Amends existing law to include health care sharing ministries as an eligible medical expense.

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 ACT1 RELATING TO MEDICAL SAVINGS ACCOUNTS; AMENDING SECTION 63-3022K, IDAHO2 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 hereby6 amended to read as follows:7 63-3022K. MEDICAL SAVINGS ACCOUNT. (1) For taxable years commencing8 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 and10 interest earned on a medical savings account shall be deducted from taxable11 income by the account holder, if such amount has not been previously deducted12 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 account20 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 behalf26 the medical savings account is established.27 (b) "Dependent" means a person for whom a deduction is permitted under28 section 151(b) or (c) of the Internal Revenue Code if a deduction for the29 person is claimed for that person on the account holder's Idaho income30 tax return.31 (c) "Dependent child" means a child or grandchild of the account holder32 who is not a dependent if the account holder actually pays the eligible33 medical expenses of the child or grandchild and the child or grandchild34 is any of the following:35 (i) Under twenty-one (21) years of age, or enrolled as a full-time36 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 his39 or her health, guidance or well-being and not otherwise emanci-40 pated, self-supporting, married or a member of the armed forces of41 the United States.; or42

2 (iii) Mentally or physically incapacitated to the extent that he1 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 fiduciary4 or an insurance administrator or insurance company authorized to do5 business in this state, a broker or investment advisor regulated by the6 department of finance, a broker or insurance agent regulated by the7 department of insurance or a health maintenance organization, frater-8 nal benefit society, hospital and professional service corporation as9 defined in section 41-3403, Idaho Code, or nonprofit mutual insurer10 regulated under title 41, Idaho Code.11 (e) "Eligible medical expense" means an expense paid by the taxpayer12 for medical care described in section 213(d) of the Internal Revenue13 Code, and long-term care expenses of the account holder, or expenses14 paid by the account holder as a member of a health care sharing ministry15 as defined in section 41-121, Idaho Code, and the spouse, dependents and16 dependent children of the account holder.17 (f) "Long-term care expenses" means expenses incurred in providing18 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 and23 the dependents and dependent children of the account holder. Medical24 savings accounts shall carry the name of the account holder, a desig-25 nated beneficiary or beneficiaries of the account holder and shall be26 designated by the depository as a "medical savings account."27 (4) Upon agreement between an employer and employee, an employer may28 establish and contribute to the employee's medical savings account or con-29 tribute to an employee's existing medical savings account. For taxable30 years beginning on or after January 1, 1995, but before January 1, 2014, the31 total combined annual contributions by an employer and the account holder32 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 owned34 by the employee.35 (5) Funds held in a medical savings account may be withdrawn by the36 account holder at any time. Withdrawals for the purpose of paying eligible37 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 account39 holder, the account holder's dependent or the account holder's dependent40 child receives any state assistance for medical care. The burden of proving41 that a withdrawal from a medical savings account was made for an eligible42 medical expense is upon on the account holder and not upon on the depository43 or the employer of the account holder. Other withdrawals shall be subject to44 the following restrictions and penalties:45 (a) There shall be a distribution penalty for withdrawal of funds by the46 account holder for purposes other than the payment of eligible medical47 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 be49 subject to the tax imposed in this chapter. The direct transfer of funds50

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 this2 section. Charges relating to the administration and maintenance of the3 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 or7 for any other reason without penalty, but subject to the tax imposed by8 this section.9 (c) Upon the death of an account holder, the account principal, as10 well as any interest accumulated thereon, shall be distributed without11 penalty to the designated beneficiary or beneficiaries.12 (d) Funds withdrawn which that are later reimbursed shall be taxable13 unless redeposited into the account within sixty (60) days of the reim-14 bursement. Deposits of reimbursed eligible medical expenses shall not15 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 within18 thirty (30) days of being deposited shall be treated as if the amounts19 had not been deposited in the medical savings account. Funds withdrawn20 from a medical savings account which that are withdrawn in error or un-21 intentionally and which that are redeposited within thirty (30) days22 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 savings26 account for the benefit of the same account holder are not a withdrawal27 for purposes of this section and shall not be included in calculating28 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 for31 all interest-bearing accounts, the same information that is provided for32 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 is34 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 medical37 savings account the account number of their medical savings account and the38 depository at which the account is held.39 (7) Any medical care savings account established pursuant to chapter40 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, privileges42 and liabilities imposed in this section upon account holders of medical care43 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 chapter46 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 account49 holder's interest in a medical savings account by reason of being the50

4 designated beneficiary of such account at the death of the account1 holder, the medical savings account shall be treated as if the spouse2 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 a5 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 of7 the date of death; and8 (ii) An amount equal to the fair market value of the assets in such9 account on such date shall be includable, if such person is not the10 estate of such holder, in such person's Idaho taxable income for11 the taxable year which that includes such date, or if such person12 is the estate of such holder, in such holder's Idaho taxable income13 for the last taxable year of such holder.14 (c) The amount includable in Idaho taxable income under subsection15 (8)(b) of this section by any person, other than the estate, shall be16 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 paid18 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