Senate
File
34
-
Introduced
SENATE
FILE
34
BY
ZAUN
A
BILL
FOR
An
Act
providing
an
exemption
from
the
computation
of
the
1
individual
income
tax
of
certain
amounts
of
retirement
2
income
and
including
retroactive
applicability
provisions.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
4
TLSB
1238XS
(3)
87
mm/sc
S.F.
34
Section
1.
Section
422.5,
subsection
3,
paragraph
a,
Code
1
2017,
is
amended
to
read
as
follows:
2
a.
The
tax
shall
not
be
imposed
on
a
resident
or
nonresident
3
whose
net
income,
as
defined
in
section
422.7
,
is
thirteen
4
thousand
five
hundred
dollars
or
less
in
the
case
of
married
5
persons
filing
jointly
or
filing
separately
on
a
combined
6
return,
heads
of
household,
and
surviving
spouses
or
nine
7
thousand
dollars
or
less
in
the
case
of
all
other
persons;
8
but
in
the
event
that
the
payment
of
tax
under
this
division
9
would
reduce
the
net
income
to
less
than
thirteen
thousand
five
10
hundred
dollars
or
nine
thousand
dollars
as
applicable,
then
11
the
tax
shall
be
reduced
to
that
amount
which
would
result
12
in
allowing
the
taxpayer
to
retain
a
net
income
of
thirteen
13
thousand
five
hundred
dollars
or
nine
thousand
dollars
as
14
applicable.
The
preceding
sentence
does
not
apply
to
estates
15
or
trusts.
For
the
purpose
of
this
subsection
,
the
entire
net
16
income,
including
any
part
of
the
net
income
not
allocated
17
to
Iowa,
shall
be
taken
into
account.
For
purposes
of
this
18
subsection
,
net
income
includes
all
amounts
of
pensions
or
19
other
retirement
income,
except
for
military
retirement
pay
20
excluded
under
section
422.7,
subsection
31A
,
paragraph
“a”
,
21
or
section
422.7,
subsection
31B
,
paragraph
“a”
,
received
from
22
any
source
which
is
not
taxable
under
this
division
as
a
result
23
of
the
government
pension
exclusions
in
section
422.7
,
or
any
24
other
state
law.
If
the
combined
net
income
of
a
husband
and
25
wife
exceeds
thirteen
thousand
five
hundred
dollars,
neither
26
of
them
shall
receive
the
benefit
of
this
subsection
,
and
it
27
is
immaterial
whether
they
file
a
joint
return
or
separate
28
returns.
However,
if
a
husband
and
wife
file
separate
returns
29
and
have
a
combined
net
income
of
thirteen
thousand
five
30
hundred
dollars
or
less,
neither
spouse
shall
receive
the
31
benefit
of
this
paragraph,
if
one
spouse
has
a
net
operating
32
loss
and
elects
to
carry
back
or
carry
forward
the
loss
as
33
provided
in
section
422.9,
subsection
3
.
A
person
who
is
34
claimed
as
a
dependent
by
another
person
as
defined
in
section
35
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34
422.12
shall
not
receive
the
benefit
of
this
subsection
if
1
the
person
claiming
the
dependent
has
net
income
exceeding
2
thirteen
thousand
five
hundred
dollars
or
nine
thousand
dollars
3
as
applicable
or
the
person
claiming
the
dependent
and
the
4
person’s
spouse
have
combined
net
income
exceeding
thirteen
5
thousand
five
hundred
dollars
or
nine
thousand
dollars
as
6
applicable.
7
Sec.
2.
Section
422.5,
subsection
3,
Code
2017,
is
amended
8
by
adding
the
following
new
paragraph:
9
NEW
PARAGRAPH
.
c.
(1)
For
purposes
of
this
subsection,
10
net
income
includes
all
amounts
of
pensions
or
other
retirement
11
income,
except
for
military
retirement
pay
excluded
under
12
section
422.7,
subsection
31A,
paragraph
“a”
,
or
section
422.7,
13
subsection
31B,
paragraph
“a”
,
and
except
for
retirement
income
14
excluded
under
section
422.7,
subsection
31C,
received
from
any
15
source
which
is
not
taxable
under
this
division
as
a
result
16
of
the
government
pension
exclusions
in
section
422.7,
or
any
17
other
state
law.
