H. B. 4023
(By Delegates Compton, Givens and Flanigan)
[Introduced January 13, 2000; referred to the
Committee on Finance then Veterans Affairs.]
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 exempting
all monetary benefits derived from military retirement from
personal income tax obligations.
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 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 in federal adjusted gross income 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(7) Amounts withdrawn from a medical savings account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 or section fifteen, article sixteen, both of chapter
thirty-three of this code, 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 in federal adjusted gross income:
(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) 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 is 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 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 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 subdivision shall may not
exceed two thousand dollars per person receiving retirement
benefits
under the West Virginia public employees retirement
system and the West Virginia state teachers retirement system and
this limitation
shall apply applies 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 firemens' retirement system or the West
Virginia
department of public safety state police death,
disability and retirement fund, including any survivorship
annuities derived therefrom, to the extent includable in gross
income for federal income tax purposes;
(7) In recognition of the distinct and sacrificial nature of
a career in military service, involving repetitive periods of hazardous duty assignments, enduring numerous family separations
and being subjected to extreme personal hardships, all forms of
military retirement income, including regular armed forces,
reserves and national guard and any survivorship annuities
derived therefrom to the extent includable in federal adjusted
gross income for any taxable year beginning after the
thirty-first day of December, two thousand;
(7) (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 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) 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 that person shall be
limited to the difference between eight thousand dollars and the
sum of modifications under subdivisions (1), (2), (5) and (6) of
this subsection;
(8) (9) 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) 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 that person
shall be limited to the difference between eight thousand dollars and the sum of subdivisions (1), (2), (5), (6) and (7) of this
subsection;
(9) (10) Contributions from any source to a medical savings
account established by or for the individual pursuant to section
twenty, article fifteen or section fifteen, article sixteen,
chapter thirty-three of this code, 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) 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; and
(10) (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. -- Changes in the language of this
section enacted in the year one thousand nine hundred ninety-six
shall apply to taxable years beginning after the thirty-first day
of December, one thousand nine hundred ninety-five.
NOTE: The purpose of this bill is to exempt any income
derived from military retirement as gross income for purposes of
calculating an individual's personal income tax obligation to
West Virginia.
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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