26 U.S.C. § 138 — Medicare Advantage MSA

Page 618 TITLE 26—INTERNAL REVENUE CODE § 138 Amendment by section 13305(b)(1) of Pub. L. 115–97 ap- plicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Pub. L. 115–97, set out as a note under section 74 of this title. EFFECTIVE AND TERMINATION DATES OF 2010 AMENDMENT Amendment by Pub. L. 111–148 terminated applicable to taxable years beginning after Dec. 31, 2011, and sec- tion is amended to read as if such amendment had never been enacted, see section 10909(c) of Pub. L. 111–148, set out as a note under section 1 of this title. Amendment by Pub. L. 111–148 applicable to taxable years beginning after Dec. 31, 2009, see section 10909(d) of Pub. L. 111–148, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2004 AMENDMENTS Amendment by Pub. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 102(e) of Pub. L. 108–357, set out as a note under section 56 of this title. Amendment by Pub. L. 108–311 effective as if included in the provisions of the Job Creation and Worker As- sistance Act of 2002, Pub. L. 107–147, to which such amendment relates, see section 403(f) of Pub. L. 108–311, set out as a note under section 56 of this title. EFFECTIVE DATE OF 2002 AMENDMENT Amendment by section 411(c)(2) of Pub. L. 107–147 ap- plicable to taxable years beginning after Dec. 31, 2002, except that amendment by section 411(c)(2)(B) applica- ble to taxable years beginning after Dec. 31, 2001, see section 411(c)(3) of Pub. L. 107–147, set out as a note under section 23 of this title. Amendment by section 418(a)(2) of Pub. L. 107–147 ef- fective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 418(c) of Pub. L. 107–147, set out as a note under section 21 of this title. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by section 202(b)(1)(B), (2)(B), (d)(2), (e)(2) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 202(g)(1) of Pub. L. 107–16, set out as a note under section 23 of this title. Amendment by section 202(a)(2) of Pub. L. 107–16 ap- plicable to taxable years beginning after Dec. 31, 2002, see section 202(g)(2) of Pub. L. 107–16, set out as a note under section 23 of this title. Amendment by section 431(c)(1) of Pub. L. 107–16 ap- plicable to payments made in taxable years beginning after Dec. 31, 2001, see section 431(d) of Pub. L. 107–16, set out as a note under section 62 of this title. EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–277 effective as if included in the provision of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 4003(l) of Pub. L. 105–277, set out as a note under section 86 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 effective as if included in the provisions of the Small Business Job Protection Act of 1996, Pub. L. 104–188, to which it relates, see sec- tion 1601(j) of Pub. L. 105–34, set out as a note under section 23 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1996, see section 1807(e) of Pub. L. 104–188, set out as a note under section 23 of this title. TRANSFER OF FUNCTIONS For transfer of authorities, functions, personnel, and assets of the Coast Guard, including the authorities and functions of the Secretary of Transportation relat- ing thereto, to the Department of Homeland Security, and for treatment of related references, see sections 468(b), 551(d), 552(d), and 557 of Title 6, Domestic Secu- rity, and the Department of Homeland Security Reor- ganization Plan of November 25, 2002, as modified, set out as a note under section 542 of Title 6. § 138. Medicare Advantage MSA (a) Exclusion Gross income shall not include any payment to the Medicare Advantage MSA of an individual by the Secretary of Health and Human Services under part C of title XVIII of the Social Secu- rity Act. (b) Medicare Advantage MSA For purposes of this section, the term ‘‘Medi- care Advantage MSA’’ means an Archer MSA (as defined in section 220(d))— (1) which is designated as a Medicare Advan- tage MSA, (2) with respect to which no contribution may be made other than— (A) a contribution made by the Secretary of Health and Human Services pursuant to part C of title XVIII of the Social Security Act, or (B) a trustee-to-trustee transfer described in subsection (c)(4), (3) the governing instrument of which pro- vides that trustee-to-trustee transfers de- scribed in subsection (c)(4) may be made to and from such account, and (4) which is established in connection with an MSA plan described in section 1859(b)(3) of the Social Security Act. (c) Special rules for distributions (1) Distributions for qualified medical ex- penses In applying section 220 to a Medicare Advan- tage MSA— (A) qualified medical expenses shall not in- clude amounts paid for medical care for any individual other than the account holder, and (B) section 220(d)(2)(C) shall not apply. (2) Penalty for distributions from Medicare Ad- vantage MSA not used for qualified med- ical expenses if minimum balance not maintained (A) In general The tax imposed by this chapter for any taxable year in which there is a payment or distribution from a Medicare Advantage MSA which is not used exclusively to pay the qualified medical expenses of the ac- count holder shall be increased by 50 percent of the excess (if any) of— (i) the amount of such payment or dis- tribution, over (ii) the excess (if any) of— (I) the fair market value of the assets in such MSA as of the close of the cal- endar year