COMMITTEE SUBSTITUTE
FOR
H. B. 4037
(By Delegates DeLong, White, Gall, Rowan, Stephens and Moye)
(Originating in the Committee on Finance)
[February 22, 2008]
A BILL to amend and reenact §11-21-12 of the Code of West Virginia,
1931, as amended, relating to reducing state income tax
liability for certain retired public employees; increasing the
amount of retirement income received from certain state and
federal retirement systems that is excluded from the
calculation of income subject to state personal income taxes;
and establishing an effective date for the increased
exclusion.
Be it enacted by the Legislature of West Virginia:
That §11-21-12 of the Code of West Virginia, 1931, as amended,
be amended and reenacted, to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-12. West Virginia adjusted gross income of resident
individual.
(a)
General. -- The West Virginia adjusted gross income of
a resident individual means his or her federal adjusted gross
income as defined in the laws of the United States for the taxable
year with the modifications specified in this section.
(b) Modifications increasing federal adjusted gross income. -
- There shall be added to federal adjusted gross income unless
already included therein the following items:
(1) Interest income on obligations of any state other than
this state or of a political subdivision of any other state unless
created by compact or agreement to which this state is a party;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States, which the laws of the United States exempt from federal
income tax but not from state income taxes;
(3) Any deduction allowed when determining federal adjusted
gross income for federal income tax purposes for the taxable year
that is not allowed as a deduction under this article for the
taxable year;
(4) Interest on indebtedness incurred or continued to purchase
or carry obligations or securities the income from which is exempt
from tax under this article, to the extent deductible in
determining federal adjusted gross income;
(5) Interest on a depository institution tax-exempt savings
certificate which is allowed as an exclusion from federal gross
income under Section 128 of the Internal Revenue Code, for the federal taxable year;
(6) The amount of a lump sum distribution for which the
taxpayer has elected under Section 402(e) of the Internal Revenue
Code of 1986, as amended, to be separately taxed for federal income
tax purposes; and
(7) Amounts withdrawn from a medical savings account
established by or for an individual under section twenty, article
fifteen, chapter thirty-three of this code or section fifteen,
article sixteen of said chapter that are used for a purpose other
than payment of medical expenses, as defined in those sections.
(c)
Modifications reducing federal adjusted gross income. --
There shall be subtracted from federal adjusted gross income to the
extent included therein:
(1) Interest income on obligations of the United States and
its possessions to the extent includable in gross income for
federal income tax purposes;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States or of the state of West Virginia to the extent includable in
gross income for federal income tax purposes but exempt from state
income taxes under the laws of the United States or of the state of
West Virginia, including federal interest or dividends paid to
shareholders of a regulated investment company, under Section 852
of the Internal Revenue Code for taxable years ending after the thirtieth day of June, one thousand nine hundred eighty-seven;
(3) Any amount included in federal adjusted gross income for
federal income tax purposes for the taxable year that is not
included in federal adjusted gross income under this article for
the taxable year;
(4) The amount of any refund or credit for overpayment of
income taxes imposed by this state, or any other taxing
jurisdiction, to the extent properly included in gross income for
federal income tax purposes;
(5)
(A) Annuities, retirement allowances, returns of
contributions and any other benefit received under the West
Virginia Public Employees Retirement System, the West Virginia
State Teachers Retirement System and all forms of military
retirement, including regular Armed Forces, reserves and National
Guard, including any survivorship annuities derived therefrom, to
the extent includable in gross income for federal income tax
purposes:
Provided, That notwithstanding any provisions in this
code to the contrary this modification shall be limited to the
first two thousand dollars of benefits received under the West
Virginia Public Employees Retirement System
, and the West Virginia
State Teachers Retirement System
and, including any survivorship
annuities derived therefrom, to the extent includable in gross
income for federal income tax purposes for taxable years beginning
after the thirty-first day of December, one thousand nine hundred eighty-six; and the first two thousand dollars of benefits received
under any federal retirement system to which Title 4 U.S.C. §111
applies:
Provided, however, That the total modification under this
paragraph shall not exceed two thousand dollars per person
receiving retirement benefits and this limitation shall apply to
all returns or amended returns filed after the last day of
December, one thousand nine hundred eighty-eight;
(B) Notwithstanding any provision of paragraph (A) of this
subdivision to the contrary, the modification provided under
paragraph (A) of this subdivision shall be limited to the first
four thousand dollars of benefits received under the West Virginia
Public Employees Retirement System and the West Virginia State
Teachers Retirement System, including any survivorship annuities
derived therefrom, to the extent includable in gross income for
federal income tax purposes for taxable years beginning after the
thirty-first day of December, two thousand eight; and to the first
four thousand dollars of benefits received under any federal
retirement system to which Title 4 U.S.C. §111 applies to the
extent includable in gross income for federal income tax purposes
for taxable years beginning after the thirty-first day of December,
two thousand eight. The total modification under this paragraph
shall not exceed four thousand dollars per person receiving
retirement benefits;
(6) Retirement income received in the form of pensions and annuities after the thirty-first day of December, one thousand nine
hundred seventy-nine, under any West Virginia police, West Virginia
firemen's retirement system or the West Virginia State Police
Death, Disability and Retirement Fund, the West Virginia State
Police Retirement System or the West Virginia Deputy Sheriff
Retirement System, including any survivorship annuities derived
from any of these programs, to the extent includable in gross
income for federal income tax purposes;
(7) (A) For taxable years beginning after the thirty-first day
of December, two thousand, and ending prior to the first day of
January, two thousand three, an amount equal to two percent
multiplied by the number of years of active duty in the Armed
Forces of the United States of America with the product thereof
multiplied by the first thirty thousand dollars of military
retirement income, including retirement income from the regular
Armed Forces, reserves and National Guard paid by the United States
or by this state after the thirty-first day of December, two
thousand, including any survivorship annuities, to the extent
included in gross income for federal income tax purposes for the
taxable year.
