S.F. 124 Section 1. Section 422.7, subsection 42A, Code 2017, is 1 amended to read as follows: 2 42A. Subtract, to the extent included, all pay of the 3 following: 4 a. Pay received by the taxpayer from the federal government 5 for military service performed while on active duty status in 6 the armed forces, the armed forces military reserve, or the 7 national guard. 8 b. Disability compensation and benefits received by the 9 taxpayer from the federal government for a service-connected 10 disability certified by the United States department of 11 veterans affairs. 12 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 13 retroactively to January 1, 2017, for tax years beginning on 14 or after that date. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 This bill exempts military disability benefits and certain 19 military pay from the individual income tax. Current law 20 exempts from the individual income tax all pay from the federal 21 government for military service performed while on active duty 22 status in the armed forces, the armed forces military reserve, 23 or national guard. The bill strikes the active duty status 24 requirement related to that exemption. As a result, all pay 25 from the federal government for military service performed in 26 the armed forces, the armed forces military reserve, or the 27 national guard will be exempt from the individual income tax. 28 The bill also exempts from the individual income tax all 29 disability compensation and benefits received from the federal 30 government for a service-connected disability certified by the 31 United States department of veterans affairs. 32 The bill applies retroactively to January 1, 2017, for tax 33 years beginning on or after that date. 34 -1- LSB 1159XS (3) 87 mm/sc 1/ 1