Text: SF02311 Text: SF02313 Text: SF02300 - SF02399 Text: SF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN
1 1 Section 1. Section 422.7, Code Supplement 2001, is amended
1 2 by adding the following new subsection:
1 3 NEW SUBSECTION. 38. If the taxpayer is an account holder
1 4 of a medical savings account pursuant to chapter 541B at any
1 5 time during the tax year, the following adjustments shall be
1 6 made:
1 7 a. Subtract, to the extent included, the following:
1 8 (1) Contributions made in cash equal to the aggregate
1 9 amount of the eligible monthly contribution amounts as
1 10 computed pursuant to section 541B.3, subsection 2.
1 11 (2) Interest and earnings on moneys in the medical savings
1 12 account.
1 13 b. Add, to the extent not included, the amount of
1 14 distributions which are not used to pay qualified medical
1 15 expenses, as defined in section 541B.1, but only if the amount
1 16 was previously excluded in determining net income under rules
1 17 adopted by the department.
1 18 c. The adjustment required to reflect the tax treatment of
1 19 transfers of an account holder's interest in a medical savings
1 20 account as a result of dissolution of marriage, separation, or
1 21 death, as provided in section 541B.4, subsections 3 and 4.
1 22 A taxpayer who is allowed a deduction under section 220 of
1 23 the Internal Revenue Code for any month of the tax year is not
1 24 allowed any adjustments under this subsection.
1 25 Sec. 2. NEW SECTION. 541B.1 DEFINITIONS.
1 26 For purposes of this chapter, unless the context otherwise
1 27 requires:
1 28 1. "Account holder" means the individual in whose name the
1 29 medical savings account is established.
1 30 2. "Medical savings account" means a financial instrument
1 31 established as provided in and meeting the requirements of
1 32 section 541B.2.
1 33 3. "Net income" means the net income as computed for state
1 34 income purposes pursuant to section 422.7.
1 35 4. "Qualified medical expenses" means amounts paid by the
2 1 account holder for medical care, as defined in section 213(d)
2 2 of the Internal Revenue Code for the account holder, account
2 3 holder's spouse and any dependent, as defined in section 152
2 4 of the Internal Revenue Code, of the account holder to the
2 5 extent not otherwise compensated for by insurance or
2 6 otherwise.
2 7 Sec. 3. NEW SECTION. 541B.2 MEDICAL SAVINGS ACCOUNT
2 8 AUTHORIZED – REQUIREMENTS.
2 9 1. A financial instrument known as a medical savings
2 10 account is established. A medical savings account is a trust
2 11 created or organized in the United States exclusively for the
2 12 purpose of paying the qualified medical expenses of the
2 13 account holder, but only if the written governing instrument
2 14 creating the trust meets the following requirements:
2 15 a. A contribution shall be accepted only if it is in cash.
2 16 b. The trustee is a bank, as defined in section 408(n) of
2 17 the Internal Revenue Code, an insurance company, as defined in
2 18 section 816 of the Internal Revenue Code, or other person
2 19 approved by the banking division as an investment mechanism
2 20 for medical savings accounts and licensed to do business in
2 21 this state.
2 22 c. The trust assets or any part of the assets shall not be
2 23 invested in life insurance contracts.
2 24 d. The trust assets shall not be commingled with other
2 25 property except in a common trust fund or common investment
2 26 fund.
2 27 e. The interest of an individual in the balance of the
2 28 individual's account is nonforfeitable.
2 29 2. An individual shall not be an account holder of more
2 30 than one medical savings account. However, the medical
2 31 expenses of an account holder may include the medical expenses
2 32 of the account holder's spouse and dependents as well as the
2 33 medical expenses of the account holder. An individual claimed
2 34 as a dependent on another's income tax return is ineligible to
2 35 be an account holder.
3 1 Sec. 4. NEW SECTION. 541B.3 ELIGIBILITY – TAX
3 2 DEDUCTION.
3 3 1. An individual is eligible to make monthly contributions
3 4 to a medical savings account if the individual is not covered
3 5 by a health plan established and maintained by the employer of
3 6 the individual or the individual's spouse, determined as of
3 7 the first day of each calendar month in which a contribution
3 8 is to be made.
3 9 For purposes of this section, "health plan" does not
3 10 include any of the following:
3 11 a. Coverage, through insurance or otherwise, for
3 12 accidents, disability, dental care, vision care, or long-term
3 13 care.
