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H0106...............................................by REVENUE AND TAXATION
MEDICAL SAVINGS ACCOUNTS - Amends existing law to provide for the
disposition of an Idaho medical savings account upon the death of the
account holder in the same manner that a federal medical savings account is
dispersed upon the death of the account holder.
01/26 House intro - 1st rdg - to printing
01/27 Rpt prt - to Rev/Tax
02/03 Rpt out - rec d/p - to 2nd rdg
02/04 2nd rdg - to 3rd rdg
02/05 3rd rdg - PASSED - 65-0-5
AYES -- Barraclough, Barrett, Bell, Bieter, Black, Boe, Bruneel,
Callister, Campbell, Chase, Clark, Crow, Cuddy, Deal, Denney,
Ellsworth, Field(13), Field(20), Gagner, Geddes, Gould, Hadley,
Hammond, Hansen(23), Henbest, Hornbeck, Jaquet, Jones, Judd, Kellogg,
Kempton, Kendell, Kjellander, Kunz, Lake, Limbaugh, Linford, Mader,
Marley, McKague, Meyer, Montgomery, Mortensen, Moyle, Pischner,
Pomeroy, Reynolds, Ridinger, Ringo, Robison, Sali, Schaefer, Sellman,
Smith, Stevenson, Stoicheff, Stone, Taylor, Tilman, Tippets, Watson,
Williams, Wood, Zimmermann, Mr Speaker
NAYS -- None
Absent and exlcused -- Alltus, Hansen(29), Loertscher, Trail, Wheeler
Floor Sponsor - Ridinger
Title apvd - to Senate
02/08 Senate intro - 1st rdg - to Loc Gov
02/11 Rpt out - rec d/p - to 2nd rdg
02/12 2nd rdg - to 3rd rdg
02/17 3rd rdg - PASSED - 34-0-1
AYES--Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
Crow, Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
Hawkins, Ingram, Ipsen, Keough, King, Lee, McLaughlin, Noh,
Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen, Stegner,
Stennett, Thorne, Twiggs, Wheeler, Whitworth
NAYS--None
Absent and excused--Parry
Floor Sponsor - Ipsen
Title apvd - to House
02/18 To enrol
02/19 Rpt enrol - Sp signed
02/22 Pres signed
02/23 To Governor
03/01 Governor signed
Session Law Chapter 31
Effective: 01/01/99
H0106|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fifth Legislature First Regular Session - 1999IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 106 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO IDAHO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO 3 CODE, TO PROVIDE FOR DISPOSITION OF A MEDICAL SAVINGS ACCOUNT UPON THE 4 DEATH OF THE ACCOUNT HOLDER; DECLARING AN EMERGENCY AND PROVIDING A RETRO- 5 ACTIVE 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. Contributions to 16 the account shall not exceed the amount deductible under this section. 17 (2) For the purpose of this section, the following terms have the follow- 18 ing meanings unless the context clearly denotes otherwise: 19 (a) "Account holder" means an individual, in the case of married individ- 20 uals each spouse, including a self-employed person, on whose behalf the 21 medical savings account is established. 22 (b) "Dependent" means a person for whom a deduction is permitted under 23 section 151(b) or (c) of the Internal Revenue Code if a deduction for the 24 person is claimed for that person on the account holder's Idaho income tax 25 return. 26 (c) "Dependent child" means a child or grandchild of the account holder 27 who is not a dependent if the account holder actually pays the eligible 28 medical expenses of the child or grandchild and the child or grandchild is 29 any of the following: 30 (i) Under nineteen (19) years of age, or enrolled as a full-time 31 student at an accredited college or university. 32 (ii) Legally entitled to the provision of proper or necessary sub- 33 sistence, education, medical care or other care necessary for his or 34 her health, guidance or well-being and not otherwise emancipated, 35 self-supporting, married or a member of the armed forces of the 36 United States. 37 (iii) Mentally or physically incapacitated to the extent that he or 38 she is not self-sufficient. 39 (d) "Depository" means a state or national bank, savings and loan associ- 40 ation, credit union or trust company authorized to act as a fiduciary or 41 an insurance administrator or insurance company authorized to do business 42 in this state, a broker or investment advisor regulated by the department 43 of finance, a broker or insurance agent regulated by the department of 2 1 insurance or a health maintenance organization, fraternal benefit society, 2 hospital and professional service corporation as defined in section 3 41-3403, Idaho Code, or nonprofit mutual insurer regulated under title 41, 4 Idaho Code. 5 (e) "Eligible medical expense" means an expense paid by the taxpayer for 6 medical care described in section 213(d) of the Internal Revenue Code, 7 medical insurance premiums, dental and long-term care expenses of the 8 account holder and the spouse, dependents and dependent children of the 9 account holder. 10 (f) "Long-term care expenses" means expenses incurred in providing custo- 11 dial care in a skilled nursing facility or intermediate care facility as 12 those terms are defined in section 39-1301, Idaho Code, and for insurance 13 premiums relating to long-term care insurance under chapter 46, title 41, 14 Idaho Code. 15 (g) "Medical savings account" means an account established with a deposi- 16 tory to pay the eligible medical expenses of the account holder and the 17 dependents and dependent children of the account holder. Medical savings 18 accounts shall carry the name of the account holder, a designated benefi- 19 ciary or beneficiaries of the account holder and shall be designated by 20 the depository as a "medical savings account." 21 (3) Upon agreement between an employer and employee, an employer may 22 establish and contribute to the employee's medical savings account or contrib- 23 ute to an employee's existing medical savings account. The total combined 24 annual contributions by an employer and the account holder shall not exceed 25 two thousand dollars ($2,000) for the account holder. Employer contributions 26 to an employee's medical savings account shall be owned by the employee. 