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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