Long-Term Care Income Tax
Establishes a long-term care income tax to pay for long-term care benefits. (HB1616 HD1)
HOUSE OF REPRESENTATIVES
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
relating to long-term care.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . LONG-TERM CARE INCOME TAX
§235-A Long-term care income tax imposed on individuals; withholding; self-employed; tax form; exclusions; rates and scheduled increases; adjustment and actuarial review. (a) There is hereby imposed on the taxable income of every:
(1) Unmarried individual (other than a surviving spouse, or the head of a household);
(2) Married individual who does not make a single return jointly with the individual's spouse under section 235-93;
(3) Surviving spouse;
(4) Head of a household; and
(5) Trust; provided that the beneficiary of the trust is not also subject to the tax imposed under this section,
a long-term care tax in the amount of $120 in each taxable year beginning in the taxable year after December 31, 2004. A taxpayer who files a joint return under section 235-93, and the taxpayer's spouse together with whom the taxpayer jointly files a return, shall each pay the amount of the tax.
(b) Any taxpayer under subsection (a) who has wages withheld pursuant to section 235-61, shall be subject to section 235-B regarding withholding of long-term care income tax on wages.
(c) Any self-employed taxpayer, who is required to file a return individually or jointly under this chapter, or any other taxpayer who is either required or elects to make estimated tax payments, shall include the amount of the long-term care income tax in the amount of estimated tax payments made for the taxable year.
(d) Any resident sixty-five-years-of-age or older who is not required to file a return, either individually or jointly, shall file a long-term care premium tax form, to be prepared and prescribed by the director of taxation, for the purpose of paying the long-term care tax imposed by this section. The tax paid in this manner shall be due no later than April 20 of each year.
(e) The exclusions from gross income, income, adjusted gross income, and taxable income, as provided by section 235-7, shall not be exclusions for purposes of the imposition of the long-term care income tax under section 235-A; provided that the gross income on:
(1) An individual return is greater than the federal poverty level for Hawaii for a one-person household for the taxable year of filing, regardless if the filer is single filing individually, single filing as head of household, or single filing as a qualifying widow with a dependent child; or
(2) A joint return is greater than the federal poverty level for Hawaii for a two-person household for the taxable year of filing, regardless if the filers are married filing separately or married filing jointly.
(f) The long-term care income tax shall be increased as follows:
For the taxable year beginning after: The tax shall be:
December 31, 2005 $144;
December 31, 2006 $168;
December 31, 2007 $192;
December 31, 2008 $216;
December 31, 2009 $240;
December 31, 2010 $264;
December 31, 2011 $276.
(g) Prior to any adjustment to the amount of the long-term care income tax, the board of trustees shall request a review and an opinion by the actuary in the actuarial report required under section 235-G.
§235-B Withholding of long-term income tax on wages. (a) The definitions of "wages", "employee", and "employer" shall have the meanings as defined in section 235-61.
(b) Every employer making payment of wages to employees shall deduct and withhold from such wages an amount of tax determined as provided in this section.
(c) For each withholding period (whether weekly, biweekly, monthly, or otherwise) the amount of tax to be withheld under this section shall be at a rate that, for the taxable year, will yield the tax imposed by section 235-51 upon each employee's annual wage, as estimated from the employee's current wage in any withholding period. The tax for the taxable year shall be calculated upon the assumptions contained in section 235-61(c).
(d) Alternatively, at the election of the employer, the employer may deduct and withhold from each employee an amount of tax determined on the basis of tables to be prepared and furnished by the department of taxation, which amount of tax shall be substantially equivalent to the amount of tax provided by subsection (c).
§235-C Remittance. Each month, the director of taxation shall remit an amount of long-term care income tax, as its share of the total income taxes, that are paid, prepaid in estimated tax payments, or deposited with the department for that month to the board of trustees of the long-term care financing program for deposit into the long-term care benefits fund.
§235-D Annual data. The director of taxation shall compile in machine-readable files (read-only computer compact disk or other suitable media) annual data on taxpayers subject to the long-term care income tax, payments, and amounts of payments made. The data so compiled shall be:
(1) Transmitted to the board of trustees of the long-term care financing program annually no later than three months after the date on which individual income tax returns are due; and
(2) Used by the board of trustees of the long-term care financing program solely for the purpose of:
(A) Maintaining an administrative file of taxpayers eligible for long-term care benefits under chapter 346C;
(B) Recording and updating the amount of premiums paid or unpaid;
(C) Determining the payment status of each individual taxpayer eligible for long-term care benefits under chapter 346C; and
(D) Computing vesting credits gained or lost for eligible taxpayers.
§235-E Delinquency; late payments; penalties. (a) If a taxpayer is delinquent in paying either the tax imposed by this chapter or the long-term care income tax imposed by section
235-A, any late payments made to the account of the delinquent taxpayer shall first be applied to payment of the long-term care income tax. The remaining balance, if any, shall then be applied to payment of the income tax imposed by this chapter.
