Page:United States Statutes at Large Volume 110 Part 3.djvu/321

 PUBLIC LAW 104-191—AUG. 21, 1996 110 STAT. 2051 (d) MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS NOT AVAILABLE UNDER CAFETERIA PLANS,—Subsection (f) of section 125 of such Code is amended by inserting "106(b)," before "117". (e) TAX ON EXCESS CONTRIBUTIONS.— Section 4973 (relating to tax on excess contributions to individual retirement accounts, certain section 403(b) contracts, and certain individual retirement annuities) is amended— (1) by inserting "MEDICAL SAVINGS ACCOUNTS," after "ACCOUNTS," in the heading of such section, (2) by striking "or" at the end of paragraph (1) of subsection (a), (3) by redesignating paragraph (2) of subsection (a) as paragraph (3) and by inserting after paragraph (1) the following: "(2) a medical savings account (within the meaning of section 220(d)), or", and (4) Iby adding at the end the following new subsection: " (d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.— For purposes of this section, in the case of medical savings accounts (within the meaning of section 220(d)), the term 'excess contributions' means the sum of— "(1) the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions described in section 220(f)(5)) which is neither excludable from gross income under section 106(b) nor allowable as a deduction under section 220 for such year, and "(2) the amount determined under this subsection for the preceding taxable year, reduced by the sum of— "(A) the distributions out of the accounts which were included in gross income under section 220(f)(2), and "(B) the excess (if any) of— "(i) the maximum amount allowable as a deduction under section 220(b)(1) (determined without regard to section 106(b)) for the taxable year, over "(ii) the amount contributed to the accounts for the taxable year. For purposes of this subsection, any contribution which is distributed out of the medical savings account in a distribution to which section 220(f)(3) applies shall be treated as an amount not contributed. ". if) TAX ON PROHIBITED TRANSACTIONS.— (1) Section 4975 (relating to tax on prohibited transactions) is amended by adding at the end of subsection (c) the following new paragraph: "(4) SPECIAL RULE FOR MEDICAL SAVINGS ACCOUNTS. — An individual for whose benefit a medical savings account (within the meaning of section 220(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a medical savings account by reason of the application of section 220(e)(2) to such account.". (2) Paragraph (1) of section 4975(e) is amended to read as follows: "(1) PLAN.—For purposes of this section, the term 'plein' means— 29-194O- 96 - 11:QL3Part3

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