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LEGISLATURE
OF
THE
STATE
OF
IDAHO
Sixty-eighth
Legislature
Second
Regular
Session
-
2026
IN
THE
HOUSE
OF
REPRESENTATIVES
HOUSE
BILL
NO.
783
BY
REVENUE
AND
TAXATION
COMMITTEE
AN
ACT
1
RELATING
TO
MEDICAL
SAVINGS
ACCOUNTS;
AMENDING
SECTION
63
-
3022K,
IDAHO
2
CODE,
TO
REVISE
A
DEFINITION
AND
TO
MAKE
TECHNICAL
CORRECTIONS;
AND
PRO
-
3
VIDING
AN
EFFECTIVE
DATE.
4
Be
It
Enacted
by
the
Legislature
of
the
State
of
Idaho:
5
SECTION
1.
That
Section
63
-
3022K,
Idaho
Code,
be,
and
the
same
is
hereby
6
amended
to
read
as
follows:
7
63
-
3022K.
MEDICAL
SAVINGS
ACCOUNT.
(1)
For
taxable
years
commencing
8
on
and
after
January
1,
1995,
annual
contributions
to
a
medical
savings
ac
-
9
count
not
exceeding
two
thousand
dollars
($2,000)
for
the
account
holder
and
10
interest
earned
on
a
medical
savings
account
shall
be
deducted
from
taxable
1
1
income
by
the
account
holder,
if
such
amount
has
not
been
previously
deducted
12
or
excluded
in
arriving
at
taxable
income.
For
married
individuals
,
the
max
-
13
imum
deduction
shall
be
computed
separately
for
each
individual.
Contribu
-
14
tions
to
the
account
shall
not
exceed
the
amount
deductible
under
this
sec
-
15
tion.
16
(2)
For
taxable
years
beginning
on
or
after
January
1,
2014,
the
an
-
17
nual
contributions
to
a
medical
savings
account
shall
be
limited
to
ten
thou
-
18
sand
dollars
($10,000).
Both
interest
earned
and
all
contributions
to
med
-
19
ical
savings
accounts
shall
be
deducted
from
taxable
income
by
the
account
20
holder,
if
such
amount
has
not
been
previously
deducted
or
excluded
in
arriv
-
21
ing
at
taxable
income.
22
(3)
For
the
purpose
of
this
section,
the
following
terms
have
the
fol
-
23
lowing
meanings
unless
the
context
clearly
denotes
otherwise:
24
(a)
"Account
holder"
means
an
individual,
in
the
case
of
married
indi
-
25
viduals
each
spouse,
including
a
self
-
employed
person,
on
whose
behalf
26
the
medical
savings
account
is
established.
27
(b)
"Dependent"
means
a
person
for
whom
a
deduction
is
permitted
under
28
section
151(b)
or
(c)
of
the
Internal
Revenue
Code
if
a
deduction
for
the
29
person
is
claimed
for
that
person
on
the
account
holder's
Idaho
income
30
tax
return.
31
(c)
"Dependent
child"
means
a
child
or
grandchild
of
the
account
holder
32
who
is
not
a
dependent
if
the
account
holder
actually
pays
the
eligible
33
medical
expenses
of
the
child
or
grandchild
and
the
child
or
grandchild
34
is
any
of
the
following:
35
(i)
Under
twenty
-
one
(21)
years
of
age
,
or
enrolled
as
a
full
-
time
36
student
at
an
accredited
college
or
university
.
;
37
(ii)
Legally
entitled
to
the
provision
of
proper
or
necessary
sub
-
38
sistence,
education,
medical
care
or
other
care
necessary
for
his
39
or
her
health,
guidance
or
well
-
being
and
not
otherwise
emanci
-
40
pated,
self
-
supporting,
married
or
a
member
of
the
armed
forces
of
41
the
United
States
.
;
or
42
2
(iii)
Mentally
or
physically
incapacitated
to
the
extent
that
he
1
or
she
is
not
self
-
sufficient.
2
(d)
"Depository"
means
a
state
or
national
bank,
savings
and
loan
asso
-
3
ciation,
credit
union
or
trust
company
authorized
to
act
as
a
fiduciary
4
or
an
insurance
administrator
or
insurance
company
authorized
to
do
5
business
in
this
state,
a
broker
or
investment
advisor
regulated
by
the
6
department
of
finance,
a
broker
or
insurance
agent
regulated
by
the
7
department
of
insurance
or
a
health
maintenance
organization,
frater
-
8
nal
benefit
society,
hospital
and
professional
service
corporation
as
9
defined
in
section
41
-
3403,
Idaho
Code,
or
nonprofit
mutual
insurer
10
regulated
under
title
41,
Idaho
Code.
