Bill Text: MI HB4230 | 2009-2010 | 95th Legislature | Engrossed
Bill Title: Income tax; deductions; initial angel investment minimum requirement; revise. Amends sec. 30 of 1967 PA 281 (MCL 206.30).
Spectrum: Slight Partisan Bill (Democrat 37-13)
Status: (Introduced - Dead) 2009-03-03 - Referred To Committee On Economic Development And Regulatory Reform [HB4230 Detail]
Download: Michigan-2009-HB4230-Engrossed.html
HB-4230, As Passed House, February 26, 2009
HOUSE BILL No. 4230
February 10, 2009, Introduced by Reps. Scripps, Clemente, Knollenberg, Meekhof, Calley, Proos, Byrnes and Schuitmaker and referred to the Committee on New Economy and Quality of Life.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 30 (MCL 206.30), as amended by 2007 PA 154.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 30. (1) "Taxable income" means, for a person other than a
corporation, estate, or trust, adjusted gross income as defined in
the internal revenue code subject to the following adjustments
under this section:
(a) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, in the
same amount that has been excluded from adjusted gross income less
related expenses not deducted in computing adjusted gross income
because of section 265(a)(1) of the internal revenue code.
(b) Add taxes on or measured by income to the extent the taxes
have been deducted in arriving at adjusted gross income.
(c) Add losses on the sale or exchange of obligations of the
United States government, the income of which this state is
prohibited from subjecting to a net income tax, to the extent that
the loss has been deducted in arriving at adjusted gross income.
(d) Deduct, to the extent included in adjusted gross income,
income derived from obligations, or the sale or exchange of
obligations, of the United States government that this state is
prohibited by law from subjecting to a net income tax, reduced by
any interest on indebtedness incurred in carrying the obligations
and by any expenses incurred in the production of that income to
the extent that the expenses, including amortizable bond premiums,
were deducted in arriving at adjusted gross income.
(e) Deduct, to the extent included in adjusted gross income,
compensation, including retirement benefits, received for services
in the armed forces of the United States.
(f) Deduct the following to the extent included in adjusted
gross income:
(i) Retirement or pension benefits received from a federal
public retirement system or from a public retirement system of or
created by this state or a political subdivision of this state.
(ii) Retirement or pension benefits received from a public
retirement system of or created by another state or any of its
political subdivisions if the income tax laws of the other state
permit a similar deduction or exemption or a reciprocal deduction
or exemption of a retirement or pension benefit received from a
public retirement system of or created by this state or any of the
political subdivisions of this state.
(iii) Social security benefits as defined in section 86 of the
internal revenue code.
(iv) Beginning on and after January 1, 2007, retirement or
pension benefits not deductible under subparagraph (i) or
subdivision (e) from any other retirement or pension system or
benefits from a retirement annuity policy in which payments are
made for life to a senior citizen, to a maximum of $42,240.00 for a
single return and $84,480.00 for a joint return. The maximum
amounts allowed under this subparagraph shall be reduced by the
amount of the deduction for retirement or pension benefits claimed
under subparagraph (i) or subdivision (e) and by the amount of a
deduction claimed under subdivision (r). For the 2008 tax year and
each tax year after 2008, the maximum amounts allowed under this
subparagraph shall be adjusted by the percentage increase in the
United States consumer price index for the immediately preceding
calendar year. The department shall annualize the amounts provided
in this subparagraph as necessary. As used in this subparagraph,
"senior citizen" means that term as defined in section 514.
(v) The amount determined to be the section 22 amount eligible
for the elderly and the permanently and totally disabled credit
provided in section 22 of the internal revenue code.
(g) Adjustments resulting from the application of section 271.
(h) Adjustments with respect to estate and trust income as
provided in section 36.
(i) Adjustments resulting from the allocation and
apportionment provisions of chapter 3.
(j) Deduct political contributions as described in section 4
of the Michigan campaign finance act, 1976 PA 388, MCL 169.204, or
2 USC 431, not in excess of $50.00 per annum, or $100.00 per annum
for a joint return.
