Print Friendly HOUSE BILL NO. 106 – Medical savings acct, disposition
HOUSE BILL NO. 106
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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
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
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature First Regular Session - 1999
IN 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
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
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-
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
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
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
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
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
The bill includes an effective date clause providing a
retroactive effective date of January 1, 1999.
No fiscal effect.
Name: Dan John/Ted Spangler
Agency: State Tax Commission
Statement of Purpose/Fiscal Impact H 106