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S1302aa........................................................by SCHROEDER
MEDICAL SAVINGS ACCOUNTS - Amends existing law to revise reporting
requirements for medical savings accounts; and to provide application to
account holders of certain medical savings accounts.
01/18 Senate intro - 1st rdg - to printing
01/21 Rpt prt - to Loc Gov
01/29 Rpt out - to 14th Ord
03/01 Rpt out amen - to engros
03/04 Rpt engros - 1st rdg - to 2nd rdg as amen
03/05 2nd rdg - to 3rd rdg as amen
03/07 3rd rdg as amen - PASSED - 35-0-0
AYES -- Andreason, Boatright, Branch(Bartlett), Brandt, Bunderson,
Burtenshaw, Cameron, Darrington, Davis, Deide, Dunklin, Frasure,
Geddes, Goedde, Hawkins, Hill, Ingram, Ipsen, Keough, King-Barrutia,
Little, Lodge, Marley, Noh, Richardson, Risch, Sandy, Schroeder,
Sims, Sorensen, Stegner, Stennett, Thorne, Wheeler, Williams
NAYS -- None
Absent and excused -- None
Floor Sponsor - Schroeder
Title apvd - to House
03/08 House intro - 1st rdg - to Rev/Tax
03/13 Rpt out - rec d/p - to 2nd rdg
Rls susp - PASSED - 66-0-4
AYES -- Aikele, Barraclough, Barrett, Bedke, Bell, Black, Block, Boe,
Bolz, Bradford, Bruneel, Callister, Campbell, Clark, Collins, Cuddy,
Deal, Denney, Ellis, Ellsworth, Eskridge, Field(13), Field(20),
Gagner, Gould, Hadley, Hammond, Harwood, Henbest, Higgins, Hornbeck,
Jaquet, Jones, Kellogg, Kendell, Kunz, Lake, Langford, Loertscher,
Mader, Martinez, McKague, Meyer, Montgomery, Mortensen, Pearce,
Pischner, Pomeroy, Raybould, Ridinger, Roberts, Robison, Sali,
Schaefer, Sellman, Shepherd, Smith(33), Smylie, Stevenson, Stone,
Tilman, Trail, Wheeler, Wood, Young, Mr. Speaker
NAYS -- None
Absent and excused -- Bieter, Crow, Moyle, Smith(23)
Floor Sponsor - Trail
Title apvd - to Senate
03/13 To enrol
03/14 Rpt enrol - Pres signed - Sp signed
03/15 To Governor
03/22 Governor signed
Session Law Chapter 212
Effective: 01/01/02
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE SENATE
SENATE BILL NO. 1302
BY SCHROEDER
1 AN ACT
2 RELATING TO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO CODE,
3 TO PROVIDE THAT DEPOSITORIES SHALL NOT BE REQUIRED TO SPECIFICALLY IDEN-
4 TIFY THE MEDICAL SAVINGS ACCOUNT IN ANY WAY, TO DELETE REPORTING REQUIRE-
5 MENTS FOR DEPOSITORIES TO THE STATE TAX COMMISSION AND TO PROVIDE APPLICA-
6 TION TO ACCOUNT HOLDERS OF CERTAIN MEDICAL SAVINGS ACCOUNTS; DECLARING AN
7 EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.
8 Be It Enacted by the Legislature of the State of Idaho:
9 SECTION 1. That Section 63-3022K, Idaho Code, be, and the same is hereby
10 amended to read as follows:
11 63-3022K. MEDICAL SAVINGS ACCOUNT. (1) For taxable years commencing on
12 and after January 1, 1995, annual contributions to a medical savings account
13 not exceeding two thousand dollars ($2,000) for the account holder and inter-
14 est earned on a medical savings account shall be deducted from taxable income
15 by the account holder, if such amount has not been previously deducted or
16 excluded in arriving at taxable income. For married individuals the maximum
17 deduction shall be computed separately for each individual. Contributions to
18 the account shall not exceed the amount deductible under this section.
19 (2) For the purpose of this section, the following terms have the follow-
20 ing meanings unless the context clearly denotes otherwise:
21 (a) "Account holder" means an individual, in the case of married individ-
22 uals each spouse, including a self-employed person, on whose behalf the
23 medical savings account is established.