(k) Deduct, to the extent included in adjusted gross income,
wages not deductible under section 280C of the internal revenue
code.
(l) Deduct the following payments made by the taxpayer in the
tax year:
(i) The amount of payment made under an advance tuition payment
contract as provided in the Michigan education trust act, 1986 PA
316, MCL 390.1421 to 390.1442.
(ii) The amount of payment made under a contract with a private
sector investment manager that meets all of the following criteria:
(A) The contract is certified and approved by the board of
directors of the Michigan education trust to provide equivalent
benefits and rights to purchasers and beneficiaries as an advance
tuition payment contract as described in subparagraph (i).
(B) The contract applies only for a state institution of
higher education as defined in the Michigan education trust act,
1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior
college in Michigan.
(C) The contract provides for enrollment by the contract's
qualified beneficiary in not less than 4 years after the date on
which the contract is entered into.
(D) The contract is entered into after either of the
following:
(I) The purchaser has had his or her offer to enter into an
advance tuition payment contract rejected by the board of directors
of the Michigan education trust, if the board determines that the
trust cannot accept an unlimited number of enrollees upon an
actuarially sound basis.
(II) The board of directors of the Michigan education trust
determines that the trust can accept an unlimited number of
enrollees upon an actuarially sound basis.
(m) If an advance tuition payment contract under the Michigan
education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, or
another contract for which the payment was deductible under
subdivision (l) is terminated and the qualified beneficiary under
that contract does not attend a university, college, junior or
community college, or other institution of higher education, add
the amount of a refund received by the taxpayer as a result of that
termination or the amount of the deduction taken under subdivision
(l) for payment made under that contract, whichever is less.
(n) Deduct from the taxable income of a purchaser the amount
included as income to the purchaser under the internal revenue code
after the advance tuition payment contract entered into under the
Michigan education trust act, 1986 PA 316, MCL 390.1421 to
390.1442, is terminated because the qualified beneficiary attends
an institution of postsecondary education other than either a state
institution of higher education or an institution of postsecondary
education located outside this state with which a state institution
of higher education has reciprocity.
(o) Add, to the extent deducted in determining adjusted gross
income, the net operating loss deduction under section 172 of the
internal revenue code.
(p) Deduct a net operating loss deduction for the taxable year
as determined under section 172 of the internal revenue code
subject to the modifications under section 172(b)(2) of the
internal revenue code and subject to the allocation and
apportionment provisions of chapter 3 of this act for the taxable
year in which the loss was incurred.
(q) Deduct, to the extent included in adjusted gross income,
benefits from a discriminatory self-insurance medical expense
reimbursement plan.
(r) Beginning on and after January 1, 2007, a taxpayer who is
a senior citizen may deduct to the extent included in adjusted
gross income, interest, dividends, and capital gains received in
the tax year not to exceed $9,420.00 for a single return and
$18,840.00 for a joint return. The maximum amounts allowed under
this subdivision shall be reduced by the amount of a deduction
claimed for retirement benefits under subdivision (e) or a
deduction claimed under subdivision (f)(i), (ii), (iv), or (v). For
the 2008 tax year and each tax year after 2008, the maximum amounts
allowed under this subdivision shall be adjusted by the percentage
increase in the United States consumer price index for the
immediately preceding calendar year. The department shall annualize
the amounts provided in this subdivision as necessary. As used in
this subdivision, "senior citizen" means that term as defined in
section 514.
(s) Deduct, to the extent included in adjusted gross income,
all of the following:
(i) The amount of a refund received in the tax year based on
taxes paid under this act.
(ii) The amount of a refund received in the tax year based on
taxes paid under the city income tax act, 1964 PA 284, MCL 141.501
to 141.787.
(iii) The amount of a credit received in the tax year based on a
claim filed under sections 520 and 522 to the extent that the taxes
used to calculate the credit were not used to reduce adjusted gross
income for a prior year.