preceding the calendar year in which the taxable year begins, over (II) an amount equal to 60 percent of the deductible under the Medicare Ad- vantage MSA plan covering the account Page 619 TITLE 26—INTERNAL REVENUE CODE § 139 holder as of January 1 of the calendar year in which the taxable year begins. Section 220(f)(4) shall not apply to any pay- ment or distribution from a Medicare Ad- vantage MSA. (B) Exceptions Subparagraph (A) shall not apply if the payment or distribution is made on or after the date the account holder— (i) becomes disabled within the meaning of section 72(m)(7), or (ii) dies. (C) Special rules For purposes of subparagraph (A)— (i) all Medicare Advantage MSAs of the account holder shall be treated as 1 ac- count, (ii) all payments and distributions not used exclusively to pay the qualified med- ical expenses of the account holder during any taxable year shall be treated as 1 dis- tribution, and (iii) any distribution of property shall be taken into account at its fair market value on the date of the distribution. (3) Withdrawal of erroneous contributions Section 220(f)(2) and paragraph (2) of this subsection shall not apply to any payment or distribution from a Medicare Advantage MSA to the Secretary of Health and Human Serv- ices of an erroneous contribution to such MSA and of the net income attributable to such contribution. (4) Trustee-to-trustee transfers Section 220(f)(2) and paragraph (2) of this subsection shall not apply to any trustee-to- trustee transfer from a Medicare Advantage MSA of an account holder to another Medicare Advantage MSA of such account holder. (d) Special rules for treatment of account after death of account holder In applying section 220(f)(8)(A) to an account which was a Medicare Advantage MSA of a dece- dent, the rules of section 220(f) shall apply in lieu of the rules of subsection (c) of this section with respect to the spouse as the account holder of such Medicare Advantage MSA. (e) Reports In the case of a Medicare Advantage MSA, the report under section 220(h)— (1) shall include the fair market value of the assets in such Medicare Advantage MSA as of the close of each calendar year, and (2) shall be furnished to the account holder— (A) not later than January 31 of the cal- endar year following the calendar year to which such reports relate, and (B) in such manner as the Secretary pre- scribes in such regulations. (f) Coordination with limitation on number of taxpayers having Archer MSAs Subsection (i) of section 220 shall not apply to an individual with respect to a Medicare Advan- tage MSA, and Medicare Advantage MSAs shall not be taken into account in determining whether the numerical limitations under section 220(j) are exceeded. (Added Pub. L. 105–33, title IV, § 4006(a), Aug. 5, 1997, 111 Stat. 332; amended Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(3), (b)(6), (10)], Dec. 21, 2000, 114 Stat. 2763, 2763A–628, 2763A–629; Pub. L. 108–311, title IV, § 408(a)(5)(A)–(F), Oct. 4, 2004, 118 Stat. 1191.) Editorial Notes REFERENCES IN TEXT The Social Security Act, referred to in subsecs. (a) and (b)(2)(A), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Part C of title XVIII of the Act is classified generally to part C (§ 1395w–21 et seq.) of subchapter XVIII of chapter 7 of Title 42, The Public Health and Welfare. Section 1859 of the Act is classified to section 1395w–28 of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. PRIOR PROVISIONS A prior section 138 was renumbered section 140 of this title. AMENDMENTS 2004—Pub. L. 108–311, § 408(a)(5)(A)–(D), substituted ‘‘Medicare Advantage’’ for ‘‘Medicare+Choice’’ wher- ever appearing in section catchline, headings, and text. Subsec. (c)(2)(C)(i). Pub. L. 108–311, § 408(a)(5)(E), sub- stituted ‘‘Medicare Advantage MSAs’’ for ‘‘Medicare+Choice MSAs’’. Subsec. (f). Pub. L. 108–311, § 408(a)(5)(F), substituted ‘‘Medicare Advantage MSAs’’ for ‘‘Medicare+Choice MSA’s’’. 2000—Subsec. (b). Pub. L. 106–554, § 1(a)(7) [title II, § 202(b)(10)], substituted ‘‘an Archer MSA’’ for ‘‘a Ar- cher MSA’’ in introductory provisions. Pub. L. 106–554, § 1(a)(7) [title II, § 202(a)(3)], sub- stituted ‘‘Archer MSA’’ for ‘‘medical savings account’’ in introductory provisions. Subsec. (f). Pub. L. 106–554, § 1(a)(7) [title II, § 202(b)(6)], substituted ‘‘Archer MSAs’’ for ‘‘medical savings accounts’’ in heading. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 105–33, title IV, § 4006(c), Aug. 5, 1997, 111 Stat. 334, provided that: ‘‘The amendments made by this sec- tion [enacting this section, amending sections 220 and 4973 of this title, and renumbering former section 138 of this title as section 139 of this title] shall apply to tax- able years beginning after December 31, 1998.’’ § 139. Disaster relief payments (a) General rule Gross income shall not include any amount re- ceived by an individual as a qualified disaster relief payment. (b) Qualified disaster relief payment defined For purposes of this section, the term ‘‘quali- fied disaster relief payment’’ means any amount paid to or for the benefit of an individual— (1) to reimburse or pay reasonable and nec- essary personal, family, living, or funeral ex- penses incurred as a result of a qualified dis- aster, (2) to reimburse or pay reasonable and nec- essary expenses incurred for the repair or re- habilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster,