing program and a governing board;
requiring actuarial studies; imposing an income tax to fund long-term care
benefits; exempting benefits from income taxation; allowing disclosure of tax
data to administer the program; appropriating money; amending Minnesota
Statutes 2008, sections 270B.14, by adding a subdivision; 290.01, subdivision
19b; 290.06, by adding a subdivision; 290.62; proposing coding for new law in
Minnesota Statutes, chapter 16A; proposing coding for new law as Minnesota
Statutes, chapter 256N.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [16A.726] LONG-TERM CARE BENEFITS TRUST FUND.
new text end

new text begin (a) A long-term care benefits trust fund is created in the state treasury. The fund is a
direct appropriated special revenue fund. The commissioner shall deposit to the credit of
the fund all money collected as long-term care taxes under section 290.06, subdivision
2g, amounts received as provided in section 256N.05, subdivision 5, and any money
appropriated to the fund.
new text end

new text begin (b) Expenditures from the fund shall be made solely for the purpose of making
benefit payments under section 256N.03, the cost of administration, and repaying the
appropriation from the general fund. Costs for the administration of the program shall be
paid from money in the long-term care benefits fund as follows: (1) up to four percent of
the total monthly deposit into the fund to cover general administrative expenses; and (2)
up to four percent of the total amount of claims paid out from the fund may be used to pay
for administrative expenses related to claims processing.
new text end

new text begin (c) Notwithstanding any law to the contrary, money in the fund shall not be
transferred to another fund at any time or used for any purpose other than that authorized
by chapter 256N.
new text end

new text begin (d) The fund shall repay the general fund appropriation for startup and actuarial costs
over a five-year period beginning July 1, 2011.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009.
new text end

Sec. 2.

new text begin [256N.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin For purposes of this chapter, the following definitions
apply.
new text end

new text begin Subd. 2. new text end

new text begin Activities of daily living. new text end

new text begin "Activities of daily living" means bathing,
continence, dressing, eating, toileting, and transferring.
new text end

new text begin Subd. 3. new text end

new text begin Board. new text end

new text begin "Board" means the board established under section 256N.05 to
administer the long-term care financing program.
new text end

new text begin Subd. 4. new text end

new text begin Long-term care services. new text end

new text begin "Long-term care services" means a broad range
of supportive services needed by individuals with physical or mental impairments who
have lost or never acquired the ability to function independently. Long-term care services
include, but are not limited to: home health care, adult day care, assisted living, nursing
facility, hospice, personal care assistant, private duty nursing, medical supplies and
equipment, home modifications, and respite care.
new text end

new text begin Subd. 5. new text end

new text begin Program. new text end

new text begin "Program" means the long-term care financing program
established by this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009.
new text end

Sec. 3.

new text begin [256N.03] LONG-TERM CARE FINANCING PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The long-term care financing program is established
to provide a universal and affordable system of providing for long-term care. The program
shall be administered by the long-term care financing program board established under
section 256N.05.
new text end

new text begin Subd. 2. new text end

new text begin Eligibility. new text end

new text begin To be eligible for payment of defined benefits under this
program, an individual must be vested as provided under subdivision 3 and have written
certification from a licensed physician that the individual requires one or more long-term
care services for the period of time during which the individual receives benefits under
the program. The written certification must also specify that the individual: (1) is unable
to perform, without substantial assistance from another individual, at least two activities
of daily living for a period of at least 90 days due to a loss of functional capacity; or (2)
requires substantial supervision to protect the individual from threats to health and safety
to self or others due to a severe cognitive impairment such as Alzheimer's disease or
dementia. The written certification must be submitted to and approved by the board.
new text end

new text begin Subd. 3. new text end

new text begin Vesting. new text end

new text begin (a) Any individual who has paid the long-term care income tax
under section 290.06, subdivision 2g, for ten years is fully vested to receive the defined
benefit provided under subdivision 4, but shall continue to be subject to the long-term
care income tax.
new text end

new text begin (b) An individual shall earn one-tenth of the defined benefit under subdivision 4
for each consecutive 12-month period that the individual pays the income tax under
section 290.06, subdivision 2g. An individual shall be allowed 12 consecutive months
of nonpayment of the income tax without penalty, provided that after the 12 consecutive
months of nonpayment, the individual shall forfeit one-tenth of the defined benefit amount
for each year of nonpayment.
new text end

