This bill amends the Montana tax code to provide an exclusion from federal taxable income for contributions and income in medical savings accounts. It specifically modifies sections 15-30-2120, 15-61-202, and 15-61-203 of the Montana Code Annotated (MCA) to allow for the exclusion of principal and income contributed to these accounts, provided the funds are used for eligible medical expenses or retained within the account. The bill sets an annual contribution limit of $4,500 for the tax year 2023, with future contributions adjusted for inflation. It also clarifies that withdrawals for non-eligible medical expenses will be taxed as ordinary income and introduces a 10% penalty for such withdrawals.

Additionally, the bill specifies that withdrawals for non-medical expenses can only occur on the last business day of the account administrator's business year. It removes previous provisions that excluded certain withdrawals from taxation and introduces new sections regarding the effective dates and applicability of the act, which will take effect upon passage and approval, with specific provisions becoming effective on January 1, 2024. The act will apply to income tax years beginning after December 31, 2023.

Statutes affected:
HB0345_1.pdf: 15-30-2120, 15-61-202, 15-61-203
HB0345_2.pdf: 15-30-2120, 15-61-202, 15-61-203
Amended: 15-30-2120, 15-61-202, 15-61-203
Introduced: 15-30-2120, 15-61-202, 15-61-203