Senate File 96 - Introduced SENATE FILE 96 BY ZAUN A BILL FOR An Act relating to the exclusion of certain retirement 1 income from the calculation of net income, and including 2 retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1653XS (3) 89 jm/jh

S.F. 96 Section 1. Section 422.7, subsection 31, Code 2021, is 1 amended to read as follows: 2 31. a. For a person who is disabled, or is fifty-five years 3 of age or older, or is the surviving spouse of an individual 4 or a survivor having an insurable interest in an individual 5 who would have qualified for the exemption exclusion under 6 this subsection for the tax year, subtract, to the extent 7 included, the total amount of a governmental or other pension 8 or retirement pay, including, but not limited to, defined 9 benefit or defined contribution plans, annuities, individual 10 retirement accounts, plans maintained or contributed to by an 11 employer, or maintained or contributed to by a self-employed 12 person as an employer, and deferred compensation plans or any 13 earnings attributable to the deferred compensation plans, up 14 to a the maximum of six thousand dollars amount provided in 15 paragraph “b” for a person, other than a husband or wife married 16 person , who files a separate state income tax return , and up 17 to a the maximum of twelve thousand dollars amount provided in 18 paragraph “c” for a husband and wife married persons who file 19 a joint state income tax return. However, a surviving spouse 20 who is not disabled or fifty-five years of age or older can 21 only exclude the amount of pension or retirement pay received 22 as a result of the death of the other spouse. A husband and 23 wife Married persons filing separate state income tax returns 24 or separately on a combined state return are allowed a combined 25 maximum exclusion under this subsection of up to twelve 26 thousand dollars the maximum amount under paragraph “c” . The 27 twelve thousand dollar exclusion under paragraph “c” shall be 28 allocated to the husband or wife either married person in the 29 proportion that each spouse’s respective pension and retirement 30 pay received bears to total combined pension and retirement pay 31 received. 32 b. (1) (a) For a single person, other than married persons 33 who file separately, the maximum amount of the exclusion under 34 paragraph “a” shall be as follows: 35 -1- LSB 1653XS (3) 89 jm/jh 1/ 3

S.F. 96 (i) For tax years beginning in the 2021 calendar year, seven 1 thousand two hundred dollars. 2 (ii) For tax years beginning in the 2022 calendar year, 3 eight thousand four hundred dollars. 4 (iii) For tax years beginning in the 2023 calendar year, 5 nine thousand six hundred dollars. 6 (iv) For tax years beginning in the 2024 calendar year, ten 7 thousand eight hundred dollars. 8 (b) This subparagraph is repealed January 1, 2025. 9 (2) For a single person, other than married persons who file 10 separately, the maximum amount of the exclusion under paragraph 11 “a” for tax years beginning on or after January 1, 2025, shall 12 be twelve thousand dollars. 13 c. (1) (a) For married persons who file a joint state tax 14 return, the maximum amount of the exclusion under paragraph “a” 15 shall be as follows: 16 (i) For tax years beginning in the 2021 calendar year, 17 fourteen thousand four hundred dollars. 18 (ii) For tax years beginning in the 2022 calendar year, 19 sixteen thousand eight hundred dollars. 20 (iii) For tax years beginning in the 2023 calendar year, 21 nineteen thousand two hundred dollars. 22 (iv) For tax years beginning in the 2024 calendar year, 23 twenty-one thousand six hundred dollars. 24 (b) This subparagraph is repealed January 1, 2025. 25 (2) For married persons who file a joint state tax return, 26 the maximum amount of the exclusion under paragraph “a” for 27 tax years beginning on or after January 1, 2025, shall be 28 twenty-four thousand dollars. 29 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 30 retroactively to January 1, 2021, for tax years beginning on 31 or after that date. 32 EXPLANATION 33 The inclusion of this explanation does not constitute agreement with 34 the explanation’s substance by the members of the general assembly. 35 -2- LSB 1653XS (3) 89 jm/jh 2/ 3

S.F. 96 This bill relates to the exclusion of certain retirement 1 income from the calculation of net income. 2 Currently, a taxpayer who is disabled, who is at least 55 3 years of age, or who is the surviving spouse or other specified 4 survivor of that qualifying taxpayer may exclude a maximum 5 of $6,000 of other retirement income ($12,000 for married 6 couples). 7 The bill phases in over a five-year period an increase to 8 the retirement income exclusion referenced above. The base 9 retirement income exclusion amount for single filers ($6,000) 10 and married filers ($12,000) increases for tax years beginning 11 in 2021, 2022, 2023, and 2024 by 20 percent, 40 percent, 60 12 percent, and 80 percent, respectively. For tax years beginning 13 in 2025 or later, the retirement income exclusion is $12,000 14 for single filers and $24,000 for married filers. 15 The bill does not affect the current exclusion of military 16 retirement income. 17 The bill applies retroactively to January 1, 2021, for tax 18 years beginning on or after that date. 19 -3- LSB 1653XS (3) 89 jm/jh 3/ 3