§40-18-312. Distributions from catastrophe savings account; additional tax.

(a) A distribution from a catastrophe savings account must be included in the income of the taxpayer unless the amount of the distribution is used to cover qualified catastrophe expenses.

(b) No amount is included in income, pursuant to subsection (a), if the qualified catastrophe expenses of the taxpayer during the taxable year are equal to or greater than the aggregate distributions during the taxable year.

(c) If aggregate distributions exceed the qualified catastrophe expenses during the taxable year, the amount otherwise included in income must be reduced by the amount of the distributions for qualified catastrophe expenses.

(d)(1) The tax paid pursuant to Section 40-18-5, attributable to a taxable distribution must be increased by two and one-half percent of the amount which is includable in income.

(2) This additional tax does not apply if any of the following occur:

a. The taxpayer no longer owns a legal residence that qualifies pursuant to Chapter 7.

b. The distribution is from an account conforming with subdivision (3) of subsection (c) of Section 40-18-311 and is made on or after the date on which the taxpayer attains the age of 70.

(3) If a taxpayer receives a nontaxable distribution under this subsection, the taxpayer must not make further contributions to any catastrophe savings account.

(e) If a taxpayer who owns a catastrophe savings account dies, his or her account is included in the income of the person who receives the account, unless that person is the surviving spouse of the taxpayer. Upon the death of the surviving spouse, the account is included in the income of the person who receives the account. The additional tax in subsection (d) does not apply to distribution on death of the taxpayer or the surviving spouse.

(Act 2012-413, p. 1123, §3.)