1
1
(e)
"Eligible
medical
expense"
means
an
expense
paid
by
the
taxpayer
12
for
medical
care
described
in
section
213(d)
of
the
Internal
Revenue
13
Code,
and
long
-
term
care
expenses
of
the
account
holder
,
or
expenses
14
paid
by
the
account
holder
as
a
member
of
a
health
care
sharing
ministry
15
as
defined
in
section
41
-
121,
Idaho
Code,
and
the
spouse,
dependents
and
16
dependent
children
of
the
account
holder.
17
(f)
"Long
-
term
care
expenses"
means
expenses
incurred
in
providing
18
custodial
care
in
a
nursing
facility
as
defined
in
section
39
-
1301,
19
Idaho
Code,
and
for
insurance
premiums
relating
to
long
-
term
care
in
-
20
surance
under
chapter
46,
title
41,
Idaho
Code.
21
(g)
"Medical
savings
account"
means
an
account
established
with
a
de
-
22
pository
to
pay
the
eligible
medical
expenses
of
the
account
holder
and
23
the
dependents
and
dependent
children
of
the
account
holder.
Medical
24
savings
accounts
shall
carry
the
name
of
the
account
holder,
a
desig
-
25
nated
beneficiary
or
beneficiaries
of
the
account
holder
and
shall
be
26
designated
by
the
depository
as
a
"medical
savings
account."
27
(4)
Upon
agreement
between
an
employer
and
employee,
an
employer
may
28
establish
and
contribute
to
the
employee's
medical
savings
account
or
con
-
29
tribute
to
an
employee's
existing
medical
savings
account.
For
taxable
30
years
beginning
on
or
after
January
1,
1995,
but
before
January
1,
2014,
the
31
total
combined
annual
contributions
by
an
employer
and
the
account
holder
32
shall
not
exceed
two
thousand
dollars
($2,000)
for
the
account
holder.
Em
-
33
ployer
contributions
to
an
employee's
medical
savings
account
shall
be
owned
34
by
the
employee.
35
(5)
Funds
held
in
a
medical
savings
account
may
be
withdrawn
by
the
36
account
holder
at
any
time.
Withdrawals
for
the
purpose
of
paying
eligible
37
medical
expenses
shall
not
be
subject
to
the
tax
imposed
in
this
chapter.
38
Funds
held
in
a
medical
savings
account
must
be
exhausted
before
the
account
39
holder,
the
account
holder's
dependent
or
the
account
holder's
dependent
40
child
receives
any
state
assistance
for
medical
care.
The
burden
of
proving
41
that
a
withdrawal
from
a
medical
savings
account
was
made
for
an
eligible
42
medical
expense
is
upon
on
the
account
holder
and
not
upon
on
the
depository
43
or
the
employer
of
the
account
holder.
Other
withdrawals
shall
be
subject
to
44
the
following
restrictions
and
penalties:
45
(a)
There
shall
be
a
distribution
penalty
for
withdrawal
of
funds
by
the
46
account
holder
for
purposes
other
than
the
payment
of
eligible
medical
47
expenses.
The
penalty
shall
be
ten
percent
(10%)
of
the
amount
of
with
-
48
drawal
from
the
account
and,
in
addition,
the
amount
withdrawn
shall
be
49
subject
to
the
tax
imposed
in
this
chapter.
The
direct
transfer
of
funds
50
3
from
a
medical
savings
account
to
a
medical
savings
account
at
a
differ
-
1
ent
depository
shall
not
be
considered
a
withdrawal
for
purposes
of
this
2
section.
Charges
relating
to
the
administration
and
maintenance
of
the
3
account
by
the
depository
are
not
withdrawals
for
purposes
of
this
sec
-
4
tion.
5
(b)
After
an
account
holder
reaches
fifty
-
nine
and
one
-
half
(59
1/2)
6
years
of
age,
withdrawals
may
be
made
for
eligible
medical
expenses
or
7
for
any
other
reason
without
penalty,
but
subject
to
the
tax
imposed
by
8
this
section.
9
(c)
Upon
the
death
of
an
account
holder,
the
account
principal,
as
10
well
as
any
interest
accumulated
thereon,
shall
be
distributed
without
1
1
penalty
to
the
designated
beneficiary
or
beneficiaries.
12
(d)
Funds
withdrawn
which
that
are
later
reimbursed
shall
be
taxable
13
unless
redeposited
into
the
account
within
sixty
(60)
days
of
the
reim
-
14
bursement.
