SF 104 (LSB 1065XS (4) 85)

SENATE FILE 104

BY  CHELGREN

A BILL FOR

An Act exempting from the computation of net income for the individual state income tax all social security benefits and governmental or other pension or retirement pay, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, subsection 13, Code 2013, is amended by striking the subsection and inserting in lieu thereof the following:
   13.  Subtract, to the extent included, the amount of social security benefits taxable under section 86 of the Internal Revenue Code.
    Sec. 2.  Section 422.7, subsection 31, Code 2013, is amended to read as follows:
   31.  For a person who is disabled, or is fifty-five years of age or older, or is the surviving spouse of an individual or a survivor having an insurable interest in an individual who would have qualified for the exemption under this subsection for the tax year, subtract
 
Subtract, to the extent included, the total amount of a governmental or other pension or retirement pay, including, but not limited to, defined benefit or defined contribution plans, annuities, individual retirement accounts, plans maintained or contributed to by an employer, or maintained or contributed to by a self-employed person as an employer, and deferred compensation plans or any earnings attributable to the deferred compensation plans, up to a maximum of six thousand dollars for a person, other than a husband or wife, who files a separate state income tax return and up to a maximum of twelve thousand dollars for a husband and wife who file a joint state income tax return. However, a surviving spouse who is not disabled or fifty-five years of age or older can only exclude the amount of pension or retirement pay received as a result of the death of the other spouse. A husband and wife filing separate state income tax returns or separately on a combined state return are allowed a combined maximum exclusion under this subsection of up to twelve thousand dollars. The twelve thousand dollar exclusion shall be allocated to the husband or wife in the proportion that each spouse’s respective pension and retirement pay received bears to total combined pension and retirement pay received.
    Sec. 3.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 4.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2013, for tax years beginning on or after that date.
EXPLANATION
   This bill exempts all social security benefits and governmental or other pension or retirement pay from the individual income tax. “Governmental or other pension or retirement pay” includes but is not limited to defined benefit or defined contribution plans, annuities, individual retirement accounts, plans maintained or contributed to by an employer, or maintained or contributed to by a self-employed person as an employer, and deferred compensation plans or any earnings attributable to the deferred compensation plans.
   Under current law, 77 percent of social security benefits are exempt from the individual income tax, which exemption amount is scheduled to rise to 89 percent in 2013 and 100 percent in 2014 and subsequent years. Also under current law, the first $6,000 for individual filers and $12,000 for joint filers of governmental or other pension or retirement pay is exempt from the individual income tax for individuals who are disabled, 55 years of age or older, or surviving spouses or certain other survivors of those individuals.
   The bill takes effect upon enactment, and applies retroactively to tax years beginning on or after January 1, 2013.