24 (b) "Dependent" means a person for whom a deduction is permitted under
25 section 151(b) or (c) of the Internal Revenue Code if a deduction for the
26 person is claimed for that person on the account holder's Idaho income tax
27 return.
28 (c) "Dependent child" means a child or grandchild of the account holder
29 who is not a dependent if the account holder actually pays the eligible
30 medical expenses of the child or grandchild and the child or grandchild is
31 any of the following:
32 (i) Under nineteen (19) years of age, or enrolled as a full-time
33 student at an accredited college or university.
34 (ii) Legally entitled to the provision of proper or necessary sub-
35 sistence, education, medical care or other care necessary for his or
36 her health, guidance or well-being and not otherwise emancipated,
37 self-supporting, married or a member of the armed forces of the
38 United States.
39 (iii) Mentally or physically incapacitated to the extent that he or
40 she is not self-sufficient.
41 (d) "Depository" means a state or national bank, savings and loan associ-
42 ation, credit union or trust company authorized to act as a fiduciary or
43 an insurance administrator or insurance company authorized to do business
2
1 in this state, a broker or investment advisor regulated by the department
2 of finance, a broker or insurance agent regulated by the department of
3 insurance or a health maintenance organization, fraternal benefit society,
4 hospital and professional service corporation as defined in section
5 41-3403, Idaho Code, or nonprofit mutual insurer regulated under title 41,
6 Idaho Code.
7 (e) "Eligible medical expense" means an expense paid by the taxpayer for
8 medical care described in section 213(d) of the Internal Revenue Code, and
9 long-term care expenses of the account holder and the spouse, dependents
10 and dependent children of the account holder.
11 (f) "Long-term care expenses" means expenses incurred in providing custo-
12 dial care in a nursing facility as defined in section 39-1301, Idaho Code,
13 and for insurance premiums relating to long-term care insurance under
14 chapter 46, title 41, 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 the depository shall be
20 designated by the depository as a "medical savings account." not be
21 required to specifically identify the account in any way.
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 sav-
5 ings 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 the
15 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 account holders of medical care sav-
27 ings accounts and the beneficiaries of those accounts shall apply to account
28 holders of medical care savings accounts and their beneficiaries established
29 pursuant to chapter 53, title 41, Idaho Code, as enacted by chapter 186, laws
30 of 1994, as if the medical care savings account were a medical savings account
31 established pursuant to this section.
32 (76) (a) If the account holder's surviving spouse acquires the account
33 holder's interest in a medical savings account by reason of being the des-
34 ignated beneficiary of such account at the death of the account holder,
35 the medical savings account shall be treated as if the spouse were the
36 account holder.
37 (b) If, by reason of the death of the account holder, any person acquires
38 the account holder's interest in a medical savings account in a case to
39 which subparagraph (76)(a) of this section does not apply:
40 (i) Such account shall cease to be a medical savings account as of
41 the date of death; and
42 (ii) An amount equal to the fair market value of the assets in such
43 account on such date shall be includable, if such person is not the
44 estate of such holder, in such person's Idaho taxable income for the
45 taxable year which includes such date, or if such person is the
46 estate of such holder, in such holder's Idaho taxable income for the
47 last taxable year of such holder.
48 (c) The amount includable in Idaho taxable income under subparagraph (b)
49 of this subsection (76) by any person, other than the estate, shall be
50 reduced by the amount of qualified medical expenses which were incurred by
51 the decedent before the date of the decedent's death and paid by such per-
52 son within one (1) year after such date.
53 SECTION 2. An emergency existing therefor, which emergency is hereby
54 declared to exist, this act shall be in full force and effect on and after its
4
1 passage and approval, and retroactively to January 1, 2002.
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
Moved by Schroeder
Seconded by Andreason
IN THE SENATE
SENATE AMENDMENT TO S.B. NO. 1302
1 AMENDMENTS TO SECTION 1
2 On page 2 of the printed bill, delete lines 19 through 21, and insert:
3 "ciary or beneficiaries of the account holder and shall be designated by the
4 depository as a "medical savings account."".
