When a C Corporation purchases a Tax-Qualified Long-Term Care Insurance Policy ("TQLTCIP") on behalf of any of its employees, or their spouses and dependents, the corporation is entitled to take a 100% deduction as a business expense on the total premium paid. Additionally, the corporation's purchase of a TQLTCIP is not subject to any non-discrimination rules, thus allowing the corporation to be selective in the classification of the employees it selects to cover. A corporate resolution could state that a TQLTCIP will be provided to all of its officers - distinct classification. The classification could be further refined to include only those officers with at least seven years of corporate service - not a discriminatory classification. In either the case, the TQLTCIP premium payments paid by the corporation will be a deductible business expense. Notwithstanding the above, one tax ruling has held that a corporation that elects to only provide a TQLTCIP to those officers with at least five years of corporate service and whom are corporate stockholders is not a proper classification - discriminatory in favor of majority owners - not a tax deductible business expense. In short, even through the financial impact may be the same, it is important to note that the language contained in the corporate resolution will pay an important role in whether the TQLTCIP expense will reign as a proper corporate business expense.
In light of the above, if a C Corporation is currently generating a significant profit, and is looking to incur business expenses for the benefit of its key employees, it may want to consider offering a TQLTCIP to each of the employees, with the annual premiums being paid on an accelerated basis - ten annual premiums. This option will allow the corporation to have higher annual business deductions, and the corporation will be able to retire the annual cost of paying for the TQLTCIP, long before the key employee actually retires - a full paid up TQLTCIP.
