Citations Affected:
IC 6-3-2.
Synopsis: Taxation of federal retiree benefits. Provides an adjusted
gross income tax deduction for the part of a federal government
pension (including a military pension) equal to the difference between:
(1) the maximum benefits payable under Social Security that could
have been excluded from federal gross income for the year; minus (2)
the Social Security benefits actually received by the taxpayer during the
year. Provides that a taxpayer may not claim both this deduction and
the existing military service deduction or federal civil service
deduction.
Effective: January 1, 2003.
December 7, 2001, read first time and referred to Committee on Finance.
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
SECTION 1.
IC 6-3-2-3.7
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JANUARY 1, 2003]: Sec. 3.7. Each taxable
year, an individual is entitled to an adjusted gross income tax deduction
equal to the remainder of:
(1) the first two thousand dollars ($2,000) which is received by
the individual during the taxable year from a federal civil service
annuity, and which is included in adjusted gross income under
Section 62 of the Internal Revenue Code; minus
(2) the total amount of Social Security benefits and railroad
retirement benefits received by the individual during the taxable
year.
However, the individual is only entitled to the deduction provided by
this section if the individual is at least sixty-two (62) years of age
before the end of the taxable year. A taxpayer may not claim both
this deduction and the deduction available under section 3.9 of this
chapter.
SECTION 2.
IC 6-3-2-3.9
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2003]: Sec. 3.9. (a) As used in this section, "applicable
maximum benefit amount" means the following:
(1) In the case of an unmarried individual, the maximum
individual Social Security benefit.
(2) In the case of a joint return, one hundred fifty percent
(150%) of the maximum individual Social Security benefit.
(3) In the case of a married individual filing a separate return,
seventy-five percent (75%) of the maximum individual Social
Security benefit.
(b) As used in this section, "maximum excludable Social
Security benefits" means an amount equal to that part of the
applicable maximum benefit amount for the taxpayer for the
taxable year that would be excluded from federal gross income
under the Internal Revenue Code if the benefit amount were
treated as Social Security benefits (within the meaning of Section
86(d) of the Internal Revenue Code) received during the taxable
year.
(c) As used in this section, "maximum individual Social Security
benefit" means, with respect to a taxable year, the maximum total
amount that could be paid for all months in the calendar year
ending in the taxable year as old age insurance benefits under
Section 202(a) of the federal Social Security Act (42 U.S.C. 402(a)),
without regard to any reduction, deduction, or offset under Section
202(k) or Section 203 of the federal Social Security Act (42 U.S.C.
402(k) or 42 U.S.C. 403), to any individual who attained retirement
age (as defined in Section 216(l) of the federal Social Security Act
(42 U.S.C. 416(l)), and has filed an application for the benefits by
the first day of the calendar year. However, in the case of an
individual who receives a qualified governmental pension for less
than a full taxable year, the maximum individual Social Security
benefit for the individual for the year shall be reduced as provided
in regulations prescribed by the United States Department of the
Treasury.
(d) As used in this section, "public retirement system" means
any pension, annuity, retirement, or similar fund or system
established by the United States, including military retirement
systems.
(e) As used in this section, "qualified governmental pension"
means any pension or annuity received under a public retirement
system to the extent the pension or annuity is not attributable to
service that:
(1) constitutes employment for purposes of Chapter 21 of the
Internal Revenue Code (relating to the Federal Insurance
Contributions Act); or
(2) is covered by an agreement made under Section 218 of the
federal Social Security Act (42 U.S.C. 418).
(f) Subject to subsection (g), each taxable year an individual, or
the individual's surviving spouse, is entitled to an adjusted gross
income tax deduction for amounts that are:
(1) received by the individual or surviving spouse as a
qualified governmental pension for service performed by the
individual; and
(2) included in federal adjusted gross income.
(g) The deduction under subsection (f) for a taxable year may
not exceed the result of:
(1) the maximum excludable Social Security benefits of the
individual or surviving spouse for the year; minus
(2) the Social Security benefits (within the meaning of Section
86(d) of the Internal Revenue Code) that:
(A) are received by the individual or surviving spouse
during the taxable year; and
(B) are excluded from federal gross income.
SECTION 3.
IC 6-3-2-4
IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JANUARY 1, 2003]: Sec. 4. Each taxable year, an
individual, or the individual's surviving spouse, is entitled to an
adjusted gross income tax deduction for the first two thousand dollars
($2,000) of income, including retirement or survivor's benefits,
received during the taxable year by the individual, or the individual's
surviving spouse, for the individual's service in an active or reserve
component of the armed forces of the United States, including the
army, navy, air force, coast guard, marine corps, merchant marine,
Indiana army national guard, or Indiana air national guard. However,
a person who is less than sixty (60) years of age on the last day of the
person's taxable year, is not, for that taxable year, entitled to a
deduction under this section for retirement or survivor's benefits. A
taxpayer may not claim both this deduction and the deduction
available under section 3.9 of this chapter.
SECTION 4. [EFFECTIVE JANUARY 1, 2003] (a)
IC 6-3-2-3.9
,
as added by this act, applies only to taxable years beginning after
December 31, 2002.
(b)
IC 6-3-2-3.7
and
IC 6-3-2-4
, both as amended by this act,
apply only to taxable years beginning after December 31, 2002.