5 On page 3, in line 21, following "relates." insert: "Reporting. Deposito-
6 ries, in the case of medical savings accounts, shall provide to the state tax
7 commission, in the routine fashion used for all interest-bearing accounts, the
8 same information that is provided for any interest-bearing bank account. So as
9 to minimize the burden of reporting, the information shall be provided in the
10 format in which information is provided for any interest-bearing bank account
11 to the state tax commission. There shall be no other reporting requirements.
12 Account holders shall provide on any state income tax form in which they take
13 a deduction for a medical savings account the account number of their medical
14 savings account and the depository at which the account is held."; in line 22,
15 delete "6" and insert: "6"; in line 31, delete "76" and insert: "7"; in line
16 38, delete "76" and insert: "7"; and in line 48, delete "76" and insert: "7".
17 CORRECTION TO TITLE
18 On page 1, delete lines 3 through 7, and insert: "TO REVISE REPORTING
19 REQUIREMENTS FOR MEDICAL SAVINGS ACCOUNTS AND TO PROVIDE APPLICATION TO
20 ACCOUNT HOLDERS OF CERTAIN MEDICAL SAVINGS ACCOUNTS; DECLARING AN EMERGENCY
21 AND PROVIDING RETROACTIVE APPLICATION.".
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE SENATE
SENATE BILL NO. 1302, As Amended
BY SCHROEDER
1 AN ACT
2 RELATING TO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO CODE,
3 TO REVISE REPORTING REQUIREMENTS FOR MEDICAL SAVINGS ACCOUNTS AND TO PRO-
4 VIDE APPLICATION TO ACCOUNT HOLDERS OF CERTAIN MEDICAL SAVINGS ACCOUNTS;
5 DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.
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, and
7 long-term care expenses of the account holder and the spouse, dependents
8 and dependent children of the account holder.
9 (f) "Long-term care expenses" means expenses incurred in providing custo-
10 dial care in a nursing facility as defined in section 39-1301, Idaho Code,
11 and for insurance premiums relating to long-term care insurance under
12 chapter 46, title 41, Idaho Code.
13 (g) "Medical savings account" means an account established with a deposi-
14 tory to pay the eligible medical expenses of the account holder and the
15 dependents and dependent children of the account holder. Medical savings
16 accounts shall carry the name of the account holder, a designated benefi-
17 ciary or beneficiaries of the account holder and shall be designated by
18 the depository as a "medical savings account."
19 (3) Upon agreement between an employer and employee, an employer may
20 establish and contribute to the employee's medical savings account or contrib-
21 ute to an employee's existing medical savings account. The total combined
22 annual contributions by an employer and the account holder shall not exceed
23 two thousand dollars ($2,000) for the account holder. Employer contributions
24 to an employee's medical savings account shall be owned by the employee.
25 (4) Funds held in a medical savings account may be withdrawn by the
26 account holder at any time. Withdrawals for the purpose of paying eligible
27 medical expenses shall not be subject to the tax imposed in this chapter. The
28 burden of proving that a withdrawal from a medical savings account was made
29 for an eligible medical expense is upon the account holder and not upon the
30 depository or the employer of the account holder. Other withdrawals shall be
31 subject to the following restrictions and penalties:
32 (a) There shall be a distribution penalty for withdrawal of funds by the
33 account holder for purposes other than the payment of eligible medical
34 expenses. The penalty shall be ten percent (10%) of the amount of with-
35 drawal from the account and, in addition, the amount withdrawn shall be
36 subject to the tax imposed in this chapter. The direct transfer of funds
37 from a medical savings account to a medical savings account at a different
38 depository shall not be considered a withdrawal for purposes of this sec-
39 tion. Charges relating to the administration and maintenance of the
40 account by the depository are not withdrawals for purposes of this sec-
41 tion.
42 (b) After an account holder reaches fifty-nine and one-half (59 1/2)
43 years of age, withdrawals may be made for eligible medical expenses or for
44 any other reason without penalty, but subject to the tax imposed by this
45 section.
46 (c) Upon the death of an account holder, the account principal, as well
47 as any interest accumulated thereon, shall be distributed without penalty
48 to the designated beneficiary or beneficiaries.
49 (d) Funds withdrawn which are later reimbursed shall be taxable unless
50 redeposited into the account within sixty (60) days of the reimbursement.
51 Deposits of reimbursed eligible medical expenses shall not be included in
52 calculating the amount deductible.