3 14 b. Insurance for liabilities incurred under workers'
3 15 compensation laws or tort liabilities.
3 16 c. Insurance for specified disease or illness.
3 17 d. Insurance paying a fixed amount per day, or other
3 18 period of time, of hospitalization.
3 19 2. Contributions to a medical savings account are
3 20 deductible in determining the account holder's net income,
3 21 subject to the following limitations:
3 22 a. For the tax year, the aggregate amount paid in cash of
3 23 the eligible monthly contribution amounts.
3 24 b. The eligible monthly contribution amount equals the
3 25 following applicable amount:
3 26 (1) If the account holder is a single person or a married
3 27 person filing a separate return, one hundred fifty dollars.
3 28 (2) If the account holder is a married person who files a
3 29 joint return and the spouse does not have a separate account,
3 30 three hundred dollars.
3 31 (3) If the account holder is a married person who files a
3 32 joint return and the spouse has a separate account, one
3 33 hundred fifty dollars.
3 34 Sec. 5. NEW SECTION. 541B.4 TAX TREATMENT OF
3 35 DISTRIBUTIONS AND TRANSFERS.
4 1 1. Any amount paid or distributed out of a medical savings
4 2 account which is used exclusively to pay qualified medical
4 3 expenses of any account holder shall not be included in the
4 4 net income of the account holder.
4 5 2. Any amount paid or distributed out of a medical savings
4 6 account which is not used exclusively to pay the qualified
4 7 medical expenses of the account holder shall be included in
4 8 net income of the account holder to the extent such amount
4 9 represents contributions that were previously excluded from
4 10 net income in any year under rules adopted by the department
4 11 of revenue and finance.
4 12 3. The transfer of an individual's interest in a medical
4 13 savings account to an individual's spouse or former spouse
4 14 under a dissolution of marriage or separation decree or
4 15 written instrument incident to such decree shall not be
4 16 considered a taxable transfer for state income tax purposes
4 17 and the spouse or former spouse shall be the account holder.
4 18 4. Upon the death of the account holder, the following
4 19 apply:
4 20 a. If the surviving spouse acquires the account holder's
4 21 interest in the medical savings account by reason of becoming
4 22 the beneficiary of such account, the account shall be treated
4 23 as if the spouse were the account holder and shall not be
4 24 included in the net income of the surviving spouse.
4 25 b. If a person other than the surviving spouse acquires
4 26 the account holder's interest in the medical savings account,
4 27 the account shall cease to be a medical savings account and
4 28 shall be included in that person's net income to the extent
4 29 moneys in the account were excluded in net income of the
4 30 account holder in any year.
4 31 Sec. 6. APPLICABILITY DATE. This Act applies to tax years
4 32 beginning on or after the effective date of this Act.
4 33 EXPLANATION
4 34 This bill creates a financial instrument known as a medical
4 35 savings account (MSA). The MSA is set up as a trust to be
5 1 used to pay the expenses for medical care of the account
5 2 holder, and the spouse and dependents of the account holder.
5 3 Incentives are provided for contributions to the MSA.
5 4 Eligible individuals who make contributions may deduct the
5 5 amount of contributions made in each month they were eligible.
5 6 To be eligible, the individual must not be covered under a
5 7 health care plan maintained by the individual's employer or
5 8 the employer of the individual's spouse. Eligibility is
5 9 determined on the first day of each month for purposes of
5 10 contributions made during that month. The amount of tax-
5 11 deductible contributions per month is $150 if the individual
5 12 is a single person, or a married person filing separately,
5 13 $300 if the individual is a married person filing jointly, or
5 14 $150 if the individual is a married person filing jointly,
5 15 where each spouse has a separate MSA.
5 16 An additional incentive includes the deduction for interest
5 17 and earnings on moneys in the MSA. Distributions from the MSA
5 18 that are not used for medical care expenses are taxable to the
5 19 extent the distribution was from moneys previously deducted.
5 20 If the account holder's interest in the MSA is transferred to
5 21 a spouse under a divorce or separation decree, the transfer is
5 22 not subject to tax. Upon the death of an account holder, the
5 23 interest in the MSA that is transferred to the surviving
5 24 spouse is a nontaxable transfer, and the interest transferred
5 25 shall be considered the spouse's MSA.
5 26 The bill applies to tax years beginning on or after the
5 27 effective date of the bill.
5 28 LSB 5960SS 79
5 29 mg/sh/8
Text: SF02311 Text: SF02313 Text: SF02300 - SF02399 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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