AB 282

Under this bill, a sponsor (the adult child of a parent) may establish an account

for his or her parent (beneficiary) to pay for health care expenses of the parent.

"Health care expenses" is defined to mean medical and dental care expenses,

prescription drugs, and care that is provided to the parent in his or her home or in

institutional or community-based settings and that is convalescent or custodial care

or care for a chronic condition or terminal illness. The account may be established

at a financial institution, such as a bank, savings and loan, or credit union, and

consists of deposits and any interest or other gain on the deposits.

In determining Wisconsin taxable income each year, the bill authorizes a

sponsor to deduct from his or her federal adjusted gross income an amount of up to

$2,000 per beneficiary, and up to a total of $4,000 annually, for deposits to the

account. All gains that accrue to such an account are also tax-exempt if the gains

are redeposited into the account.

If a beneficiary incurs costs for health care expenses, the bill, or the receipt if

the bill has been paid, may be submitted to the financial institution, and the financial

institution must pay the bill or reimburse the payee if sufficient funds are in the

account.

If any amount is withdrawn from the account by, or at the direction of, a sponsor

or beneficiary and is used for any purpose other than the allowed purposes, the

sponsor or beneficiary must pay a penalty equal to 10 percent of any accumulated

interest, dividends, or other gain that has accrued to the account from the time that

the account was opened. In addition, the sponsor or beneficiary must pay taxes on

any interest, dividends, or other gain that accrues to the account in the year in which

an improper withdrawal occurs. Upon the death of all beneficiaries, the account

terminates and any amount left in the account becomes taxable and passes to the

sponsor, if he or she is alive, or to the estate of the beneficiary if the sponsor is not

alive.

The bill also requires that the Department of Health Services request and

implement any waiver of federal Medicaid laws or state plan amendment necessary

to exempt the account from liability as a third party for payments under the Medical

Assistance program.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.