Deposits
of
reimbursed
eligible
medical
expenses
shall
not
15
be
included
in
calculating
the
amount
deductible.
16
(e)
Funds
deposited
in
a
medical
savings
account
which
that
are
de
-
17
posited
in
error
or
unintentionally
and
which
that
are
withdrawn
within
18
thirty
(30)
days
of
being
deposited
shall
be
treated
as
if
the
amounts
19
had
not
been
deposited
in
the
medical
savings
account.
Funds
withdrawn
20
from
a
medical
savings
account
which
that
are
withdrawn
in
error
or
un
-
21
intentionally
and
which
that
are
redeposited
within
thirty
(30)
days
22
of
being
withdrawn
shall
be
treated
as
if
the
amounts
had
not
been
with
-
23
drawn
from
the
medical
savings
account.
24
(f)
Funds
withdrawn
which
that
are,
not
later
than
the
sixtieth
day
af
-
25
ter
the
day
of
the
withdrawal,
deposited
into
another
medical
savings
26
account
for
the
benefit
of
the
same
account
holder
are
not
a
withdrawal
27
for
purposes
of
this
section
and
shall
not
be
included
in
calculating
28
the
amount
deductible.
29
(6)
Reporting.
Depositories,
in
the
case
of
medical
savings
accounts,
30
shall
provide
to
the
state
tax
commission,
in
the
routine
fashion
used
for
31
all
interest
-
bearing
accounts,
the
same
information
that
is
provided
for
32
any
interest
-
bearing
bank
account.
So
as
to
minimize
the
burden
of
report
-
33
ing,
the
information
shall
be
provided
in
the
format
in
which
information
is
34
provided
for
any
interest
-
bearing
bank
account
to
the
state
tax
commission.
35
There
shall
be
no
other
reporting
requirements.
Account
holders
shall
pro
-
36
vide
on
any
state
income
tax
form
in
which
they
take
a
deduction
for
a
medical
37
savings
account
the
account
number
of
their
medical
savings
account
and
the
38
depository
at
which
the
account
is
held.
39
(7)
Any
medical
care
savings
account
established
pursuant
to
chapter
40
53,
title
41,
Idaho
Code,
as
enacted
by
chapter
186,
laws
of
1994,
may
be
con
-
41
tinued
pursuant
to
the
provisions
of
this
section
and
all
duties,
privileges
42
and
liabilities
imposed
in
this
section
upon
account
holders
of
medical
care
43
savings
accounts
and
the
beneficiaries
of
those
accounts
shall
apply
to
ac
-
44
count
holders
of
medical
care
savings
accounts
and
their
beneficiaries
es
-
45
tablished
pursuant
to
chapter
53,
title
41,
Idaho
Code,
as
enacted
by
chapter
46
186,
laws
of
1994,
as
if
the
medical
care
savings
account
were
a
medical
sav
-
47
ings
account
established
pursuant
to
this
section.
48
(8)(a)
If
the
account
holder's
surviving
spouse
acquires
the
account
49
holder's
interest
in
a
medical
savings
account
by
reason
of
being
the
50
4
designated
beneficiary
of
such
account
at
the
death
of
the
account
1
holder,
the
medical
savings
account
shall
be
treated
as
if
the
spouse
2
were
the
account
holder.
3
(b)
If,
by
reason
of
the
death
of
the
account
holder,
any
person
ac
-
4
quires
the
account
holder's
interest
in
a
medical
savings
account
in
a
5
case
to
which
subsection
(8)(a)
of
this
section
does
not
apply:
6
(i)
Such
account
shall
cease
to
be
a
medical
savings
account
as
of
7
the
date
of
death;
and
8
(ii)
An
amount
equal
to
the
fair
market
value
of
the
assets
in
such
9
account
on
such
date
shall
be
includable,
if
such
person
is
not
the
10
estate
of
such
holder,
in
such
person's
Idaho
taxable
income
for
1
1
the
taxable
year
which
that
includes
such
date,
or
if
such
person
12
is
the
estate
of
such
holder,
in
such
holder's
Idaho
taxable
income
13
for
the
last
taxable
year
of
such
holder.
14
(c)
The
amount
includable
in
Idaho
taxable
income
under
subsection
15
(8)(b)
of
this
section
by
any
person,
other
than
the
estate,
shall
be
16
reduced
by
the
amount
of
qualified
medical
expenses
which
that
were
in
-
17
curred
by
the
decedent
before
the
date
of
the
decedent's
death
and
paid
18
by
such
person
within
one
(1)
year
after
such
date.
19
SECTION
2.
This
act
shall
be
in
full
force
and
effect
on
and
after
Jan
-
20
uary
1,
2027.
21