(t) Add the amount paid by the state on behalf of the taxpayer
in the tax year to repay the outstanding principal on a loan taken
on which the taxpayer defaulted that was to fund an advance tuition
payment contract entered into under the Michigan education trust
act, 1986 PA 316, MCL 390.1421 to 390.1442, if the cost of the
advance tuition payment contract was deducted under subdivision (l)
and was financed with a Michigan education trust secured loan.
(u) Deduct the amount calculated under section 30d.
(v) Deduct, to the extent included in adjusted gross income,
any amount, and any interest earned on that amount, received in the
tax year by a taxpayer who is a Holocaust victim as a result of a
settlement of claims against any entity or individual for any
recovered asset pursuant to the German act regulating unresolved
property claims, also known as Gesetz zur Regelung offener
Vermogensfragen, as a result of the settlement of the action
entitled In re: Holocaust victim assets litigation, CV-96-4849, CV-
96-5161, and CV-97-0461 (E.D. NY), or as a result of any similar
action if the income and interest are not commingled in any way
with and are kept separate from all other funds and assets of the
taxpayer. As used in this subdivision:
(i) "Holocaust victim" means a person, or the heir or
beneficiary of that person, who was persecuted by Nazi Germany or
any Axis regime during any period from 1933 to 1945.
(ii) "Recovered asset" means any asset of any type and any
interest earned on that asset including, but not limited to, bank
deposits, insurance proceeds, or artwork owned by a Holocaust
victim during the period from 1920 to 1945, withheld from that
Holocaust victim from and after 1945, and not recovered, returned,
or otherwise compensated to the Holocaust victim until after 1993.
(w) Deduct, to the extent not deducted in determining adjusted
gross income, both of the following:
(i) Contributions made by the taxpayer in the tax year less
qualified withdrawals made in the tax year from education savings
accounts, calculated on a per education savings account basis,
pursuant to the Michigan education savings program act, 2000 PA
161, MCL 390.1471 to 390.1486, not to exceed a total deduction of
$5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for each
education savings account shall not be less than zero.
(ii) The amount under section 30f.
(x) Add, to the extent not included in adjusted gross income,
the amount of money withdrawn by the taxpayer in the tax year from
education savings accounts, not to exceed the total amount deducted
under subdivision (w) in the tax year and all previous tax years,
if the withdrawal was not a qualified withdrawal as provided in the
Michigan education savings program act, 2000 PA 161, MCL 390.1471
to 390.1486. This subdivision does not apply to withdrawals that
are less than the sum of all contributions made to an education
savings account in all previous tax years for which no deduction
was claimed under subdivision (w), less any contributions for which
no deduction was claimed under subdivision (w) that were withdrawn
in all previous tax years.
(y) Deduct, to the extent included in adjusted gross income,
the amount of a distribution from individual retirement accounts
that qualify under section 408 of the internal revenue code if the
distribution is used to pay qualified higher education expenses as
that term is defined in the Michigan education savings program act,
2000 PA 161, MCL 390.1471 to 390.1486.
(z) Deduct, to the extent included in adjusted gross income,
an amount equal to the qualified charitable distribution made in
the tax year by a taxpayer to a charitable organization. The amount
allowed under this subdivision shall be equal to the amount
deductible
by the taxpayer under section 170(c) 170 of the internal
revenue code with respect to the qualified charitable distribution
in the tax year in which the taxpayer makes the distribution to the
qualified charitable organization, reduced by both the amount of
the deduction for retirement or pension benefits claimed by the
taxpayer under subdivision (f)(i), (ii), (iv), or (v) and by 2 times
the total amount of credits claimed under sections 260 and 261 for
the tax year. As used in this subdivision, "qualified charitable
distribution" means a distribution of assets to a qualified
charitable organization by a taxpayer not more than 60 days after
the date on which the taxpayer received the assets as a
distribution from a retirement or pension plan described in
subsection (8)(a). A distribution is to a qualified charitable
organization if the distribution is made in any of the following
circumstances:
(i) To an organization described in section 501(c)(3) of the
internal revenue code except an organization that is controlled by
a political party, an elected official or a candidate for an
elective office.
