House File 2629 - Introduced HOUSE FILE BY MAY Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to an exclusion of governmental pension or 2 retirement pay under the individual income tax and including 3 effective and applicability date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 6055YH 82 6 mg/sc/24 PAG LIN 1 1 Section 1. Section 422.7, Code Supplement 2007, is amended 1 2 by adding the following new subsection: 1 3 NEW SUBSECTION. 53. a. For a person who is sixty=five 1 4 years of age or older or is the surviving spouse of an 1 5 individual who would have qualified for the exemption under 1 6 this subsection for the tax year, subtract, to the extent 1 7 included in adjusted net income, the amount of governmental 1 8 pension or retirement pay up to the maximum amount specified 1 9 in paragraph "b". 1 10 b. Subject to reduction as provided under paragraph "c", 1 11 the maximum amount to be subtracted under paragraph "a" equals 1 12 the following: 1 13 (1) For tax years beginning in the 2010 calendar year, 1 14 twenty percent of the pension or retirement pay included. 1 15 (2) For tax years beginning in the 2011 calendar year, 1 16 forty percent of the pension or retirement pay included. 1 17 (3) For tax years beginning in the 2012 calendar year, 1 18 sixty percent of the pension or retirement pay included. 1 19 (4) For tax years beginning in the 2013 calendar year, 1 20 eighty percent of the pension or retirement pay included. 1 21 (5) For tax years beginning on or after January 1, 2014, 1 22 the total amount of pension or retirement pay included. 1 23 c. The maximum amount allowed to be subtracted under 1 24 paragraph "a" as specified in paragraph "b" shall be reduced, 1 25 but not below zero, by the following: 1 26 (1) In the case of a married couple filing jointly, the 1 27 reduction shall be equal to the sum of the following: 1 28 (a) The amount of adjusted net income in excess of one 1 29 hundred thousand dollars. 1 30 (b) The amount of social security benefits not included in 1 31 adjusted net income. 1 32 (2) In the case of an individual not described in 1 33 subparagraph (1) the reduction shall be equal to the sum of 1 34 the following: 1 35 (a) The amount of adjusted net income in excess of 2 1 eighty=five thousand dollars. 2 2 (b) The amount of social security benefits not included in 2 3 adjusted net income. 2 4 d. For purposes of this subsection: 2 5 (1) "Adjusted net income" means net income as calculated 2 6 pursuant to this section prior to any exclusion under this 2 7 subsection. 2 8 (2) "Social security benefits" means the same as defined 2 9 in section 86 of the Internal Revenue Code. 2 10 Sec. 2. EFFECTIVE AND APPLICABILITY DATE. This Act takes 2 11 effect January 1, 2010, and applies to tax years beginning on 2 12 or after that date. 2 13 EXPLANATION 2 14 This bill excludes an amount of governmental pension or 2 15 retirement pay from the individual income tax. The amount of 2 16 the exclusion is phased in over five tax years beginning with 2 17 the 2010 tax year. The maximum exclusion starts at 20 percent 2 18 and increases by 20 percentage points until the maximum 2 19 exclusion equals 100 percent of the governmental pension or 2 20 retirement pay received. 2 21 The maximum amount of the exclusion is reduced by the sum 2 22 of social security benefits not taxed by the state plus the 2 23 amount of adjusted net income in excess of $100,000 for 2 24 married persons filing jointly or in excess of $85,000 for all 2 25 other filers. 2 26 Adjusted net income equals the taxpayer's net income prior 2 27 to the subtraction allowed in the bill. 2 28 The bill takes effect January 1, 2010, and applies to tax 2 29 years beginning on or after that date. 2 30 LSB 6055YH 82 2 31 mg/sc/24