2017 Arizona Revised Statutes
Title 43 - Taxation of Income
§ 43-1032 Long-term health care savings accounts; report; definitions

43-1032. Long-term health care savings accounts; report; definitions

A. For taxable years beginning from and after December 31, 2012, in computing Arizona adjusted gross income an Arizona resident taxpayer may subtract amounts contributed in cash during the taxable year to a long-term health care savings account as provided by this section to the extent that the contributions are included in the individual's federal adjusted gross income.

B. For the purposes of this section, a taxpayer may establish a long-term health care savings account with an account administrator. To establish an account, the taxpayer shall enter into an agreement with the account administrator. The account administrator shall administer the account and has a fiduciary duty to the taxpayer who makes contributions to the account.

C. The account administrator shall use monies in the account only to pay for the taxpayer's long-term health care expenses. The account administrator shall pay for the taxpayer's long-term health care expenses that are directly based on bills or other evidence of debt. The account administrator shall reimburse the taxpayer from the taxpayer's long-term health care savings account for any long-term health care expenses that the taxpayer directly paid for based on documentation that the taxpayer submits to the account administrator.

D. If the taxpayer makes any other withdrawal from the long-term health care savings account for purposes other than paying long-term health care expenses, the taxpayer shall pay a penalty, equal to ten per cent of the amount of the withdrawal, to the department at the same time as the individual files the income tax return under this title for the taxable year. Money withdrawn pursuant to this subsection is considered income for the purposes of computing Arizona adjusted gross income. The department shall credit penalty monies to the state general fund.

E. The account administrator shall make an annual report to the department and to the taxpayer regarding the long-term health care savings account. The report must be in a form prescribed by the department and be furnished to the department and the taxpayer on or before January 31 of the year following the calendar year to which the report relates. The report must include the following information:

1. The date and amount of every contribution made to the account during the taxable year.

2. The date, description and amount of every distribution made from the account during the taxable year.

3. A statement regarding each distribution indicating whether the distribution was for a long-term health care expense or for a withdrawal that is required to be included in income and is subject to a penalty pursuant to subsection D of this section.

4. The balance remaining in the account at the end of the year.

5. Any other information the department may require.

F. For the purposes of this section:

1. " Account administrator" means a trustee that is a bank, trust company, savings and loan association or credit union and that is authorized to act as a fiduciary in this state.

2. " Long-term health care expense" means any expense paid by the taxpayer for long-term health care costs, including expenses for skilled nursing care, home health care, personal care or supportive services due to the loss of some capacity for self-care based on a chronic illness or condition.

3. " Long-term health care savings account" means a trust established or organized in this state exclusively for the purpose of paying the long-term health care expenses of the taxpayer who established and made contributions to the account.