(ii) To a charitable remainder annuity trust or a charitable
remainder unitrust as defined in section 664(d) of the internal
revenue code; to a pooled income fund as defined in section
642(c)(5) of the internal revenue code; or for the issuance of a
charitable gift annuity as defined in section 501(m)(5) of the
internal revenue code. A trust, fund, or annuity described in this
subparagraph is a qualified charitable organization only if no
person holds any interest in the trust, fund, or annuity other than
1 or more of the following:
(A) The taxpayer who received the distribution from the
retirement or pension plan.
(B) The spouse of an individual described in sub-subparagraph
(A).
(C) An organization described in section 501(c)(3) of the
internal revenue code.
(aa) A taxpayer who is a resident tribal member may deduct, to
the extent included in adjusted gross income, all nonbusiness
income earned or received in the tax year and during the period in
which an agreement entered into between the taxpayer's tribe and
this state pursuant to section 30c of 1941 PA 122, MCL 205.30c, is
in full force and effect. As used in this subdivision:
(i) "Business income" means business income as defined in
section 4 and apportioned under chapter 3.
(ii) "Nonbusiness income" means nonbusiness income as defined
in section 14 and, to the extent not included in business income,
all of the following:
(A) All income derived from wages whether the wages are earned
within the agreement area or outside of the agreement area.
(B) All interest and passive dividends.
(C) All rents and royalties derived from real property located
within the agreement area.
(D) All rents and royalties derived from tangible personal
property, to the extent the personal property is utilized within
the agreement area.
(E) Capital gains from the sale or exchange of real property
located within the agreement area.
(F) Capital gains from the sale or exchange of tangible
personal property located within the agreement area at the time of
sale.
(G) Capital gains from the sale or exchange of intangible
personal property.
(H) All pension income and benefits including, but not limited
to, distributions from a 401(k) plan, individual retirement
accounts under section 408 of the internal revenue code, or a
defined contribution plan, or payments from a defined benefit plan.
(I) All per capita payments by the tribe to resident tribal
members, without regard to the source of payment.
(J) All gaming winnings.
(iii) "Resident tribal member" means an individual who meets all
of the following criteria:
(A) Is an enrolled member of a federally recognized tribe.
(B) The individual's tribe has an agreement with this state
pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in
full force and effect.
(C) The individual's principal place of residence is located
within the agreement area as designated in the agreement under sub-
subparagraph (B).
(bb) For tax years that begin after December 31, 2006, deduct,
to the extent included in adjusted gross income, all or a portion
of
the gain, as determined under this section, realized from an a
total initial equity investment of not less than $100,000.00 made
by
the taxpayer before December 31, 2009,
in a qualified business,
if the taxpayer's share of the total initial investment is at least
$25,000.00 and if an amount equal to the sum of the taxpayer's
basis in the investment as determined under the internal revenue
code plus the gain, or a portion of that amount, is reinvested in
an
a total equity investment of at least $100,000.00 in a
qualified
business within 1 year after the sale or disposition of the
investment in the qualified business. If the amount of the
taxpayer's subsequent investment is less than the sum of the
taxpayer's basis from the prior equity investment plus the gain
from the prior equity investment, the amount of a deduction under
this section shall be reduced by the difference between the sum of
the taxpayer's basis from the prior equity investment plus the gain
from the prior equity investment and the subsequent investment. As
used in this subdivision:
(i) "Advanced automotive, manufacturing, and materials
technology" means any technology that involves 1 or more of the
following:
(A) Materials with engineered properties created through the
development of specialized process and synthesis technology.
(B) Nanotechnology, including materials, devices, or systems
at the atomic, molecular, or macromolecular level, with a scale
measured in nanometers.
(C) Microelectromechanical systems, including devices or
systems integrating microelectronics with mechanical parts and a
scale measured in micrometers.
