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March 24, 2021 - Introduced by Senators Kooyenga, Wirch and L. Taylor,
cosponsored by Representatives Armstrong, Ohnstad, Brooks, Anderson,
Baldeh, Cabrera, Conley, Doyle, Hebl, Kerkman, Knodl, McGuire, B.
Meyers
, Moses, Neubauer, S. Rodriguez, Rozar, Shankland, Sinicki,
Skowronski, Spreitzer, Stubbs, Subeck, VanderMeer, Vruwink and Drake.
Referred to Committee on Financial Institutions and Revenue.
SB246,1,3 1An Act to amend 71.05 (1) (an), 71.05 (6) (b) 4. (intro.), 71.05 (6) (b) 54. (intro.)
2and 71.83 (1) (a) 6.; and to create 71.05 (1) (ad) of the statutes; relating to:
3exempting from taxation the pension benefits of certain federal employees.
Analysis by the Legislative Reference Bureau
This bill exempts from taxation up to $8,000 in payments received in 2021 by
an individual from the U.S. Civil Service Retirement System and the full amount of
such payments received in 2022 and beyond. Under the bill, the exemption applies
without regard to when the individual became a member of or retired under CSRS.
CSRS was the retirement system used by the federal government until 1984. In
1984, the federal government created a new retirement system, but federal
employees covered by CSRS were allowed to choose to stay in CSRS.
Under current law, payments received from CSRS are exempt from Wisconsin
income taxes, but generally only if the individual was a member of or retired under
CSRS as of December 31, 1963. Similarly, payments received from the Milwaukee
City and County Retirement Systems, the police officer's annuity and benefit fund
of Milwaukee, the Milwaukee public school teachers' retirement fund, the Wisconsin
state teachers' retirement fund, and the sheriff's annuity and benefit fund of
Milwaukee County are exempt from tax for individuals who were members of or
retired from the systems as of December 31, 1963. Current law also provides an
exemption for payments received from the U.S. Military Employee Retirement
System and retirement payments that relate to service with the U.S. Coast Guard,
the commissioned corps of the National Oceanic and Atmospheric Administration,

and the commissioned corps of the U.S. Public Health Service. Also under current
law, an individual may subtract up to $5,000 of payments or distributions received
from a qualified retirement plan or individual retirement account if the individual
is at least 65 years old and has federal adjusted gross income of less than $15,000,
or $30,000 if married.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB246,1 1Section 1 . 71.05 (1) (ad) of the statutes is created to read:
SB246,2,42 71.05 (1) (ad) Federal employee pension income. One of the following amounts
3of payments received from the U.S. civil service retirement system, to the extent that
4the payments are not exempt under par. (a) or (an):
SB246,2,65 1. For taxable years beginning after December 31, 2020, and before January
61, 2022, up to $8,000 of the payments received during the taxable year.
SB246,2,87 2. For taxable years beginning after December 31, 2021, the amount of the
8payments received during the taxable year.
SB246,2 9Section 2. 71.05 (1) (an) of the statutes, as affected by 2021 Wisconsin Act 1,
10is amended to read:
SB246,2,1511 71.05 (1) (an) Uniformed services retirement benefits. All retirement payments
12received from the U.S. government that relate to service with the coast guard, the
13commissioned corps of the national oceanic and atmospheric administration, or the
14commissioned corps of the public health service, to the extent that such payments are
15not exempt under par. (a), (ad), or (am) or sub. (6) (b) 54.
SB246,3 16Section 3. 71.05 (6) (b) 4. (intro.) of the statutes, as affected by 2021 Wisconsin
17Act 1
, is amended to read:
SB246,3,13
171.05 (6) (b) 4. (intro.) Disability payments other than disability payments that
2are paid from a retirement plan, the payments from which are exempt under sub. (1)
3(ad), (am), (an), and (b) 54., if the individual either is single or is married and files
4a joint return and is under 65 years of age before the close of the taxable year to which
5the subtraction relates, retired on disability, and, when the individual retired, was
6permanently and totally disabled. In this subdivision, “permanently and totally
7disabled” means an individual who is unable to engage in any substantial gainful
8activity by reason of any medically determinable physical or mental impairment that
9can be expected to result in death or which has lasted or can be expected to last for
10a continuous period of not less than 12 months. An individual shall not be considered
11permanently and totally disabled for purposes of this subdivision unless proof is
12furnished in such form and manner, and at such times, as prescribed by the
13department. The exclusion under this subdivision shall be determined as follows:
SB246,4 14Section 4. 71.05 (6) (b) 54. (intro.) of the statutes, as created by 2021 Wisconsin
15Act 1
, is amended to read:
SB246,3,2116 71.05 (6) (b) 54. (intro.) Except for a payment that is exempt under sub. (1) (a),
17(ad), (am), or (an), or that is exempt as a railroad retirement benefit, for taxable years
18beginning after December 31, 2020, up to $5,000 of payments or distributions
19received each year by an individual from a qualified retirement plan under the
20Internal Revenue Code or from an individual retirement account established under
2126 USC 408, if all of the following conditions apply:
SB246,5 22Section 5. 71.83 (1) (a) 6. of the statutes, as affected by 2021 Wisconsin Act 1,
23is amended to read:
SB246,4,424 71.83 (1) (a) 6. ``Retirement plans.'' Any natural person who is liable for a
25penalty for federal income tax purposes under section 72 (m) (5), (q), (t), and (v), 4973,

14974, 4975, or 4980A of the Internal Revenue Code is liable for 33 percent of the
2federal penalty unless the income received is exempt from taxation under s. 71.05
3(1) (a) or (ad) or (6) (b) 54. The penalties provided under this subdivision shall be
4assessed, levied, and collected in the same manner as income or franchise taxes.
SB246,6 5Section 6 . Initial applicability.
SB246,4,66 (1) This act first applies to taxable years beginning on January 1, 2021.
SB246,4,77 (End)
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