FISCAL
NOTE
WEST virginia Legislature
2017 regular session
By
[
to the Committee on Pensions and Retirement then Finance
A BILL to amend and
reenact §11-21-12 of
the Code of West Virginia, 1931, as amended, relating to the reduction of state
income taxes for certain state and federal retirees by increasing the exemption
on retirement income in calculating the federal gross income for state personal
income tax purposes.
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.
PART II. RESIDENTS.
§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 The following items are 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 with 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 Deductions 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(7) Amounts withdrawn from a medical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 thirty-three that are used of this
code for a purpose other than payment of medical expenses as defined in
those sections.
(c) Modifications reducing federal adjusted gross income.
-- There shall be The following items are 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 June 30, 1987;
(3) Any Amounts included in federal
adjusted gross income for federal income tax purposes for the taxable year that
is are 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) 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 contrary provisions in this code, to the
contrary this modification shall be is limited to the first
$2,000 of benefits received under the West Virginia Public Employees Retirement
System, 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 December 31, one thousand nine hundred eighty-six 2017
and the first two thousand dollars $20,000 of benefits received
under any federal retirement system to which Title 4 U.S.C. §111 applies. Provided,
however, That However,
the total modification under this paragraph shall subdivision may
not exceed two thousand dollars $20,000
per person receiving retirement benefits and this limitation shall applies
to all returns or amended returns filed for taxable years beginning
after December 31, one thousand nine hundred eighty-eight 2017;
(6) Retirement income received in the form of pensions and
annuities after December 31, 1979, 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 December 31, 2000, and ending prior to January 1, 2003, 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 $30,000 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 December 31, 2000,
including any survivorship annuities, to the extent included in gross income
for federal income tax purposes for the taxable year. For taxable years ending after December
31, 2017, persons claiming a modification for military retirement pursuant to
subdivision (5), subsection (c) of this section and modification under this
subdivision may receive a combined modification of $22,000 total under the two
subdivisions.
(B) For taxable years beginning after December 31, 2002, the
first $20,000 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 December 31, 2002,
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 If any of the
provision of this subdivision are is 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 becomes null
and void. by operation of law
(8) Federal adjusted gross income in the amount of $8,000
received from any source after December 31, 1986, 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 However:
(i) Where the total modification under subdivisions (1), (2),
(5), (6) and (7) of this subsection is $8,000 per person or more, no
deduction shall be is allowed under this subdivision; and
(ii) Where the total modification under subdivisions (1),
(2), (5), (6) and (7) of this subsection is less than $8,000 per person,
the total modification allowed under this subdivision for all gross income
received by that person shall be is limited to the difference
between $8,000 and the sum of modifications under subdivisions (1), (2), (5),
(6) and (7) of this subsection;
(9) Federal adjusted gross income in the amount of $8,000
received from any source after December 31, 1986, 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 However:
(i) Where the total modification under subdivisions (1), (2),
(5), (6), (7) and (8) of this subsection is $8,000 or more, no deduction
shall be is 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 $8,000 per
person, the total modification allowed under this subdivision for all gross
income received by that person shall be is limited to the
difference between $8,000 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 sections fifteen
and 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 However, the amount
subtracted pursuant to this subdivision for any one taxable year may not exceed
$2,000 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 2006 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 $30,000.
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 A taxpayer's share, as beneficiary of an estate or trust, of the West
Virginia fiduciary adjustment determined under section nineteen of this article
is added to or subtracted from federal adjusted gross income, as the case
may be.
(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 relating to items of income, gain,
loss or deduction of a partnership or an S corporation, shall be is
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 2000 shall applies to taxable
years beginning after December 31, 2000.
(2) Changes in the language of this section enacted in the
year 2002 shall applies to taxable years beginning after December
31, 2002.
(3) Changes in the language of this section enacted in the
year 2017 apply to taxable years beginning after December 31, 2017.
NOTE: The purpose of this bill is to reduce state
income taxes for state and federal retirees by increasing the exemption on
retirement income in calculating the federal gross income for state personal
income tax purposes.
Strike-throughs indicate language
that would be stricken from a heading or the present law, and underscoring
indicates new language that would be added.