1999 Legislation
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HOUSE BILL NO. 106 – Medical savings acct, disposition


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Daily Data Tracking History

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
         Effective: 01/01/99

Bill Text


 ||||              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

 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


 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


 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 / Fiscal Impact

                       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.

                    FISCAL IMPACT

No fiscal effect.

Name: Dan John/Ted Spangler
Agency: State Tax Commission
Phone: 334-7530
Statement of Purpose/Fiscal Impact                  H 106