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(1) A Montana medical care savings account (MSA) is subject to the following requirements:

(a) The MSA must have a unique account holder who is an individual and a resident of Montana. A jointly held account does not qualify. Regardless of income tax filing status, married taxpayers must each open an account to register as an account holder to be eligible to reduce their federal adjusted gross income by the amount of their allowable contributions.

(b) Annual interest or income earned in a Montana MSA is excluded from Montana adjusted gross income as long as it remains as a deposit in the account, is withdrawn from the account to pay for eligible medical expenses, is distributed to an immediate family member as provided in 15-61-202, MCA, or is used for paying the expenses of administering the account. Year-end interest or other income reports provided to the taxing authorities and the account holder must be provided in such a manner that the interest or other income earned on the Montana MSA can be separately identified in order to remain exempt.

(c) A taxpayer who used a loss in the value of the investment contained in the MSA as a reduction of their federal adjusted gross income, must add this loss back to the federal adjusted gross income for the determination of the Montana taxable income.

(d) Beginning January 1, 2018, an account holder cannot contribute in excess of the contribution limit stated in 15-61-202, MCA. During the 2018 calendar year only, any contribution made before January 1, 2018, in excess of the principal, which is the sum of contributions deducted from adjusted gross income in all preceding tax years, can be used as deductible contribution, as eligible expenses, or withdrawn free of tax and penalties. After December 31, 2018, an account holder cannot exclude from adjusted gross income any contribution in excess of the principal remaining in the MSA, and all unqualified withdrawals must be taxed as ordinary income and subject to the penalty as provided in 15-61-203, MCA.

(e) Before receiving any exempted transfer of funds from a Montana MSA of an immediate family member, a transferee must establish his or her own account, provided he or she is eligible to be an account holder of a Montana MSA.

(2) Every account holder of a self-administered account, or account administrator, is required to annually submit the following information regarding each MSA:

(a) name of the account holder;

(b) address of the account holder;

(c) taxpayer identification number of the account holder;

(d) starting and ending balances of the account;

(e) contributions made during the tax year by the account holder;

(f) amount of withdrawals made during the tax year by the account holder;

(g) dates of any withdrawals;

(h) interest or other income earned on the principal of the MSA; and

(i) amount of penalties withheld and remitted.

(3) Each individual account holder of a self-administered account must file the information required in (2) on forms provided by or authorized by the department and be remitted with the individual income tax form for the corresponding tax year. The account holder must report the name and address where the account is established, and the account number, annually.

(4) On or before January 31, an account administrator, other than an account holder, must file the information required under (2) on forms provided by or authorized by the department.

(5) Account holders or account administrators who withhold penalties on unqualified withdrawals must submit the penalties to the department as follows:

(a) Account administrators must remit the penalties on or before January 31 of the following year to the department.

(b) Self-administered individual account holders must report and remit penalties with the individual income tax form for the corresponding tax year.

(6) Failure to remit any withheld penalties within the time provided is considered to be an unlawful conversion of trust money. Penalties provided in 15-1-216 and 15-30-2641, MCA, apply to any violation of the requirement to collect, truthfully account for, and pay amounts required to be withheld from ineligible withdrawals of the account holder.


History: 15-1-201, 15-30-2620, MCA; IMP, 15-61-202, 15-61-203, 15-61-204, MCA; NEW, 1996 MAR p. 1162, Eff. 4/26/96; AMD, 1998 MAR p. 1015, Eff. 4/17/98; AMD, 2004 MAR p. 1974, Eff. 8/20/04; AMD, 2010 MAR p. 1088, Eff. 4/30/10; AMD, 2018 MAR p. 851, Eff. 4/28/18.

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