new text begin (c) If an individual dies before January 1, 2014, the estate or heirs, as appropriate,
of that individual may make a claim for reimbursement of the income taxes paid under
section 290.06, subdivision 2g, and voluntary payments made under section 256N.05,
subdivision 5, by the individual.
new text end

new text begin Subd. 4. new text end

new text begin Defined benefit. new text end

new text begin (a) Payment of a defined benefit for long-term care
services shall begin January 1, 2014. The defined benefit shall be the daily amount
specified in subdivision 5 up to a cumulative period of 365 days.
new text end

new text begin (b) The defined benefit shall begin after the thirtieth day following the date of the
approval by the board of the written certification submitted under subdivision 2. The board
shall pay the defined benefit to a vested individual who is the recipient of a long-term care
service, or to the legal representative of the recipient in the name of the recipient, as a
reimbursement for long-term care service expenditures. The amount of the defined benefit
shall not vary with the income of a recipient.
new text end

new text begin (c) The defined benefit is primary to private insurance and medical assistance
benefits. An individual shall not receive a defined benefit while the individual is receiving
Medicare benefits for long-term care, but may be eligible for a defined benefit under
subdivision 2 once Medicare long-term care benefits are exhausted.
new text end

new text begin (d) Once an individual begins receiving a defined benefit, that individual is no longer
subject to the long-term care income tax imposed under section 290.06, subdivision 2g.
new text end

new text begin Subd. 5. new text end

new text begin Level of defined benefit. new text end

new text begin The defined benefit amount for the period
January 1, 2014, to December 31, 2014, for persons who are fully vested under subdivision
3, paragraph (a), is the amount per day determined by the board of the long-term care
financing program under section 256N.05, or the appropriate proportion of this amount for
individuals who are partially vested under subdivision 3, paragraph (b). The board shall
adjust the defined benefit amount for future years to reflect changes in the cost of long-term
care services. The board shall also adjust the defined benefit amount, based upon actuarial
analyses, to ensure that the long-term care benefits trust fund retains a positive balance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009.
new text end

Sec. 4.

new text begin [256N.05] BOARD OF THE LONG-TERM CARE FINANCING
PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Composition. new text end

new text begin (a) The board of the long-term care financing
program shall consist of six members appointed by the governor. The members of the
board shall have experience in accounting, business, finance, law, or other similar fields,
and experience equivalent to five years as an officer or manager of a viable business or
organization involved with insurance management, portfolio management, health care
management, or a similar field. The composition of the board shall represent a diversity of
relevant experience.
new text end

new text begin (b) The board shall elect a chair from among themselves.
new text end

new text begin Subd. 2. new text end

new text begin Governance. new text end

new text begin The board is governed by section 15.0575, except that
members shall be compensated only for expenses.
new text end

new text begin Subd. 3. new text end

new text begin Duties of the board. new text end

new text begin (a) The board shall:
new text end

new text begin (1) establish and administer the long-term care financing program;
new text end

new text begin (2) have and maintain a fiduciary obligation for the program;
new text end

new text begin (3) set and adjust long-term care income tax contribution levels and defined benefit
amounts, based upon the result of actuarial analyses required by section 256N.07;
new text end

new text begin (4) establish procedures to prevent fraud and abuse in claims for and payment of
defined benefits; and
new text end

new text begin (5) carry out other duties assigned by this chapter.
new text end

new text begin Subd. 4. new text end

new text begin Staff and administrative support; contracting. new text end

new text begin (a) The board shall
be housed within and receive staff and administrative support from the Department of
Human Services. The board may hire an executive director and other staff necessary to
perform assigned duties.
new text end

new text begin (b) The board shall contract with a qualified entity to prepare the annual actuarial
report required under section 256N.07 and to conduct other actuarial analyses as needed.
new text end

new text begin (c) The board may:
new text end

new text begin (1) contract with a qualified entity to administer the program or to process claims
for benefit payments; or
new text end

new text begin (2) contract with a qualified entity to assume the risk of underwriting loss under the
program at a capitated rate of payment to the entity.
new text end

new text begin Subd. 5. new text end

new text begin Voluntary payment of long-term care income tax. new text end

new text begin The board shall
establish a procedure to allow individuals exempted from the long-term care income tax
under section 290.06, subdivision 2g, due to insufficient income to voluntarily pay the
long-term care income tax and thereby be eligible for vesting for the defined benefit.
new text end

new text begin Subd. 6. new text end

new text begin Rules. new text end

new text begin The board shall adopt rules necessary to implement this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after final enactment.
new text end