18
(2)
This
paragraph
“c”
is
repealed
January
1,
2021.
19
Sec.
3.
Section
422.5,
subsection
3B,
paragraph
a,
Code
20
2017,
is
amended
to
read
as
follows:
21
a.
The
tax
shall
not
be
imposed
on
a
resident
or
nonresident
22
who
is
at
least
sixty-five
years
old
on
December
31
of
23
the
tax
year
and
whose
net
income,
as
defined
in
section
24
422.7
,
is
thirty-two
thousand
dollars
or
less
in
the
case
25
of
married
persons
filing
jointly
or
filing
separately
on
a
26
combined
return,
heads
of
household,
and
surviving
spouses
or
27
twenty-four
thousand
dollars
or
less
in
the
case
of
all
other
28
persons;
but
in
the
event
that
the
payment
of
tax
under
this
29
division
would
reduce
the
net
income
to
less
than
thirty-two
30
thousand
dollars
or
twenty-four
thousand
dollars
as
applicable,
31
then
the
tax
shall
be
reduced
to
that
amount
which
would
result
32
in
allowing
the
taxpayer
to
retain
a
net
income
of
thirty-two
33
thousand
dollars
or
twenty-four
thousand
dollars
as
applicable.
34
The
preceding
sentence
does
not
apply
to
estates
or
trusts.
35
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S.F.
34
For
the
purpose
of
this
subsection
,
the
entire
net
income,
1
including
any
part
of
the
net
income
not
allocated
to
Iowa,
2
shall
be
taken
into
account.
For
purposes
of
this
subsection
,
3
net
income
includes
all
amounts
of
pensions
or
other
retirement
4
income,
except
for
military
retirement
pay
excluded
under
5
section
422.7,
subsection
31A
,
paragraph
“a”
,
or
section
422.7,
6
subsection
31B
,
paragraph
“a”
,
received
from
any
source
which
is
7
not
taxable
under
this
division
as
a
result
of
the
government
8
pension
exclusions
in
section
422.7
,
or
any
other
state
law.
9
If
the
combined
net
income
of
a
husband
and
wife
exceeds
10
thirty-two
thousand
dollars,
neither
of
them
shall
receive
the
11
benefit
of
this
subsection
,
and
it
is
immaterial
whether
they
12
file
a
joint
return
or
separate
returns.
However,
if
a
husband
13
and
wife
file
separate
returns
and
have
a
combined
net
income
14
of
thirty-two
thousand
dollars
or
less,
neither
spouse
shall
15
receive
the
benefit
of
this
paragraph,
if
one
spouse
has
a
net
16
operating
loss
and
elects
to
carry
back
or
carry
forward
the
17
loss
as
provided
in
section
422.9,
subsection
3
.
A
person
18
who
is
claimed
as
a
dependent
by
another
person
as
defined
in
19
section
422.12
shall
not
receive
the
benefit
of
this
subsection
20
if
the
person
claiming
the
dependent
has
net
income
exceeding
21
thirty-two
thousand
dollars
or
twenty-four
thousand
dollars
22
as
applicable
or
the
person
claiming
the
dependent
and
the
23
person’s
spouse
have
combined
net
income
exceeding
thirty-two
24
thousand
dollars
or
twenty-four
thousand
dollars
as
applicable.
25
Sec.
4.
Section
422.5,
subsection
3B,
Code
2017,
is
amended
26
by
adding
the
following
new
paragraph:
27
NEW
PARAGRAPH
.
d.