(D) Improvements to vehicle safety, vehicle performance,
vehicle production, or environmental impact, including, but not
limited to, vehicle equipment and component parts.
(E) Any technology that involves an alternative energy vehicle
or its components. "Alternative energy vehicle" means that term as
defined in section 2 of the Michigan next energy authority act,
2002 PA 593, MCL 207.822.
(F) A new technology, device, or system that enhances or
improves the manufacturing process of wood, timber, or
agricultural-based products.
(G) Advanced computing or electronic device technology related
to technology described under this subparagraph.
(H) Design, engineering, testing, or diagnostics related to
technology described under this subparagraph.
(I) Product research and development related to technology
described under this subparagraph.
(ii) "Advanced computing" means any technology used in the
design and development of 1 or more of the following:
(A) Computer hardware and software.
(B) Data communications.
(C) Information technologies.
(iii) "Alternative energy technology" means applied research or
commercialization of new or next generation technology in 1 or more
of the following:
(A) Alternative energy technology as that term is defined in
section 2 of the Michigan next energy authority act, 2002 PA 593,
MCL 207.822.
(B) Devices or systems designed and used solely for the
purpose of generating energy from agricultural crops, residue and
waste generated from the production and processing of agricultural
products, animal wastes, or food processing wastes, not including a
conventional gasoline or diesel fuel engine or a retrofitted
conventional gasoline or diesel fuel engine.
(C) A new technology, product, or system that permits the
utilization of biomass for the production of specialty, commodity,
or foundational chemicals or of novel or economical commodity
materials through the application of biotechnology that minimizes,
complements, or replaces reliance on petroleum for the production.
(D) Advanced computing or electronic device technology related
to technology described under this subparagraph.
(E) Design, engineering, testing, or diagnostics related to
technology described under this subparagraph.
(F) Product research and development related to a technology
described under this subparagraph.
(iv) "Competitive edge technology" means 1 or more of the
following:
(A) Advanced automotive, manufacturing, and materials
technology.
(B) Alternative energy technology.
(C) Homeland security and defense technology.
(D) Life sciences technology.
(v) "Electronic device technology" means any technology that
involves microelectronics, semiconductors, electronic equipment,
and instrumentation, radio frequency, microwave, and millimeter
electronics; optical and optic-electrical devices; or data and
digital communications and imaging devices.
(vi) "Homeland security and defense technology" means
technology that assists in the assessment of threats or damage to
the general population and critical infrastructure, protection of,
defense against, or mitigation of the effects of foreign or
domestic threats, disasters, or attacks, or support for crisis or
response management, including, but not limited to, 1 or more of
the following:
(A) Sensors, systems, processes, or equipment for
communications, identification and authentication, screening,
surveillance, tracking, and data analysis.
(B) Advanced computing or electronic device technology related
to technology described under this subparagraph.
(C) Aviation technology including, but not limited to,
avionics, airframe design, sensors, early warning systems, and
services related to the technology described in this subparagraph.
(D) Design, engineering, testing, or diagnostics related to
technology described under this subparagraph.
(E) Product research and development related to technology
described under this subparagraph.
(vii) "Life sciences technology" means any technology derived
from life sciences intended to improve human health or the overall
quality of human life, including, but not limited to, systems,
processes, or equipment for drug or gene therapies, biosensors,
testing, medical devices or instrumentation with a therapeutic or
diagnostic value, a pharmaceutical or other product that requires
United States food and drug administration approval or registration
prior to its introduction in the marketplace and is a drug or
medical device as defined by the federal food, drug, and cosmetic
act, 21 USC 301 to 399, or 1 or more of the following:
(A) Advanced computing or electronic device technology related
to technology described under this subparagraph.
(B) Design, engineering, testing, or diagnostics related to
technology or the commercial manufacturing of technology described
under this subparagraph.
(C) Product research and development related to technology
described under this subparagraph.
(viii) "Life sciences" means science for the examination or
understanding of life or life processes, including, but not limited
to, all of the following:
(A) Bioengineering.
