Bill Text: IA SF2402 | 2017-2018 | 87th General Assembly | Introduced

Iowa Senate Bill 2402 (Prior Session Legislation)

Introduced

Bill Title: A bill for an act providing for an exclusion from the individual income tax for certain amounts of governmental pension or retirement pay related to periods of employment not covered by the federal Social Security Act, and including applicability provisions.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2018-04-04 - Subcommittee: Feenstra, Behn, and Jochum. S.J. 887. [SF2402 Detail]

Download: Iowa-2017-SF2402-Introduced.html


Senate File 2402 - Introduced




                                 SENATE FILE       
                                 BY  SMITH

                                      A BILL FOR

  1 An Act providing for an exclusion from the individual
  2    income tax for certain amounts of governmental pension
  3    or retirement pay related to periods of employment not
  4    covered by the federal Social Security Act, and including
  5    applicability provisions.
  6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN



  1  1    Section 1.  Section 422.7, Code 2018, is amended by adding
  1  2 the following new subsection:
  1  3    NEW SUBSECTION.  13A.  a.  Subtract, to the extent included,
  1  4 the total amount of governmental pension or retirement pay
  1  5 received by a taxpayer or the qualified beneficiary of a
  1  6 taxpayer from a public retirement system to the extent the
  1  7 governmental pension or retirement pay relates to a period
  1  8 of public employment that was not covered under Tit. II of
  1  9 the federal Social Security Act and for which social security
  1 10 retirement contributions with respect to wages under the
  1 11 federal Insurance Contributions Act were not made, not to
  1 12 exceed an amount which the taxpayer would have received during
  1 13 the tax year as federal social security retirement benefits for
  1 14 that same period of public employment had the employment been
  1 15 covered under Tit. II of the federal Social Security Act and
  1 16 had social security retirement contributions with respect to
  1 17 wages been made under the federal Insurance Contributions Act.
  1 18    b.  The exclusion of amounts of governmental pension or
  1 19 retirement pay under this subsection is in addition to any
  1 20 exclusion provided under subsection 31.
  1 21    c.  The director of revenue shall adopt rules pursuant to
  1 22 chapter 17A to administer this subsection, including but not
  1 23 limited to rules for determining the amount of social security
  1 24 benefits a taxpayer or the qualified beneficiary would have
  1 25 received during a tax year.
  1 26    Sec. 2.  APPLICABILITY.  This Act applies to tax years
  1 27 beginning on or after January 1, 2019.
  1 28                           EXPLANATION
  1 29 The inclusion of this explanation does not constitute agreement with
  1 30 the explanation's substance by the members of the general assembly.
  1 31    BACKGROUND.  Certain public employers do not participate in
  1 32 the federal old=age, survivors, and disability benefits program
  1 33 under Tit. II of the federal Social Security Act (social
  1 34 security retirement).  Thus, employees of that public employer
  1 35 are not subject to the mandatory wage contributions related
  2  1 to social security retirement under the federal Insurance
  2  2 Contributions Act (FICA social security tax) and do not receive
  2  3 social security retirement benefits with respect to that period
  2  4 of public employment.  Iowa excludes social security retirement
  2  5 benefits from taxation under the individual income tax.
  2  6    BILL CHANGES.  This bill provides an exclusion from the
  2  7 individual income tax for governmental pension or retirement
  2  8 pay received by a taxpayer or the qualified beneficiary of
  2  9 a taxpayer from a public retirement system to the extent it
  2 10 relates to a period of public employment that was not covered
  2 11 by social security retirement and for which FICA social
  2 12 security tax was not collected and paid.  The exclusion cannot
  2 13 exceed an amount equal to the social security retirement
  2 14 benefits the taxpayer would have received during the tax year
  2 15 with respect to that period of public employment had the
  2 16 employment been covered by social security retirement and had
  2 17 FICA social security tax been collected and paid.
  2 18    The bill provides that this exclusion is in addition to the
  2 19 general pension exclusion in Code section 422.7(31).
  2 20    By operation of law, this excluded retirement income will
  2 21 be included in the calculation of net income for purposes of
  2 22 determining the income tax return filing threshold, and for
  2 23 purposes of the alternate tax calculation in Code section
  2 24 422.5, in the same manner as social security retirement
  2 25 benefits are.
  2 26    The bill requires the director of the department of revenue
  2 27 to adopt rules to administer the exemption, including rules for
  2 28 determining the amount of social security benefits a taxpayer
  2 29 or the qualified beneficiary would have received during a tax
  2 30 year.
  2 31    The bill applies to tax years beginning on or after January
  2 32 1, 2019.
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