(B) For taxable years beginning after the thirty-first day of
December, two thousand two, the first twenty thousand dollars of
military retirement income, including retirement income from the
regular Armed Forces, reserves and National Guard paid by the United States or by this state after the thirty-first day of
December, two thousand two, including any survivorship annuities,
to the extent included in gross income for federal income tax
purposes for the taxable year.
(C) In the event that any of the provisions of this
subdivision are found by a court of competent jurisdiction to
violate either the Constitution of this state or of the United
States, or is held to be extended to persons other than specified
in this subdivision, this subdivision shall become null and void by
operation of law.
(8)
(A) Federal adjusted gross income in the amount of eight
thousand dollars received from any source after the thirty-first
day of December, one thousand nine hundred eighty-six, by any
person who has attained the age of sixty-five on or before the last
day of the taxable year, or by any person certified by proper
authority as permanently and totally disabled, regardless of age,
on or before the last day of the taxable year, to the extent
includable in federal adjusted gross income for federal tax
purposes:
Provided, That if a person has a medical certification
from a prior year and he or she is still permanently and totally
disabled, a copy of the original certificate is acceptable as proof
of disability. A copy of the form filed for the federal disability
income tax exclusion is acceptable:
Provided, however, That:
(i) Where the total modification under subdivisions (1), (2), (5), (6) and (7) of this subsection is eight thousand dollars per
person or more, no deduction shall be allowed under this
subdivision; and
(ii) Where the total modification under subdivisions (1), (2),
(5), (6) and (7) of this subsection is less than eight thousand
dollars per person, the total modification allowed under this
subdivision for all gross income received by that person shall be
limited to the difference between eight thousand dollars and the
sum of modifications under subdivisions (1), (2), (5), (6) and (7)
of this subsection;
The provisions of this paragraph remain applicable for taxable
years beginning prior to the first day of January, two thousand
nine, for all persons otherwise eligible, and the provisions of
paragraph (B) of this subdivision are applicable for taxable years
beginning after the thirty-first day of December, two thousand
eight, exclusively for all persons described in paragraph (B) of
this subdivision in lieu of the provisions of this paragraph, and
as to those persons, no modification shall be allowed under this
paragraph for taxable years beginning after the thirty-first day of
December, two thousand eight;
(B) Notwithstanding any provision of paragraph (A) of this
subdivision to the contrary, federal adjusted gross income in the
amount of sixteen thousand dollars received from any source after
the thirty-first day of December, two thousand eight, by any person who has attained the age of sixty-five on or before the last day of
the taxable year, or by any person certified by proper authority as
permanently and totally disabled, regardless of age, on or before
the last day of the taxable year, where the person during the
taxable year receives benefits under the West Virginia Public
Employees Retirement System or the West Virginia State Teachers
Retirement System, including any survivorship annuities derived
therefrom, to the extent includable in gross income for federal
income tax purposes for taxable years beginning after the
thirty-first day of December, two thousand eight, or where the
person during the taxable year receives benefits under any federal
retirement system to which Title 4 U.S.C. §111 applies to the
extent includable in gross income for federal income tax purposes
for taxable years beginning after the thirty-first day of December,
two thousand eight: Provided, That if a person has a medical
certification from a prior year and he or she is still permanently
and totally disabled, a copy of the original certificate is
acceptable as proof of disability. A copy of the form filed for
the federal disability income tax exclusion is acceptable:
Provided, however, That:
(i) Where the total modification under subdivisions (1), (2),
(5), (6) and (7) of this subsection is sixteen thousand dollars per
person or more, no deduction shall be allowed under this paragraph;
and
(ii) Where the total modification under subdivisions (1), (2),
(5), (6) and (7) of this subsection is less than sixteen thousand
dollars per person, the total modification allowed under this
paragraph for all gross income received by that person shall be
limited to the difference between sixteen thousand dollars and the
sum of modifications under subdivisions (1), (2), (5), (6) and (7)
of this subsection;
(9)
(A) Federal adjusted gross income in the amount of eight
thousand dollars received from any source after the thirty-first
day of December, one thousand nine hundred eighty-six, by the
surviving spouse of any person who had attained the age of
sixty-five or who had been certified as permanently and totally
disabled, to the extent includable in federal adjusted gross income
for federal tax purposes:
Provided, That:
(i) Where the total modification under subdivisions (1), (2),
(5), (6), (7) and (8) of this subsection is eight thousand dollars
or more, no deduction shall be allowed under this subdivision; and
(ii) Where the total modification under subdivisions (1), (2),
(5), (6), (7) and (8) of this subsection is less than eight
thousand dollars per person, the total modification allowed under
this subdivision for all gross income received by that person shall