(B) Biomedical engineering.
(C) Genomics.
(D) Proteomics.
(E) Molecular and chemical ecology.
(F) Biotechnology, including any technology that uses living
organisms, cells, macromolecules, microorganisms, or substances
from living organisms to make or modify a product for useful
purposes. Biotechnology or life sciences do not include any of the
following:
(I) Activities prohibited under section 2685 of the public
health code, 1978 PA 368, MCL 333.2685.
(II) Activities prohibited under section 2688 of the public
health code, 1978 PA 368, MCL 333.2688.
(III) Activities prohibited under section 2690 of the public
health code, 1978 PA 368, MCL 333.2690.
(IV) Activities prohibited under section 16274 of the public
health code, 1978 PA 368, MCL 333.16274.
(V) Stem cell research with human embryonic tissue.
(ix) "Qualified business" means a business that complies with
all of the following:
(A) The business is a seed or early stage business as defined
in section 3 of the Michigan early stage venture investment act of
2003, 2003 PA 296, MCL 125.2233.
(B) The business has its headquarters in this state, is
domiciled in this state, or has a majority of its employees working
a majority of their time in this state.
(C) The business has a preinvestment valuation of less than
$10,000,000.00.
(D) The business has been in existence less than 5 years. This
sub-subparagraph does not apply to a business, the business
activity of which is derived from research at an institution of
higher education located within this state or an organization
exempt from federal taxation under section 501c(3) of the internal
revenue code and that is located within this state.
(E) The business is engaged only in competitive edge
technology.
(F) The business is certified by the Michigan strategic fund
as meeting the requirements of sub-subparagraphs (A) to (E) at the
time of each proposed investment.
(2) Except as otherwise provided in subsection (7), a personal
exemption of $2,500.00 multiplied by the number of personal or
dependency exemptions allowable on the taxpayer's federal income
tax return pursuant to the internal revenue code shall be
subtracted in the calculation that determines taxable income.
(3) Except as otherwise provided in subsection (7), a single
additional exemption determined as follows shall be subtracted in
the calculation that determines taxable income in each of the
following circumstances:
(a) $1,800.00 for each taxpayer and every dependent of the
taxpayer who is 65 years of age or older. When a dependent of a
taxpayer files an annual return under this act, the taxpayer or
dependent of the taxpayer, but not both, may claim the additional
exemption allowed under this subdivision. As used in this
subdivision and subdivision (c), "dependent" means that term as
defined in section 30e.
(b) $1,800.00 for each taxpayer and every dependent of the
taxpayer who is a deaf person as defined in section 2 of the deaf
persons' interpreters act, 1982 PA 204, MCL 393.502; a paraplegic,
a quadriplegic, or a hemiplegic; a person who is blind as defined
in section 504; or a person who is totally and permanently disabled
as defined in section 522. When a dependent of a taxpayer files an
annual return under this act, the taxpayer or dependent of the
taxpayer, but not both, may claim the additional exemption allowed
under this subdivision.
(c) $1,800.00 if the taxpayer's return includes unemployment
compensation that amounts to 50% or more of adjusted gross income.
(d) For tax years beginning after 2007, $250.00 for each
taxpayer and every dependent of the taxpayer who is a qualified
disabled veteran. When a dependent of a taxpayer files an annual
return under this act, the taxpayer or dependent of the taxpayer,
but not both, may claim the additional exemption allowed under this
subdivision. As used in this subdivision:
(i) "Qualified disabled veteran" means a veteran with a
service-connected disability.
(ii) "Service-connected disability" means a disability incurred
or aggravated in the line of duty in the active military, naval, or
air service as described in 38 USC 101(16).
(iii) "Veteran" means a person who served in the active
military, naval, marine, coast guard, or air service and who was
discharged or released from his or her service with an honorable or
general discharge.
