House File 2638 - Introduced HOUSE FILE 2638 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 2105) A BILL FOR An Act excluding nonqualified deferred compensation income 1 from the individual income tax, and including retroactive 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5596HV (2) 90 jm/jh

H.F. 2638 Section 1. Section 422.7, subsection 19, paragraph a, Code 1 2024, is amended to read as follows: 2 a. (1) Subtract, to the extent included, the total amount 3 received from a governmental or other pension or retirement 4 plan, including defined benefit or defined contribution plans, 5 annuities, individual retirement accounts, plans maintained or 6 contributed to by an employer, or maintained or contributed 7 to by a self-employed person as an employer, and deferred 8 compensation plans or any earnings attributable to the deferred 9 compensation plans received by a person who is disabled, or is 10 fifty-five years of age or older, or is the surviving spouse of 11 an individual or is a survivor having an insurable interest in 12 an individual who would have qualified for the exemption under 13 this subsection subparagraph for the tax year. 14 (2) Subtract, to the extent included, up to five hundred 15 thousand dollars of a nonqualified deferred compensation plan 16 or any earnings attributable to the nonqualified deferred 17 compensation plan received by a person who is disabled, or is 18 fifty-five years of age or older, or is the surviving spouse of 19 an individual or is a survivor having an insurable interest in 20 an individual who would have qualified for the exemption under 21 this subparagraph for the tax year. 22 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 23 retroactively to January 1, 2024, for tax years beginning on 24 or after that date. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 Under current law, a taxpayer may exclude retirement 29 income from the computation of net income for purposes of 30 the individual income tax. In order to be eligible for 31 the retirement income exclusion, a person must be disabled, 32 at least 55 years of age, or be the surviving spouse of an 33 individual or be a survivor having an insurable interest in an 34 individual who would have qualified for the retirement income 35 -1- LSB 5596HV (2) 90 jm/jh 1/ 2

H.F. 2638 exclusion. 1 This bill excludes up to $500,000 of nonqualified deferred 2 compensation plan income from the computation of net income 3 for purposes of the individual income tax under similar 4 circumstances as the retirement income exclusion. In order to 5 be eligible for the nonqualified deferred compensation plan 6 income exclusion, the taxpayer must be disabled, at least 55 7 years of age, or be the surviving spouse of an individual or be 8 a survivor having an insurable interest in an individual who 9 would have qualified for the income exclusion. 10 A nonqualified deferred compensation plan is deferred 11 compensation with no federal legal deferral limit that is 12 subject to tax at a later date, and is usually made available 13 to select employees. 14 The bill applies retroactively to January 1, 2024, for tax 15 years beginning on or after that date. 16 -2- LSB 5596HV (2) 90 jm/jh 2/ 2