53 (e) Funds deposited in a medical savings account which are deposited in
54 error or unintentionally and which are withdrawn within thirty (30) days
55 of being deposited shall be treated as if the amounts had not been depos-
3
1 ited in the medical savings account. Funds withdrawn from a medical sav-
2 ings account which are withdrawn in error or unintentionally and which
3 are redeposited within thirty (30) days of being withdrawn shall be
4 treated as if the amounts had not been withdrawn from the medical savings
5 account.
6 (f) Funds withdrawn which are, not later than the sixtieth day after the
7 day of the withdrawal, deposited into another medical savings account for
8 the benefit of the same account holder are not a withdrawal for purposes
9 of this section and shall not be included in calculating the amount
10 deductible.
11 (5) Reporting. Depositories shall provide to the state tax commission the
12 following information regarding medical savings accounts: the name of the
13 account holder, the address of the account holder, the taxpayer identification
14 number of the account holder, deposits made during the tax year by the account
15 holder, withdrawals made during the tax year by the account holder, interest
16 earned on the proceeds of a medical savings account or other information
17 deemed necessary by the commission. Reports shall be filed annually on or
18 before the last day of February following the year to which the information in
19 the report relates. Reporting. Depositories, in the case of medical savings
20 accounts, shall provide to the state tax commission, in the routine fashion
21 used for all interest-bearing accounts, the same information that is provided
22 for any interest-bearing bank account. So as to minimize the burden of report-
23 ing, the information shall be provided in the format in which information is
24 provided for any interest-bearing bank account to the state tax commission.
25 There shall be no other reporting requirements. Account holders shall provide
26 on any state income tax form in which they take a deduction for a medical sav-
27 ings account the account number of their medical savings account and the
28 depository at which the account is held.
29 (6) Any medical care savings account established pursuant to chapter 53,
30 title 41, Idaho Code, as enacted by chapter 186, laws of 1994, may be contin-
31 ued pursuant to the provisions of this section and all duties, privileges and
32 liabilities imposed in this section upon account holders of medical care sav-
33 ings accounts and the beneficiaries of those accounts shall apply to account
34 holders of medical care savings accounts and their beneficiaries established
35 pursuant to chapter 53, title 41, Idaho Code, as enacted by chapter 186, laws
36 of 1994, as if the medical care savings account were a medical savings account
37 established pursuant to this section.
38 (7) (a) If the account holder's surviving spouse acquires the account
39 holder's interest in a medical savings account by reason of being the des-
40 ignated beneficiary of such account at the death of the account holder,
41 the medical savings account shall be treated as if the spouse were the
42 account holder.
43 (b) If, by reason of the death of the account holder, any person acquires
44 the account holder's interest in a medical savings account in a case to
45 which subparagraph (7)(a) of this section does not apply:
46 (i) Such account shall cease to be a medical savings account as of
47 the date of death; and
48 (ii) An amount equal to the fair market value of the assets in such
49 account on such date shall be includable, if such person is not the
50 estate of such holder, in such person's Idaho taxable income for the
51 taxable year which includes such date, or if such person is the
52 estate of such holder, in such holder's Idaho taxable income for the
53 last taxable year of such holder.
54 (c) The amount includable in Idaho taxable income under subparagraph (b)
55 of this subsection (7) by any person, other than the estate, shall be
4
1 reduced by the amount of qualified medical expenses which were incurred by
2 the decedent before the date of the decedent's death and paid by such per-
3 son within one (1) year after such date.
4 SECTION 2. An emergency existing therefor, which emergency is hereby
5 declared to exist, this act shall be in full force and effect on and after its
6 passage and approval, and retroactively to January 1, 2002.
STATEMENT OF PURPOSE
The purpose of this legislation is to provide that with respect to Medical
Savings Accounts, depositories shall not be required to specifically identify
the medical savings account in any way, to delete reporting requirements for
depositories to the State Tax Commission, and to provide application to account
holders of certain medical savings accounts.
FISCAL NOTE
There is no fiscal impact to the General Fund or any level of local government.
Contact:
Marilyn Schwam
514 South Polk
Moscow, Idaho 83843
208-882-4190
Senator Gary J. Schroeder
332-1321
S 1302