(4) An individual with respect to whom a deduction under
section 151 of the internal revenue code is allowable to another
federal taxpayer during the tax year is not considered to have an
allowable federal exemption for purposes of subsection (2), but may
subtract $1,500.00 in the calculation that determines taxable
income for a tax year.
(5) A nonresident or a part-year resident is allowed that
proportion of an exemption or deduction allowed under subsection
(2), (3), or (4) that the taxpayer's portion of adjusted gross
income from Michigan sources bears to the taxpayer's total adjusted
gross income.
(6) In calculating taxable income, a taxpayer shall not
subtract from adjusted gross income the amount of prizes won by the
taxpayer under the McCauley-Traxler-Law-Bowman-McNeely lottery act,
1972 PA 239, MCL 432.1 to 432.47.
(7) For each tax year, the personal exemption allowed under
subsection (2) shall be adjusted by multiplying the exemption for
the tax year beginning in 1997 by a fraction, the numerator of
which is the United States consumer price index for the state
fiscal year ending in the tax year prior to the tax year for which
the adjustment is being made and the denominator of which is the
United States consumer price index for the 1995-96 state fiscal
year. The resultant product shall be rounded to the nearest $100.00
increment. The personal exemption for the tax year shall be
determined by adding $200.00 to that rounded amount. As used in
this section, "United States consumer price index" means the United
States consumer price index for all urban consumers as defined and
reported by the United States department of labor, bureau of labor
statistics. For each tax year, the exemptions allowed under
subsection (3) shall be adjusted by multiplying the exemption
amount under subsection (3) for the tax year by a fraction, the
numerator of which is the United States consumer price index for
the state fiscal year ending the tax year prior to the tax year for
which the adjustment is being made and the denominator of which is
the United States consumer price index for the 1998-1999 state
fiscal year. The resultant product shall be rounded to the nearest
$100.00 increment.
(8) As used in subsection (1)(f), "retirement or pension
benefits" means distributions from all of the following:
(a) Except as provided in subdivision (d), qualified pension
trusts and annuity plans that qualify under section 401(a) of the
internal revenue code, including all of the following:
(i) Plans for self-employed persons, commonly known as Keogh or
HR10 plans.
(ii) Individual retirement accounts that qualify under section
408 of the internal revenue code if the distributions are not made
until the participant has reached 59-1/2 years of age, except in
the case of death, disability, or distributions described by
section 72(t)(2)(A)(iv) of the internal revenue code.
(iii) Employee annuities or tax-sheltered annuities purchased
under section 403(b) of the internal revenue code by organizations
exempt under section 501(c)(3) of the internal revenue code, or by
public school systems.
(iv) Distributions from a 401(k) plan attributable to employee
contributions mandated by the plan or attributable to employer
contributions.
(b) The following retirement and pension plans not qualified
under the internal revenue code:
(i) Plans of the United States, state governments other than
this state, and political subdivisions, agencies, or
instrumentalities of this state.
(ii) Plans maintained by a church or a convention or
association of churches.
(iii) All other unqualified pension plans that prescribe
eligibility for retirement and predetermine contributions and
benefits if the distributions are made from a pension trust.
(c) Retirement or pension benefits received by a surviving
spouse if those benefits qualified for a deduction prior to the
decedent's death. Benefits received by a surviving child are not
deductible.
(d) Retirement and pension benefits do not include:
(i) Amounts received from a plan that allows the employee to
set the amount of compensation to be deferred and does not
prescribe retirement age or years of service. These plans include,
but are not limited to, all of the following:
(A) Deferred compensation plans under section 457 of the
internal revenue code.
(B) Distributions from plans under section 401(k) of the
internal revenue code other than plans described in subdivision
(a)(iv).
(C) Distributions from plans under section 403(b) of the
internal revenue code other than plans described in subdivision
(a)(iii).
(ii) Premature distributions paid on separation, withdrawal, or
discontinuance of a plan prior to the earliest date the recipient
could have retired under the provisions of the plan.
(iii) Payments received as an incentive to retire early unless
the distributions are from a pension trust.