(1)
For
purposes
of
this
subsection,
28
net
income
includes
all
amounts
of
pensions
or
other
retirement
29
income,
except
for
military
retirement
pay
excluded
under
30
section
422.7,
subsection
31A,
paragraph
“a”
,
or
section
422.7,
31
subsection
31B,
paragraph
“a”
,
and
except
for
retirement
income
32
excluded
under
section
422.7,
subsection
31C,
received
from
any
33
source
which
is
not
taxable
under
this
division
as
a
result
34
of
the
government
pension
exclusions
in
section
422.7,
or
any
35
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S.F.
34
other
state
law.
1
(2)
This
paragraph
“d”
is
repealed
January
1,
2021.
2
Sec.
5.
Section
422.7,
subsection
31,
Code
2017,
is
amended
3
to
read
as
follows:
4
31.
a.
For
a
person
who
is
disabled,
or
is
fifty-five
5
years
of
age
or
older,
or
is
the
surviving
spouse
of
an
6
individual
or
a
survivor
having
an
insurable
interest
in
an
7
individual
who
would
have
qualified
for
the
exemption
under
8
this
subsection
for
the
tax
year,
subtract,
to
the
extent
9
included,
the
total
amount
of
a
governmental
or
other
pension
10
or
retirement
pay,
including,
but
not
limited
to,
defined
11
benefit
or
defined
contribution
plans,
annuities,
individual
12
retirement
accounts,
plans
maintained
or
contributed
to
by
an
13
employer,
or
maintained
or
contributed
to
by
a
self-employed
14
person
as
an
employer,
and
deferred
compensation
plans
or
any
15
earnings
attributable
to
the
deferred
compensation
plans,
up
16
to
a
maximum
of
six
thousand
dollars
for
a
person,
other
than
a
17
husband
or
wife,
who
files
a
separate
state
income
tax
return
18
and
up
to
a
maximum
of
twelve
thousand
dollars
for
a
husband
19
and
wife
who
file
a
joint
state
income
tax
return.
However,
a
20
surviving
spouse
who
is
not
disabled
or
fifty-five
years
of
age
21
or
older
can
only
exclude
the
amount
of
pension
or
retirement
22
pay
received
as
a
result
of
the
death
of
the
other
spouse.
A
23
husband
and
wife
filing
separate
state
income
tax
returns
or
24
separately
on
a
combined
state
return
are
allowed
a
combined
25
maximum
exclusion
under
this
subsection
of
up
to
twelve
26
thousand
dollars.
The
twelve
thousand
dollar
exclusion
shall
27
be
allocated
to
the
husband
or
wife
in
the
proportion
that
each
28
spouse’s
respective
pension
and
retirement
pay
received
bears
29
to
total
combined
pension
and
retirement
pay
received.
30
b.
This
subsection
is
repealed
January
1,
2021.
31
Sec.
6.
Section
422.7,
subsection
31A,
Code
2017,
is
amended
32
by
adding
the
following
new
paragraph:
33
NEW
PARAGRAPH
.
c.
This
section
is
repealed
January
1,
2021.
34
Sec.
7.
Section
422.7,
subsection
31B,
Code
2017,
is
amended
35
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34
by
adding
the
following
new
paragraph:
1
NEW
PARAGRAPH
.
c.
This
subsection
is
repealed
January
1,
2
2021.
3
Sec.
8.
Section
422.7,
Code
2017,
is
amended
by
adding
the
4
following
new
subsection:
5
NEW
SUBSECTION
.
31C.
a.
(1)
For
tax
years
beginning
6
in
the
2017
calendar
year,
subtract,
to
the
extent
included,
7
twenty
percent
of
retirement
income
received
by
a
taxpayer
8
remaining
after
the
subtractions
in
subsections
31,
31A,
and
9
31B.
10
(2)
For
tax
years
beginning
in
the
2018
calendar
year,
11
subtract,
to
the
extent
included,
forty
percent
of
retirement
12
income
received
by
a
taxpayer
remaining
after
the
subtractions
13
in
subsections
31,
31A,
and
31B.
14
(3)
For
tax
years
beginning
in
the
2019
calendar
year,
15
subtract,
to
the
extent
included,
sixty
percent
of
retirement
16
income
received
by
a
taxpayer
remaining
after
the
subtractions
17
in
subsections
31,
31A,
and
31B.
