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H0787...............................................by REVENUE AND TAXATION
MEDICAL SAVINGS ACCOUNT - Amends existing law to limit the contributions to
medical savings accounts and to allow adjustments for erroneous withdrawals
from an account.
02/27 House intro - 1st rdg - to printing
03/02 Rpt prt - to Rev/Tax
03/05 Rpt out - rec d/p - to 2nd rdg
03/06 2nd rdg - to 3rd rdg
03/11 3rd rdg - PASSED - 65-2-3
AYES -- Alltus, Barraclough, Barrett, Bell, Bieter, Bivens,
Black(15), Black(23), Boe, Callister, Campbell, Chase, Clark, Crane,
Cuddy, Deal, Denney, Ellsworth, Field(13), Field(20), Gagner, Geddes,
Gould, Henbest, Hornbeck, Jaquet, Jones(9), Jones(22), Jones(20),
Judd, Kellogg, Kempton, Kendell, Kjellander, Kunz, Lake, Linford,
Loertscher, Mader, Marley, McKague, Meyer, Miller, Mortensen,
Newcomb, Pischner, Pomeroy, Reynolds, Richman, Ridinger, Robison,
Sali, Schaefer, Stevenson, Stoicheff, Stone, Stubbs, Taylor, Tilman,
Tippets, Trail, Watson, Wheeler, Zimmermann, Mr Speaker
NAYS -- Bruneel, Wood
Absent and excused -- Crow, Hadley, Hansen,
Floor Sponsor - Kellogg
Title apvd - to Senate
03/12 Senate intro - 1st rdg - to Com/HuRes
03/18 Rpt out - rec d/p - to 2nd rdg
03/19 2nd rdg - to 3rd rdg
03/20 3rd rdg - PASSED - 33-1-1
AYES--Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
Crow, Darrington, Deide, Dunklin, Frasure, Geddes, Hansen, Hawkins,
Ingram, Ipsen, Keough, King, Lee, McLaughlin, Noh, Parry, Richardson,
Risch, Sandy, Schroeder, Sorensen, Stennett, Sweeney, Thorne, Twiggs,
Wheeler, Whitworth
NAYS--Danielson
Absent and excused--Riggs
Floor Sponsor - Andreason
Title apvd - to House
03/23 To enrol - rpt enrol - Sp signed
03/24 Pres signed - to Governor
03/25 Governor signed
Session Law Chapter 398
Effective: 01/01/98
H0787|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fourth Legislature Second Regular Session - 1998IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 787 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO CODE, 3 TO LIMIT THE AMOUNT OF CONTRIBUTIONS TO THE ACCOUNT AND TO ALLOW ADJUST- 4 MENTS FOR ERRONEOUS WITHDRAWALS; DECLARING AN EMERGENCY AND PROVIDING A 5 RETROACTIVE EFFECTIVE DATE. 6 Be It Enacted by the Legislature of the State of Idaho: 7 SECTION 1. That Section 63-3022K, Idaho Code, be, and the same is hereby 8 amended to read as follows: 9 63-3022K. MEDICAL SAVINGS ACCOUNT. (1) For taxable years commencing on 10 and after January 1, 1995, annual contributions to a medical savings account 11 not exceeding two thousand dollars ($2,000) for the account holder and inter- 12 est earned on a medical savings account shall be deducted from taxable income 13 by the account holder, if such amount has not been previously deducted or 14 excluded in arriving at taxable income. For married individuals the maximum 15 deduction shall be computed separately for each individual. Contribu- 16 tions to the account shall not exceed the amount deductible under this sec- 17 tion. 18 (2) For the purpose of this section, the following terms have the follow- 19 ing meanings unless the context clearly denotes otherwise: 20 (a) "Account holder" means an individual, in the case of married individ- 21 uals each spouse, including a self-employed person, on whose behalf the 22 medical savings account is established. 23 (b) "Dependent" means a person for whom a deduction is permitted under 24 section 151(b) or (c) of the Internal Revenue Code if a deduction for the 25 person is claimed for that person on the account holder's Idaho income tax 26 return. 27 (c) "Dependent child" means a child or grandchild of the account holder 28 who is not a dependent if the account holder actually pays the eligible 29 medical expenses of the child or grandchild and the child or grandchild is 30 any of the following: 31 (i) Under nineteen (19) years of age, or enrolled as a full-time 32 student at an accredited college or university. 33 (ii) Legally entitled to the provision of proper or necessary sub- 34 sistence, education, medical care or other care necessary for his or 35 her health, guidance or well-being and not otherwise emancipated, 36 self-supporting, married or a member of the armed forces of the 37 United States. 38 (iii) Mentally or physically incapacitated to the extent that he or 39 she is not self-sufficient. 40 (d) "Depository" means a state or national bank, savings and loan associ- 41 ation, credit union or trust company authorized to act as a fiduciary or 42 an insurance administrator or insurance company authorized to do business 43 in this state, a broker or investment advisor regulated by the department 2 1 of finance, a broker or insurance agent regulated by the department of 2 insurance or a health maintenance organization, fraternal benefit society, 3 hospital and professional service corporation as defined in section 4 41-3403, Idaho Code, or nonprofit mutual insurer regulated under title 41, 5 Idaho Code. 6 (e) "Eligible medical expense" means an expense paid by the taxpayer for 7 medical care described in section 213(d) of the Internal Revenue Code, 8 medical insurance premiums, dental and long-term care expenses of the 9 account holder and the spouse, dependents and dependent children of the 10 account holder. 