Current through Register Vol. 18, September 20, 2024
(1) The funds held
in a Montana medical care savings account (MSA) may be withdrawn by the account
holder free of tax at any time during the year if they are qualified
withdrawals.
(2) Except as provided
in (7), qualified withdrawals include:
(a)
eligible medical expenses, as defined in
15-61-102,
MCA, paid during that year; or
(b)
expenses incurred for administering the account.
(3) An unqualified withdrawal must be:
(a) included in the taxpayer's income tax
return as ordinary income; and
(b)
is subject to a penalty equal to 10 percent of the amount of the withdrawal
from the account. An unqualified withdrawal made on the last business day of
the business year, as set forth in
15-61-203,
MCA, is not subject to this penalty but shall be taxed as ordinary income as
provided in (a).
(4)
Withdrawals that do not meet the following requirements and exceptions are
deemed unqualified:
(a) Withdrawals must be
made by the account holder of a self-administered account, or on behalf of an
account holder, by January 15 for the purpose of reimbursing eligible medical
expenses paid during the previous year.
(b) Each account holder must maintain
documentation of eligible expenses for a minimum of three years from the date
the account holder filed a Montana income tax return for the year the expenses
were incurred.
(c) In the case of
requests made by account holders from account administrators for withdrawals to
pay for eligible medical expenses, the expenses must be supported by an
itemized statement of expenses that were either paid or charged by the account
holder and the signature of the account holder attesting that these expenses
are "eligible medical expenses."
The burden of proving that a withdrawal from an MSA was made
for an eligible expense is upon the account holder and not upon the account
administrator.
(d) All
payments made from an MSA must be made payable to the account holder, the
eligible medical provider, the estate, or the legal guardian of the account
holder, unless an agreement exists between the account holder and/or the
account administrator and the payee to pay eligible medical expenses
electronically.
(5) An
account holder who becomes a resident of another state is deemed to have made
an unqualified withdrawal for the entire value of the balance contained in the
account on the date the individual changed residency. The withdrawal is deemed
to have been made on the last business day of the taxpayer's Montana residency,
and is not subject to the 10 percent penalty provided in 15-61-206,
MCA.
(6) The direct transfer of
funds from a Montana MSA of an account holder to another Montana MSA is deemed
an unqualified withdrawal to the transferor and ordinary income to the
transferee, to the extent it is includable in the transferee's federal gross
income, except when the funds are directly transferred to:
(a) another Montana MSA of the same account
holder established to replace the initial one or with a different account
administrator; or
(b) a Montana MSA
held by an immediate family member of the account holder, to the extent it is
not includable in the transferee's federal gross income.
(7) After the death of the account holder:
(a) any distribution or withdrawal of funds
from the Montana MSA is deemed an unqualified withdrawal unless:
(i) the funds are distributed as an inherited
account; or
(ii) the withdrawals
are made during the 365 days following the death of the account owner, either
by the estate of the deceased on an existing account, or by any account holder
of an inherited account to pay for eligible expenses incurred by the
deceased;
(b) inherited
accounts are deductible from Montana adjusted gross income to the extent they
are included in the federal adjusted gross income; and
(c) the 10 percent penalty for unqualified
withdrawals does not apply to any distribution of funds to the heirs of the
deceased whether or not the funds received qualify as an inherited
account.
(8) Qualified
withdrawals made with respect to a family leave expense, as defined in
15-61-102,
MCA, are deemed to be in exchange of adequate consideration for loss of income
and must be treated as ordinary income to the recipient, except when received
by the account holder or the spouse of the account holder.
(9) All medical records and expenses provided
by an account holder to an account administrator are to be kept confidential by
the account administrator unless the account holder gives authorization to
disclose them to a third party.
AUTH:
15-1-201,
15-30-2620,
MCA; IMP:
15-61-102,
15-61-202,
15-61-203,
MCA