18
(4)
For
tax
years
beginning
in
the
2020
calendar
year,
19
subtract,
to
the
extent
included,
eighty
percent
of
retirement
20
income
received
by
a
taxpayer
remaining
after
the
subtractions
21
in
subsections
31,
31A,
and
31B.
22
(5)
For
tax
years
beginning
on
or
after
January
1,
2021,
23
subtract,
to
the
extent
included,
retirement
income
received
24
by
a
taxpayer.
25
b.
For
purposes
of
this
subsection,
“retirement
income”
26
means
a
governmental
or
other
pension
or
retirement
pay,
27
including
but
not
limited
to
defined
benefit
or
defined
28
contribution
plans,
annuities,
individual
retirement
accounts,
29
plans
maintained
or
contributed
to
by
an
employer,
or
30
maintained
or
contributed
to
by
a
self-employed
person
as
an
31
employer,
and
deferred
compensation
plans
or
any
earnings
32
attributable
to
the
deferred
compensation
plans.
“Retirement
33
income”
includes
amounts
received
as
survivor
benefits
by
a
34
taxpayer
from
the
federal
government
pursuant
to
10
U.S.C
35
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34
§1447,
et
seq.
1
Sec.
9.
RETROACTIVE
APPLICABILITY.
This
Act
applies
2
retroactively
to
January
1,
2017,
for
tax
years
beginning
on
3
or
after
that
date.
4
EXPLANATION
5
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
6
the
explanation’s
substance
by
the
members
of
the
general
assembly.
7
This
bill
relates
to
the
exclusion
of
retirement
income
from
8
the
computation
of
net
income
for
purposes
of
the
individual
9
income
tax.
10
Under
current
law,
a
taxpayer
may
exclude
all
retirement
11
pay,
including
certain
survivor
benefits,
received
from
the
12
federal
government
for
military
service
performed
in
the
armed
13
forces,
the
armed
forces
military
reserve,
or
national
guard.
14
In
addition,
a
taxpayer
who
is
disabled,
who
is
at
least
55
15
years
of
age,
or
who
is
the
surviving
spouse
or
other
specified
16
survivor
of
that
qualifying
taxpayer,
may
exclude
a
maximum
17
of
$6,000
of
other
retirement
income
($12,000
for
married
18
couples).
19
The
bill
phases
in
over
a
five-year
period
the
complete
20
exclusion
from
the
individual
income
tax
of
a
taxpayer’s
21
retirement
income
remaining
after
the
two
exclusions
referenced
22
above.
The
percentage
of
this
retirement
income
that
is
23
excluded
for
tax
years
beginning
in
2017,
2018,
2019,
and
24
2020,
is
20
percent,
40
percent,
60
percent,
and
80
percent,
25
respectively.
For
tax
years
beginning
in
2021
or
later,
100
26
percent
of
a
taxpayer’s
retirement
income
will
be
excluded
from
27
the
individual
income
tax.
28
The
bill
also
excludes
this
retirement
income
from
the
29
calculation
of
net
income
for
purposes
of
determining
whether
30
or
not
a
taxpayer’s
net
income
exceeds
the
amount
at
which
the
31
individual
income
tax
will
not
be
imposed
pursuant
to
Code
32
section
422.5(3)
or
Code
section
422.5(3B),
and
for
which
an
33
individual
income
tax
return
is
not
required
to
be
filed,
and
34
for
purposes
of
calculating
the
alternate
tax
in
Code
section
35
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34
422.5,
and
further
provides
that
any
retirement
income
excluded
1
from
the
individual
income
tax
will
not
be
added
back
to
these
2
calculations
for
tax
years
beginning
in
2021
or
later.
3
The
bill
defines
“retirement
income”
for
purposes
of
the
4
exclusion.
5
The
bill
applies
retroactively
to
January
1,
2017,
for
tax
6
years
beginning
on
or
after
that
date.
7
-7-
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(3)
87
mm/sc
7/
7