House File 2 - Introduced
HOUSE FILE
BY J. K. VAN FOSSEN
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the phaseout of state income tax on pension
2 income and providing a retroactive applicability date.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 1691HH 81
5 sc/sh/8
PAG LIN
1 1 Section 1. Section 422.7, subsection 31, Code 2005, is
1 2 amended to read as follows:
1 3 31. a. For a person who is disabled, or is fifty=five
1 4 years of age or older, or is the surviving spouse of an
1 5 individual or a survivor having an insurable interest in an
1 6 individual who would have qualified for the exemption under
1 7 this subsection for the tax year, subtract, to the extent
1 8 included, the total amount of a governmental or other pension
1 9 or retirement pay, including, but not limited to, defined
1 10 benefit or defined contribution plans, annuities, individual
1 11 retirement accounts, plans maintained or contributed to by an
1 12 employer, or maintained or contributed to by a self=employed
1 13 person as an employer, and deferred compensation plans or any
1 14 earnings attributable to the deferred compensation plans, up
1 15 to a maximum of six thousand dollars for a person, other than
1 16 a husband or wife, who files a separate state income tax
1 17 return and up to a maximum of twelve thousand dollars for a
1 18 husband and wife who file a joint state income tax return.
1 19 However, a surviving spouse who is not disabled or fifty=five
1 20 years of age or older can only exclude the amount of pension
1 21 or retirement pay received as a result of the death of the
1 22 other spouse. A husband and wife filing separate state income
1 23 tax returns or separately on a combined state return are
1 24 allowed a combined maximum exclusion under this subsection of
1 25 up to twelve thousand dollars. The twelve thousand dollar
1 26 exclusion shall be allocated to the husband or wife in the
1 27 proportion that each spouse's respective pension and
1 28 retirement pay received bears to total combined pension and
1 29 retirement pay received.
1 30 b. For the tax year beginning January 1, 2005, subtract an
1 31 amount equal to twenty percent of the income described in
1 32 paragraph "a" after the exclusion in paragraph "a" is
1 33 subtracted.
1 34 c. For the tax year beginning January 1, 2006, subtract an
1 35 amount equal to forty percent of the income described in
2 1 paragraph "a" after the exclusion in paragraph "a" is
2 2 subtracted.
2 3 d. For the tax year beginning January 1, 2007, subtract an
2 4 amount equal to sixty percent of the income described in
2 5 paragraph "a" after the exclusion in paragraph "a" is
2 6 subtracted.
2 7 e. For the tax year beginning January 1, 2008, subtract an
2 8 amount equal to eighty percent of the income described in
2 9 paragraph "a" after the exclusion in paragraph "a" is
2 10 subtracted.
2 11 f. For tax years beginning on or after January 1, 2009,
2 12 subtract the total amount of the income described in paragraph
2 13 "a".
2 14 g. For a husband and wife filing separate state income tax
2 15 returns or separately on a combined state return, the
2 16 additional exclusion in paragraphs "b" through "f" shall be
2 17 allocated to the husband or wife in the proportion that each
2 18 spouse's respective pension and retirement pay received bears
2 19 to total combined pension and retirement pay received.
2 20 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies
2 21 retroactively to January 1, 2005, for tax years beginning on
2 22 or after that date.
2 23 EXPLANATION
2 24 This bill phases out the state income tax on pension and
2 25 retirement income over a five=year period. For the tax year
2 26 beginning January 1, 2005, an additional 20 percent of pension
2 27 or retirement income is exempted after the $6,000 (for single
2 28 filers) or $12,000 (for married filers) is subtracted. For
2 29 the tax year beginning January 1, 2006, an additional 40
2 30 percent is exempted; for the tax year beginning January 1,
2 31 2007, an additional 60 percent is exempted; for the tax year
2 32 beginning January 1, 2008, an additional 80 percent is
2 33 exempted; and for tax years beginning January 1, 2009, and all
2 34 subsequent tax years, the total amount of pension and
2 35 retirement income is exempted from state income taxation.
3 1 The bill applies retroactively to January 1, 2005, for tax
3 2 years beginning on or after that date.
3 3 LSB 1691HH 81
3 4 sc/sh/8