SB336: Bill Text

2019 Senate BILL 336

August 8, 2019 - Introduced by Senators Kooyenga, Risser, Wirch, Marklein, L. Taylor and Smith, cosponsored by Representatives Ohnstad, Kuglitsch, Subeck, Horlacher, Kolste, Skowronski, Milroy, Dittrich, Goyke, Kerkman, C. Taylor, Brandtjen, Stubbs, Pope, Fields, Sinicki, Vruwink, Mursau and Knodl. Referred to Committee on Agriculture, Revenue and Financial Institutions.

SB336,1,3 An Act to amend 71.05 (1) (ae) (intro.), 71.05 (1) (an), 71.05 (6) (b) 4. and 71.83 (1) (a) 6.; and to create 71.05 (1) (ad) of the statutes; relating to: exempting from taxation the pension benefits of certain retired federal employees.

Analysis by the Legislative Reference Bureau

This bill exempts from taxation up to $8,000 in payments received by an individual from the U.S. Civil Service Retirement System, for taxable year 2019, and up to $16,000 of such payments received in 2020 and beyond, to the extent that such payments are not currently subject to an exemption.

Under current law, the pension benefits of certain public employees are exempt from state taxation. The pensions that are exempt include payments received from the CSRS, the U.S. Military Employee Retirement System, 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. For most of these pension plans, the exemption applies only to persons who were members of or retired from the plans as of December 31, 1963, although this limitation does not apply to retirement payments received from the U.S. Military Employee Retirement System or from payments received from the U.S. government that relate to service with the U.S. Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, or the commissioned corps of the U.S. Public Health Service. Also under current law, up to $5,000 of payments or distributions received by certain individuals from a qualified retirement plan under the Internal Revenue Code, or from certain individual retirement accounts, are exempt from taxation. To be eligible, the individual must be at least 65 years old and have federal adjusted gross income under $15,000, or under $30,000 if married.

Under federal law, until 1984, employment by the federal government was covered under CSRS and not by social security. In 1984, the federal government created the Federal Employees Retirement System. Federal employees who began working for the federal government in 1984 or later are covered by FERS instead of CSRS. Some federal employees who had been covered by CSRS switched to FERS, and some stayed in CSRS. Work under FERS is covered by social security. Federal employees who remained in CSRS after 1983 are still not covered by social security.

This bill exempts from taxation $8,000 for 2019, or $16,000 for 2020 and thereafter, of payments received from CSRS, to the extent that such payments are not already exempt, and without regard to whether the former employee was a member of or retired from CSRS as of December 31, 1963.

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:

SB336,1 Section 1 . 71.05 (1) (ad) of the statutes is created to read:

SB336,2,4 71.05 (1) (ad) Federal employee pension income. One of the following amounts of payments received from the U.S. civil service retirement system, to the extent that such payments are not exempt under par. (a), (ae), or (an):

SB336,2,6 1. For taxable years beginning after December 31, 2018, and before January 1, 2020, $8,000.

SB336,2,7 2. For taxable years beginning after December 31, 2019, $16,000.

SB336,2 Section 2. 71.05 (1) (ae) (intro.) of the statutes is amended to read:

SB336,3,3 71.05 (1) (ae) Pension, individual retirement income. (intro.) Except for a payment that is exempt under par. (a), (ad), (am), or (an), or that is exempt as a railroad retirement benefit, for taxable years beginning after December 31, 2008, up to $5,000 of payments or distributions received each year by an individual from a qualified retirement plan under the Internal Revenue Code or from an individual retirement account established under 26 USC 408, if all of the following conditions apply:

SB336,3 Section 3. 71.05 (1) (an) of the statutes is amended to read:

SB336,3,9 71.05 (1) (an) Uniformed services retirement benefits. All retirement payments received from the U.S. government that relate to service with the coast guard, the commissioned corps of the national oceanic and atmospheric administration, or the commissioned corps of the public health service, to the extent that such payments are not exempt under par. (a), (ad), (ae), or (am).

SB336,4 Section 4. 71.05 (6) (b) 4. of the statutes is amended to read:

SB336,3,22 71.05 (6) (b) 4. Disability payments other than disability payments that are paid from a retirement plan, the payments from which are exempt under sub. (1) (ad), (ae), (am), and (an), if the individual either is single or is married and files a joint return, to the extent those payments are excludable under section 105 (d) of the Internal Revenue Code as it existed immediately prior to its repeal in 1983 by section 122 (b) of P.L. 98-21, except that if an individual is divorced during the taxable year that individual may subtract an amount only if that person is disabled and the amount that may be subtracted then is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less. If the exclusion under this subdivision is claimed on a joint return and only one of the spouses is disabled, the maximum exclusion is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less.

SB336,5 Section 5. 71.83 (1) (a) 6. of the statutes is amended to read:

SB336,4,4 71.83 (1) (a) 6. `Retirement plans.' Any natural person who is liable for a penalty for federal income tax purposes under section 72 (m) (5), (q), (t), and (v), 4973, 4974, 4975, or 4980A of the Internal Revenue Code is liable for 33 percent of the federal penalty unless the income received is exempt from taxation under s. 71.05 (1) (a), (ad), or (ae). The penalties provided under this subdivision shall be assessed, levied, and collected in the same manner as income or franchise taxes.

SB336,6 Section 6 . Initial applicability.

SB336,4,6 (1) This act first applies to taxable years beginning on January 1, 2019.

SB336,4,7 (End)