(b) The amount of the delinquent long-term care income tax paid in a late payment, and any interest thereon, shall be deposited into the long-term care benefits fund established in section 346C-5. Any penalties resulting from any tax payment delinquency shall be retained by the department of taxation.
§235-F Long-term care benefits; disbursement; benefit levels; delinquency and loss carryback; adjustment and actuarial review. (a) The proceeds of the long-term care income tax shall be deposited into the long-term care benefits fund established in section 346C-5. Benefit disbursements shall begin no earlier than the day following the end of the third year of long-term care income tax collections.
(b) The initial benefit level shall be $70 per day for three hundred sixty-five days, subject to restrictions imposed by the required vesting period, for long-term care services as described in section 431:10H-301(c). The benefits shall increase as follows:
(1) $72.10 per day in 2008;
(2) $74.26 per day in 2009;
(3) $76.49 per day in 2010;
(4) $78.79 per day in 2011;
(5) $81.15 per day in 2012;
(6) $83.58 per day in 2013 and thereafter.
(c) For any individual who is subject to the long-term care income tax and who:
(1) Is or has been delinquent in paying the tax; and
(2) Begins to pay overdue back taxes within three years of the initial delinquency,
any such delinquent long-term care income tax payments may be credited to the individual's vesting record and restore any benefit loss up to that point.
(d) Prior to any adjustment to the amount of the long-term care benefit, the board of trustees shall request a review and an opinion by the actuary in the actuarial report required under section 235-G.
§235-G Actuarial report and actuarial opinion. (a) The board of trustees of the long-term care financing program shall cause to be prepared an actuarial report and actuarial opinion, 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. Costs of the actuarial report shall be deemed an administrative expense under section 346C-5(b).
(b) The actuarial report shall contain a statement by the actuary certifying that the techniques and methods used are generally accepted within the actuarial profession and that the assumptions and cost estimates used are reasonable. The report shall include:
(1) An estimate of the expected future income to and disbursements to be made from the Hawaii long-term care benefits fund during each of the next ensuing ten fiscal years;
(2) A projection of the tax rates necessary to keep the Hawaii long-term care benefits fund actuarially sound over short-range and long-range future periods;
(3) A statement of actuarial assumptions and methods used to determine costs and a detailed explanation of any change in actuarial assumptions or methods;
(4) The current and projected number of participants and beneficiaries and the current and projected paid-in taxes, benefit payments, current and permanent benefit credits earned, and the like, aggregated by current and past Hawaii taxpayer status and age;
(5) The current value of accumulated assets of the Hawaii long-term care financing program and the value of assets used by the actuary in any computation of the amount of required taxes; and
(6) The results of short-range and long-range actuarial sensitivity analyses.
(c) All work products, papers, documents, and data used or prepared by the actuary in preparing the actuarial report shall be public documents within the meaning of chapter 92F.
(d) The actuarial report shall be completed annually, demonstrate actuarial solvency for seventy-five years, and be submitted to the governor and the legislature.
§235-H Confidentiality. The confidentiality privileges relating to taxpayer communications, as they apply to the department of taxation under section 231-1.5, shall also apply to the board of trustees of the long-term care financing program and its employees, and to any third party administrator that may be contracted to perform activities for the long-term care financing program."
SECTION 2. Section 346C-6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) With the advice of the director of finance to ensure investment soundness, the board of trustees shall invest moneys in the long-term care benefits fund in investments with sufficient liquidity to allow market transactions to meet expected payout requirements without substantial loss in value or unreasonable delay. The board of trustees shall invest solely in:
(1) Obligations of any of the following classes:
(A) Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that the principal of and interest on such obligations are payable in currency of the United States, or sovereign debt instruments issued by agencies of, or guaranteed by foreign governments;
(B) Revenue bonds, whether or not permitted by any other provision hereof, of the State or any political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and
(C) Obligations issued or guaranteed by any federal home loan bank including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;
(2) Obligations eligible by law for purchase in the open market by federal reserve banks; and
(3) Securities and futures contracts in which in the informed opinion of the board of trustees it is prudent to invest funds of the system, including currency, interest rate, bond, and stock index futures contracts and options on such contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the system's securities portfolios; covered put and call options on securities; and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of any of the foregoing paragraphs[
; and (4) Any other investments deemed secure on the advice of the state director of finance]."
SECTION 3. Act 245, Session Laws of Hawaii 2002, is amended by amending section 3(a) to read as follows:
"(a) The governor shall appoint a temporary board of trustees, pursuant to section 26-41, Hawaii Revised Statutes, which shall be placed within the department of health, executive office on aging, for administrative purposes to serve beginning July 1, 2002, until June 30, 2003, to design the Hawaii long-term care financing program, based upon consideration of the actuarial report submitted to the legislature by the executive office on aging in 2002, and the report of the joint legislative committee on long term care financing of 2001, as stipulated by Senate Concurrent Resolution No. 23, C.D. 1, regular session of 2001, including:
(1) Determining the amount of and means of collection of a tax or fee; and
(2) Determining the nature of and amount of benefits[
; and (3) Recommending a third-party administrator]."
SECTION 4. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect upon its approval.