Title VII, SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED INDIVIDUALS. (a) In General. Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 23 the following new section: ``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED INDIVIDUALS. ``(a) Allowance of Credit. ``(1) In general. In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the personal assistance expenses paid or incurred by the taxpayer during such taxable year. ``(2) Applicable percentage. For purposes of paragraph (1), the term `applicable percentage' means 50 percent reduced (but not below zero) by 10 percentage points for each $5,000 by which the modified adjusted gross income (as defined in section 59B(d)(2)) of the taxpayer for the taxable year exceeds $45,000. In the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting `$2,500' for `$5,000' and `$22,500' for `$45,000'. ``(b) Limitation. The amount of personal assistance expenses incurred for the benefit of an individual which may be taken into account under subsection (a) for the taxable year shall not exceed the lesser of ``(1) $15,000, or ``(2) such individual's earned income (as defined in section 32(c)(2)) for the taxable year. ``In the case of a joint return, the amount under the preceding sentence shall be determined separately for each spouse. ``(c) Eligible Individual. For purposes of this section, the term `eligible individual' means any individual (other than a nonresident alien) who, by reason of any medically determinable physical impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, is unable to engage in any substantial gainful activity without personal assistance services appropriate to carry out activities of daily living. An individual shall not be treated as an eligible individual unless such individual furnishes such proof thereof (in such form and manner, and at such times) as the Secretary may require. ``(d) Other Definitions. For purposes of this section ``(1) Personal assistance expenses. The term `personal assistance expenses' means expenses for ``(A) personal assistance services appropriate to carry out activities of daily living in or outside the home, ``(B) homemaker/chore services incidental to the provision of such personal assistance services, ``(C) in the case of an individual with a cognitive impairment, assistance with life skills, ``(D) communication services, ``(E) work-related support services, ``(F) coordination of services described in this paragraph, ``(G) assistive technology and devises, including assessment of the need for particular technology and devices and training of family members, and ``(H) modifications to the principal place of abode of the individual to the extent the expenses for such modifications would (but for subsection (e)(2)) be expenses for medical care (as defined by section 213) of such individual. ``(2) Activities of daily living. The term `activities of daily living' means the activities referred to in section 213(g)(3). ``(e) Special Rules. ``(1) Payments to related persons. No credit shall be allowed under this section for any amount paid by the taxpayer to any person who is related (within the meaning of section 267 or 707(b)) to the taxpayer. ``(2) Coordination with medical expense deduction. Any amount taken into account in determining the credit under this section shall not be taken into account in determining the amount of the deduction under section 213. ``(3) Basis reduction. For purposes of this subtitle, if a credit is allowed under this section for any expense with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expense shall be reduced by the amount of the credit so allowed. ``(f) Cost-of-Living Adjustment. In the case of any taxable year beginning after 1996, the $45,000 and $22,500 amounts in subsection (a)(2) and the $15,000 amount in subsection (b) shall be increased by an amount equal to ``(1) such dollar amount, multiplied by ``(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins by substituting `calendar year 1995' for `calendar year 1992' in subparagraph (B) thereof. ``If any increase determined under the preceding sentence is not a multiple of $1,000, such increase shall be rounded to the nearest multiple of $1,000.'' (b) Technical Amendment. Subsection (a) of section 1016 is amended by striking ``and'' at the end of paragraph (24), by striking the period at the end of paragraph (25) and inserting ``, and'', and by adding at the end thereof the following new paragraph: ``(26) in the case of any property with respect to which a credit has been allowed under section 23, to the extent provided in section 23(e)(3).'' (c) Clerical Amendment. The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 22 the following new item: ``Sec. 23. Cost of personal assistance services required by employed individuals.'' (d) Effective Date. The amendments made by this section shall apply to taxable years beginning after December 31, 1995.