27 (4) Funds held in a medical savings account may be withdrawn by the 28 account holder at any time. Withdrawals for the purpose of paying eligible 29 medical expenses shall not be subject to the tax imposed in this chapter. The 30 burden of proving that a withdrawal from a medical savings account was made 31 for an eligible medical expense is upon the account holder and not upon the 32 depository or the employer of the account holder. Other withdrawals shall be 33 subject to the following restrictions and penalties: 34 (a) There shall be a distribution penalty for withdrawal of funds by the 35 account holder for purposes other than the payment of eligible medical 36 expenses. The penalty shall be ten percent (10%) of the amount of with- 37 drawal from the account and, in addition, the amount withdrawn shall be 38 subject to the tax imposed in this chapter. The direct transfer of funds 39 from a medical savings account to a medical savings account at a different 40 depository shall not be considered a withdrawal for purposes of this sec- 41 tion. Charges relating to the administration and maintenance of the 42 account by the depository are not withdrawals for purposes of this sec- 43 tion. 44 (b) After an account holder reaches fifty-nine and one-half (59 1/2) 45 years of age, withdrawals may be made for eligible medical expenses or for 46 any other reason without penalty, but subject to the tax imposed by this 47 section. 48 (c) Upon the death of an account holder, the account principal, as well 49 as any interest accumulated thereon, shall be distributed without penalty 50 to the designated beneficiary or beneficiaries. 51 (d) Funds withdrawn which are later reimbursed shall be taxable unless 52 redeposited into the account within sixty (60) days of the reimbursement. 53 Deposits of reimbursed eligible medical expenses shall not be included in 54 calculating the amount deductible. 55 (e) Funds deposited in a medical savings account which are deposited in 3 1 error or unintentionally and which are withdrawn within thirty (30) days 2 of being deposited shall be treated as if the amounts had not been depos- 3 ited in the medical savings account. Funds withdrawn from a medical sav- 4 ings account which are withdrawn in error or unintentionally and which are 5 redeposited within thirty (30) days of being withdrawn shall be treated as 6 if the amounts had not been withdrawn from the medical savings account. 7 (f) Funds withdrawn which are, not later than the sixtieth day after the 8 day of the withdrawal, deposited into another medical savings account for 9 the benefit of the same account holder are not a withdrawal for purposes 10 of this section and shall not be included in calculating the amount 11 deductible. 12 (5) Reporting -- Depositories shall provide to the state tax commission 13 the following information regarding medical savings accounts: the name of the 14 account holder, the address of the account holder, the taxpayer identification 15 number of the account holder, deposits made during the tax year by the account 16 holder, withdrawals made during the tax year by the account holder, interest 17 earned on the proceeds of a medical savings account or other information 18 deemed necessary by the commission. Reports shall be filed annually on or 19 before the last day of February following the year to which the information in 20 the report relates. 21 (6) Any medical care savings account established pursuant to chapter 53, 22 title 41, Idaho Code, as enacted by chapter 186, laws of 1994, may be contin- 23 ued pursuant to the provisions of this section and all duties, privileges and 24 liabilities imposed in this section upon medical care savings accounts and the 25 beneficiaries of those accounts shall apply to medical care savings accounts 26 and their beneficiaries established pursuant to chapter 53, title 41, Idaho 27 Code, as enacted by chapter 186, laws of 1994, as if the medical care savings 28 account were a medical savings account established pursuant to this section. 29 (7) (a) If the account holder's surviving spouse acquires the 30 account holder's interest in a medical savings account by reason of being 31 the designated beneficiary of such account at the death of the account 32 holder, the medical savings account shall be treated as if the spouse were 33 the account holder. 34 (b) If, by reason of the death of the account holder, any person acquires 35 the account holder's interest in a medical savings account in a case to 36 which subparagraph (7)(a) of this section does not apply: 37 (i) Such account shall cease to be a medical savings account as of 38 the date of death; and 39 (ii) An amount equal to the fair market value of the assets in such 40 account on such date shall be includable, if such person is not the 41 estate of such holder, in such person's Idaho taxable income for the 42 taxable year which includes such date, or if such person is the 43 estate of such holder, in such holder's Idaho taxable income for the 44 last taxable year of such holder. 45 (c) The amount includable in Idaho taxable income under subparagraph (b) 46 of this subsection (7) by any person, other than the estate, shall be 47 reduced by the amount of qualified medical expenses which were incurred by 48 the decedent before the date of the decedent's death and paid by such per- 49 son within one (1) year after such date. 50 SECTION 2. An emergency existing therefor, which emergency is hereby 51 declared to exist, this act shall be in full force and effect on and after its 52 passage and approval, and retroactively to January 1, 1999.
STATEMENT OF PURPOSE
RS08390C1
This bill amends the section of the Idaho Income Tax Act
relating to Idaho medical savings accounts. It adds a new
subsection to provide rules for tax treatment of a medical
savings account upon the death of the account holder. The rules
parallel the provisions of section 220(f)(8) of the federal
Internal Revenue Code relating to federal medical savings
accounts.
The bill includes an effective date clause providing a
retroactive effective date of January 1, 1999.
FISCAL IMPACT
No fiscal effect.
CONTACT
Name: Dan John/Ted Spangler
Agency: State Tax Commission
Phone: 334-7530
Statement of Purpose/Fiscal Impact H 106