Sec. 5.

new text begin [256N.07] ANNUAL ACTUARIAL REPORT.
new text end

new text begin Subdivision 1. new text end

new text begin Required report. new text end

new text begin The board of the long-term care financing program
shall require an annual actuarial report and actuarial opinion to be prepared, as defined by
the Actuarial Standards Board of the American Academy of Actuaries. The report and
opinion shall be prepared by a member of the American Academy of Actuaries who is a
fellow of the Society of Actuaries, certifying that the program is in actuarial balance and
providing the information required in subdivisions 2 and 3. The report must be submitted
to the board, the governor, and the legislature, in compliance with sections 3.195 and
3.197, by January 15 of each year, beginning January 15, 2009. Costs of the actuarial
report are an administrative expense for purposes of section 16A.726.
new text end

new text begin Subd. 2. new text end

new text begin Report requirements; initial report. new text end

new text begin The first annual actuarial report
required to be submitted under this section must include:
new text end

new text begin (1) the current and projected numbers of individuals who would be subject to paying
the long-term care income tax, aggregated by taxpayer status and age;
new text end

new text begin (2) the current and projected numbers of individuals presently receiving long-term
care services, aggregated by taxpayer status and age;
new text end

new text begin (3) the current and projected costs of long-term care services provided to individuals
in Minnesota;
new text end

new text begin (4) a recommended initial defined benefit payment amount necessary to provide
adequate long-term care services in Minnesota over the short range (ten years);
new text end

new text begin (5) a recommended initial long-term care tax rate sufficient to fund payment of
defined benefits over the short range (ten years);
new text end

new text begin (6) an estimate of the expected future income to and disbursements to be made from
the long-term care benefits trust fund during each of the next ten fiscal years;
new text end

new text begin (7) recommendations for program administration necessary to ensure that the
program remains actuarially sound;
new text end

new text begin (8) a statement of actuarial assumptions and methods used to project costs and a
detailed explanation of any change in actuarial assumptions or methods; and
new text end

new text begin (9) the results of short-range and long-range actuarial sensitivity analyses.
new text end

new text begin Subd. 3. new text end

new text begin Report requirements; ongoing annual report. new text end

new text begin The annual actuarial
report submitted by January 15, 2010, and following years must include:
new text end

new text begin (1) the current and projected number of individuals paying the long-term care
income tax, aggregated by taxpayer status and age;
new text end

new text begin (2) the current and projected number of individuals receiving the defined benefit,
aggregated by taxpayer status and age;
new text end

new text begin (3) the current value of accumulated assets of the long-term care financing program;
new text end

new text begin (4) the current and projected costs of long-term care services provided to individuals
in Minnesota;
new text end

new text begin (5) recommendations for adjustments to the defined benefit payment amount to
reflect changes in the cost of long-term care services;
new text end

new text begin (6) estimates of the amount of long-term care income tax payments necessary to fund
defined benefit payments and to keep the long-term care benefits trust fund actuarially
sound over the short-range (ten years) and long-range (75 years);
new text end

new text begin (7) an estimate of the expected future income to and disbursements to be made from
the long-term care benefits trust fund during each of the next ten fiscal years;
new text end

new text begin (8) recommendations for any changes in the level of long-term care income tax
payments, the amount or duration of the defined benefit, or in program administration
necessary to ensure that the program remains actuarially sound;
new text end

new text begin (9) a statement of actuarial assumptions and methods used to determine costs and a
detailed explanation of any change in actuarial assumptions or methods; and
new text end

new text begin (10) the results of short-range and long-range actuarial sensitivity analyses.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after final enactment.
new text end

Sec. 6.