be limited to the difference between eight thousand dollars and the
sum of subdivisions (1), (2), (5), (6), (7) and (8) of this
subsection;
The provisions of this paragraph remain applicable for taxable
years beginning prior to the first day of January, two thousand
nine, for all persons otherwise eligible, and the provisions of
paragraph (B) of this subdivision are applicable for taxable years
beginning after the thirty-first day of December, two thousand
eight, exclusively for all persons described in paragraph (B) of
this subdivision in lieu of the provisions of this paragraph, and
as to those persons, no modification shall be allowed under this
paragraph for taxable years beginning after the thirty-first day of
December, two thousand eight;
(B) Notwithstanding any provision of paragraph (A) of this
subdivision to the contrary, federal adjusted gross income in the
amount of sixteen thousand dollars received from any source after
the thirty-first day of December, two thousand eight, by the
surviving spouse of any person who had attained the age of
sixty-five or who had been certified as permanently and totally
disabled, where the surviving spouse during the taxable year
receives survivorship annuities under the West Virginia Public
Employees Retirement System or the West Virginia State Teachers
Retirement System, to the extent includable in gross income for
federal income tax purposes for taxable years beginning after the
thirty-first day of December, two thousand eight, or where the
surviving spouse during the taxable year receives survivorship
annuities under any federal retirement system to which Title 4 U.S.C. §111 applies to the extent includable in gross income for
federal income tax purposes for taxable years beginning after the
thirty-first day of December, two thousand eight: Provided, That:
(i) Where the total modification under subdivisions (1), (2),
(5), (6), (7) and (8) of this subsection is sixteen thousand
dollars or more, no deduction shall be allowed under this
paragraph; and
(ii) Where the total modification under subdivisions (1), (2),
(5), (6), (7) and (8) of this subsection is less than sixteen
thousand dollars per person, the total modification allowed under
this paragraph for all gross income received by that person shall
be limited to the difference between sixteen thousand dollars and
the sum of subdivisions (1), (2), (5), (6), (7) and (8) of this
subsection;
(10) Contributions from any source to a medical savings
account established by or for the individual pursuant to section
twenty, article fifteen, chapter thirty-three of this code or
section fifteen, article sixteen of said chapter, plus interest
earned on the account, to the extent includable in federal adjusted
gross income for federal tax purposes:
Provided, That the amount
subtracted pursuant to this subdivision for any one taxable year
may not exceed two thousand dollars plus interest earned on the
account. For married individuals filing a joint return, the
maximum deduction is computed separately for each individual;
(11) For the two thousand six taxable year only, severance
wages received by a taxpayer from an employer as the result of the
taxpayer's permanent termination from employment through a
reduction in force and through no fault of the employee, not to
exceed thirty thousand dollars. For purposes of this subdivision:
(i) The term "severance wages" means any monetary compensation
paid by the employer in the taxable year as a result of permanent
termination from employment in excess of regular annual wages or
regular annual salary;
(ii) The term "reduction in force" means a net reduction in
the number of employees employed by the employer in West Virginia,
determined based on total West Virginia employment of the
employer"s controlled group;
(iii) The term "controlled group" means one or more chains of
corporations connected through stock ownership with a common parent
corporation if stock possessing at least fifty percent of the
voting power of all classes of stock of each of the corporations is
owned directly or indirectly by one or more of the corporations and
the common parent owns directly stock possessing at least fifty
percent of the voting power of all classes of stock of at least one
of the other corporations;
(iv) The term "corporation" means any corporation, joint-stock
company or association and any business conducted by a trustee or
trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument;
and
(12) Any other income which this state is prohibited from
taxing under the laws of the United States.
(d)
Modification for West Virginia fiduciary adjustment. --
There shall be added to or subtracted from federal adjusted gross
income, as the case may be, the taxpayer's share, as beneficiary of
an estate or trust, of the West Virginia fiduciary adjustment
determined under section nineteen of this article.
(e)
Partners and S corporation shareholders. -- The amounts of
modifications required to be made under this section by a partner
or an S corporation shareholder, which relate to items of income,
gain, loss or deduction of a partnership or an S corporation, shall
be determined under section seventeen of this article.
(f)
Husband and wife. -- If husband and wife determine their
federal income tax on a joint return but determine their West
Virginia income taxes separately, they shall determine their West
Virginia adjusted gross incomes separately as if their federal
adjusted gross incomes had been determined separately.
(g)
Effective date. -- (1) Changes in the language of this
section enacted in the year two thousand shall apply to taxable
years beginning after the thirty-first day of December, two
thousand.
(2) Changes in the language of this section enacted in the year two thousand two shall apply to taxable years beginning after
the thirty-first day of December, two thousand two.