110 STAT. 2042 PUBLIC LAW 104-191—AUG. 21, 1996 " (C) MEDICAL EXPENSES OF INDIVIDUALS WHO ARE NOT ELIGIBLE INDIVIDUALS. — Subparagraph (A) shall apply to an amount paid by an account holder for medical care of an individual who is not an eligible individual for the month in which the expense for such care is incurred only if no amount is contributed (other than a rollover contribution) to any medical savings account of such account holder for the taxable year which includes such month. This subparagraph shall not apply to any expense for coverage described in subclause (I) or (III) of subparagraph (B)(ii). "(3) ACCOUNT HOLDER.— The term 'account holder' means the individual on whose behalf the medical savings account was established. "(4) CERTAIN RULES TO APPLY. —Rules similar to the following rules shall apply for purposes of this section: "(A) Section 219(d)(2) (relating to no deduction for rollovers). "(B) Section 219(f)(3) (relating to time when contributions deemed made). "(C) Except as provided in section 106(b), section 219(f)(5) (relating to employer payments). "(D) Section 408(g) (relating to community property laws). "(E) Section 408(h) (relating to custodial accounts). "(e) TAX TREATMENT OF ACCOUNTS.— "(1) IN GENERAL,—A medical savings account is exempt from taxation under this subtitle unless such account has ceased to be a medical savings account. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations). "(2) ACCOUNT TERMINATIONS.—Rules similar to the niles of paragraphs (2) and (4) of section 408(e) shall apply to medical savings accounts, and any amount treated as distributed under such rules shall be treated as not used to pay qualified medical expenses. " (f) TAX TREATMENT OF DISTRIBUTIONS.— " (1) AMOUNTS USED FOR QUALIFIED MEDICAL EXPENSES.— Any amount psdd or distributed out of a medical savings account which is used exclusively to pay qualified medical expenses of any account holder shall not be includible in gross income. "(2) INCLUSION OF AMOUNTS NOT USED FOR QUALIFIED MEDI- CAL EXPENSES.—Any amount paid or distributed out of a medical savings account which is not used exclusively to pay the qualified medical expenses of the account holder shall be included in the gross income of such holder. "(3) EXCESS CONTRIBUTIONS RETURNED BEFORE DUE DATE OF RETURN.— "(A) IN GENERAL.— I f any excess contribution is contributed for a taxable year to any medical savings account of an individual, paragraph (2) shall not apply to distributions from the medical savings accounts of such individual (to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) if—
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