Senate Bill No. 224
(By Senators Helmick, Ross, Anderson, Bailey,
Blatnik, Boley, Burdette, Mr. President, Chafin, Chernenko,
Claypole, Craigo, Dalton, Dittmar, Humphreys, Jones, Manchin,
Miller, Plymale, Schoonover, Sharpe, Tomblin, Wagner, Whitlow,
Withers, Wooton and Yoder)
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[Introduced January 31, 1994; referred to the Committee
on Finance.]
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A BILL to amend and reenact section twelve, article twenty-one,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, relating to exemption
from personal income tax of all monetary benefits derived
from military pensions.
Be it enacted by the Legislature of West Virginia:
That section twelve, article twenty-one, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one,
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 ofa resident individual means his 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 such 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) Income taxes imposed by this state or any other taxing
jurisdiction, to the extent deductible in determining federal
adjusted gross income and not credited against federal income
tax: Provided, That this modification shall not be made for
taxable years beginning after the thirty-first day of December,
one thousand nine hundred eighty-six;
(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 grossincome under section 128 of the Internal Revenue Code, for the
federal taxable year;
(6) The amount allowed as a deduction from federal gross
income under section 221 of the Internal Revenue Code by married
couples who file a joint federal return for the federal taxable
year: Provided, That this modification shall not be made for
taxable years beginning after the thirty-first day of December,
one thousand nine hundred eighty-six;
(7) The deferral value of certain income that is not
recognized for federal tax purposes, which value shall be an
amount equal to a percentage of the amount allowed as a deduction
in determining federal adjusted gross income pursuant to the
accelerated cost recovery system under section 168 of the
Internal Revenue Code for the federal taxable year, with the
percentage of the federal deduction to be added as follows with
respect to the following recovery property: Three-year property
-- no modification; five-year property -- ten percent; ten-year
property -- fifteen percent; fifteen-year public utility property
-- twenty-five percent; and fifteen-year real property -- thirty-
five percent: Provided, That this modification shall not apply
to any person whose federal deduction is determined by the use of
the straight line method: Provided, however, That this
modification shall not be made for taxable years beginning after
the thirty-first day of December, one thousand nine hundred
eighty-six; and
(8) The amount of a lump sum distribution for which thetaxpayer has elected under section 402(e) of the Internal Revenue
Code of 1986, as amended, to be separately taxed for federal
income tax purposes.
(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 includible 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 includible
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 gain from the sale or other disposition of property
having a higher fair market value on the first day of January,
one thousand nine hundred sixty-one, than the adjusted basis at
said date for federal income tax purposes: Provided, That the
amount of this adjustment is limited to that portion of any such
gain which does not exceed the difference between such fair
market value and such adjusted basis: Provided, however, That ifsuch gain is considered a long-term capital gain for federal
income tax purposes, the modification shall be limited to forty
percent of such portion of the gain: Provided further, That this
modification shall not be made for taxable years beginning after
the thirty-first day of December, one thousand nine hundred
eighty-six;
(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) 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 includible 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, 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 includible in gross income for federal income tax
purposes for taxable years beginning after the thirty-first dayof 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 such 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;
(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
department of public safety death, disability and retirement
fund, including any survivorship annuities derived therefrom, to
the extent includible in gross income for federal income tax
purposes;
(7) 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 includible in federal adjusted gross income for federal
tax purposes:
Provided,
That if a person has a medical
certification from a prior year and he is still permanently andtotally 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) and (6) 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) and (6) of this subsection is less than eight thousand
dollars per person, the total modification allowed under this
subdivision for all gross income received by such person shall be
limited to the difference between eight thousand dollars and the
sum of modifications under such subdivisions;
(8) 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 includible in federal adjusted gross
income for federal tax purposes:
Provided,
That:
(i) Where the total modification under subdivisions (1),
(2), (5), (6) and (7) 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) 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 such person
shall be limited to the difference between eight thousand dollars
and the sum of such subdivisions;
(9) Any pay or allowances received, after the thirty-first
day of December, one thousand nine hundred seventy-nine, by West
Virginia residents who have not attained the age of sixty-five,
as compensation for active service in the armed forces of the
United States:
Provided,
That such deduction shall be limited to
an amount not to exceed four thousand dollars:
Provided,
however,
That this modification shall not be made for taxable
years beginning after the thirty-first day of December, one
thousand nine hundred eighty-six;
(10) Gross income to the extent included in federal adjusted
gross income under section 86 of the Internal Revenue Code for
federal income tax purposes:
Provided,
That this modification
shall not be made for taxable years beginning after the thirty-
first day of December, one thousand nine hundred eighty-six;
(11) The amount of any lottery prize awarded by the West
Virginia state lottery commission, to the extent properly
included in gross income for federal income tax purposes:
Provided, That for taxable years beginning after the thirty-first
day of December, one thousand nine hundred ninety-two, this
modification shall not be made for lottery prizes awarded by the
West Virginia state lottery commission;
(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.
NOTE: The purpose of this bill is to exempt any income
derived from military pensions from West Virginia state income
tax.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
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