1998 Legislation
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HOUSE BILL NO. 787 – Medical Savings Acct, withdraw, adj


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Daily Data Tracking History

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
      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

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fourth Legislature                 Second Regular Session - 1998

                             IN THE HOUSE OF REPRESENTATIVES

                                    HOUSE BILL NO. 787

                            BY REVENUE AND TAXATION COMMITTEE

 1                                        AN ACT

 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


 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.


 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 / Fiscal Impact


    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.
    No fiscal 
    Name: Dan John / Ted Spangler
    Agency: State Tax Commission
    Phone: 334-7530
    H 787