Minnesota Statutes 2008, section 270B.14, is amended by adding a subdivision
to read:

new text begin Subd. 20. new text end

new text begin Long-term care tax. new text end

new text begin (a) The commissioner may disclose return
information related to the long-term care income tax under section 290.06, subdivision 2g,
as provided in this subdivision.
new text end

new text begin (b) The commissioner and the board of the long-term care program established
under section 256N.05 shall agree upon the data items to be maintained on each taxpayer
necessary to determine eligibility for benefits and to calculate and pay benefits, as well as
any other data necessary to administer the program established under section 256N.03.
The commissioner and the board shall agree upon the format and manner for storing and
transmitting the data. The commissioner shall annually transmit this data to the board
within four months after the due date for the returns, including extensions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2008, section 290.01, subdivision 19b, is amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
of the Internal Revenue Code in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(11) to the extent included in federal taxable income, the amount of compensation
paid to members of the Minnesota National Guard or other reserve components of the
United States military for active service performed in Minnesota, excluding compensation
for services performed under the Active Guard Reserve (AGR) program. For purposes of
this clause, "active service" means (i) state active service as defined in section 190.05,
subdivision 5a, clause (1); (ii) federally funded state active service as defined in section
190.05, subdivision 5b; or (iii) federal active service as defined in section 190.05,
subdivision 5c, but "active service" excludes service performed in accordance with section
190.08, subdivision 3;

(12) to the extent included in federal taxable income, the amount of compensation
paid to Minnesota residents who are members of the armed forces of the United States or
United Nations for active duty performed outside Minnesota under United States Code,
title 10, section 101(d); United States Code, title 32, section 101(12); or the authority of
the United Nations;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a service
member as defined in United States Code, title 10, section 101(a)(5), for military service
as defined in the Servicemembers Civil Relief Act, Public Law 108-189, section 101(2);

(16) international economic development zone income as provided under section
469.325; deleted text begin and
deleted text end

(17) to the extent included in federal taxable income, the amount of national service
educational awards received from the National Service Trust under United States Code,
title 42, sections 12601 to 12604, for service in an approved Americorps National Service
program new text begin ; and
new text end

new text begin (18) to the extent included in federal taxable income, long-term care defined benefit
payments under section 256N.03 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2013.
new text end

Sec. 8.

Minnesota Statutes 2008, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 2g. new text end

new text begin Long-term care tax. new text end

new text begin (a) In addition to the tax imposed under subdivision
2c, the tax under this subdivision applies to the following resident individuals, other than
an individual receiving defined benefits under section 256N.03:
new text end

new text begin (1) unmarried individuals and married individuals filing separate returns, if the
individual's gross income exceeds $10,000 for the taxable year; and
new text end

new text begin (2) unmarried individuals qualifying as heads of household as defined in section 2(b)
of the Internal Revenue Code and married couples filing a joint return, if the filer's gross
income exceeds $17,000 for the taxable year.
new text end

new text begin (b) The liability for tax under this subdivision for each taxable year equals the amount
determined by the board of the long-term care financing program under section 256N.05
for each individual, including both spouses for a married couple filing a joint return.
new text end

new text begin (c) For purposes of this subdivision, "gross income" means gross income as defined
in section 61 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end

Sec. 9.

Minnesota Statutes 2008, section 290.62, is amended to read:

290.62 DISTRIBUTION OF REVENUES.

All revenues derived from the taxes, interest, penalties and charges under this
chapter shall, notwithstanding any other provisions of law, be paid into the state treasury
and credited to the general fund, and be distributed as follows:

(1) There shall, notwithstanding any other provision of the law, be paid from this
general fund all refunds of taxes erroneously collected from taxpayers under this chapter
as provided herein;

(2) There is hereby appropriated to the persons entitled to payment herein, from
the fund or account in the state treasury to which the money was credited, an amount
sufficient to make the refund and payment.

new text begin By the 15th day of the first month after the close of each calendar quarter, the
commissioner shall certify to the commissioner of finance an estimate of the amount
of the revenues, including interest and penalties, attributable to the tax imposed under
section 290.06, subdivision 2g, collected during the calendar quarter. The commissioner
may adjust the certified amount for collections in prior quarters as actual data or better
estimates of the amounts become available. The commissioner of finance shall transfer
this amount from the general fund to the long-term care benefits trust fund under section
16A.726 after receipt of certification from the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
for taxable years beginning after December 31, 2010.
new text end

Sec. 10. new text begin APPROPRIATION.
new text end

new text begin $....... is appropriated from the general fund to the board of the long-term care
financing program for the biennium ending June 30, 2011, to be deposited into the
long-term care benefits trust fund and used for startup and actuarial costs related to
planning and preparing for implementation of the long-term care financing program.
new text end