11 (f) "Long-term care expenses" means expenses incurred in providing custo- 12 dial care in a skilled nursing facility or intermediate care facility as 13 those terms are defined in section 39-1301, Idaho Code, and for insurance 14 premiums relating to long-term care insurance under chapter 46, title 41, 15 Idaho Code. 16 (g) "Medical savings account" means an account established with a deposi- 17 tory to pay the eligible medical expenses of the account holder and the 18 dependents and dependent children of the account holder. Medical savings 19 accounts shall carry the name of the account holder, a designated benefi- 20 ciary or beneficiaries of the account holder and shall be designated by 21 the depository as a "medical savings account." 22 (3) Upon agreement between an employer and employee, an employer may 23 establish and contribute to the employee's medical savings account or contrib- 24 ute to an employee's existing medical savings account. The total combined 25 annual contributions by an employer and the account holder shall not exceed 26 two thousand dollars ($2,000) for the account holder. Employer contributions 27 to an employee's medical savings account shall be owned by the employee. 28 (4) Funds held in a medical savings account may be withdrawn by the 29 account holder at any time. Withdrawals for the purpose of paying eligible 30 medical expenses shall not be subject to the tax imposed in this chapter. The 31 burden of proving that a withdrawal from a medical savings account was made 32 for an eligible medical expense is upon the account holder and not upon the 33 depository or the employer of the account holder. Other withdrawals shall be 34 subject to the following restrictions and penalties: 35 (a) There shall be a distribution penalty for withdrawal of funds by the 36 account holder for purposes other than the payment of eligible medical 37 expenses. The penalty shall be ten percent (10%) of the amount of with- 38 drawal from the account and, in addition, the amount withdrawn shall be 39 subject to the tax imposed in this chapter. The direct transfer of funds 40 from a medical savings account to a medical savings account at a different 41 depository shall not be considered a withdrawal for purposes of this sec- 42 tion. Charges relating to the administration and maintenance of the 43 account by the depository are not withdrawals for purposes of this sec- 44 tion. 45 (b) After an account holder reaches fifty-nine and one-half (59 1/2) 46 years of age, withdrawals may be made for eligible medical expenses or for 47 any other reason without penalty, but subject to the tax imposed by this 48 section. 49 (c) Upon the death of an account holder, the account principal, as well 50 as any interest accumulated thereon, shall be distributed without penalty 51 to the designated beneficiary or beneficiaries. 52 (d) Funds withdrawn which are later reimbursed shall be taxable unless 53 redeposited into the account within sixty (60) days of the reimbursement. 54 Deposits of reimbursed eligible medical expenses shall not be included in 55 calculating the amount deductible. 3 1 (e) Funds deposited in a medical savings account which are deposited in 2 error or unintentionally and which are withdrawn within thirty (30) days 3 of being deposited shall be treated as if the amounts had not been depos- 4 ited in the medical savings account. Funds withdrawn from a medical 5 savings account which are withdrawn in error or unintentionally and which 6 are redeposited within thirty (30) days of being withdrawn shall be 7 treated as if the amounts had not been withdrawn from the medical savings 8 account. 9 (f) Funds withdrawn which are, not later than the sixtieth day after the 10 day of the withdrawal, deposited into another medical savings account for 11 the benefit of the same account holder are not a withdrawal for purposes 12 of this section and shall not be included in calculating the amount 13 deductible. 14 (5) Reporting -- Depositories shall provide to the state tax commission 15 the following information regarding medical savings accounts: the name of the 16 account holder, the address of the account holder, the taxpayer identification 17 number of the account holder, deposits made during the tax year by the account 18 holder, withdrawals made during the tax year by the account holder, interest 19 earned on the proceeds of a medical savings account or other information 20 deemed necessary by the commission. Reports shall be filed annually on or 21 before the last day of February following the year to which the information in 22 the report relates. 23 (6) Any medical care savings account established pursuant to chapter 53, 24 title 41, Idaho Code, as enacted by chapter 186, laws of 1994, may be contin- 25 ued pursuant to the provisions of this section and all duties, privileges and 26 liabilities imposed in this section upon medical care savings accounts and the 27 beneficiaries of those accounts shall apply to medical care savings accounts 28 and their beneficiaries established pursuant to chapter 53, title 41, Idaho 29 Code, as enacted by chapter 186, laws of 1994, as if the medical care savings 30 account were a medical savings account established pursuant to this section. 31 SECTION 2. An emergency existing therefor, which emergency is hereby 32 declared to exist, this act shall be in full force and effect on and after its 33 passage and approval, and retroactively to January 1, 1998.
STATEMENT OF PURPOSE
RS08153
Idahoans can make contributions to medical savings
accounts and deduct the contributions from their Idaho taxable
income on their state income tax returns. This bill limits the
balance of a medical saving account to the amount that can be
deducted. It also allows correction of erroneous withdrawals.
It will apply to tax returns for 1998 and later.
FISCAL NOTE
No fiscal
effect.
Contact
Name: Dan John / Ted Spangler
Agency: State Tax Commission
Phone: 334-7530
H 787