H. B. 2736
(By Delegates Boggs, Modesitt, L. Smith,)
[Introduced February 11, 1999; referred to the
Committee on Veterans' Affairs then Finance.]
A BILL to amend and reenact section twelve, article twenty-one,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, relating generally to
definition of West Virginia adjusted gross income; and
exempting military retirement income for taxable years
beginning after the thirty-first day of December, one
thousand nine hundred ninety-nine.
Be it enacted by the Legislature of West Virginia:
That section twelve, article twenty-one, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted to read as follows:
ARTICLE 21. PERSONAL INCOME TAX.
PART II. RESIDENTS.
§11-21-12. West Virginia adjusted gross income of resident individual.
(a) General. -- The West Virginia adjusted gross income of
a resident individual means his or her federal adjusted gross
income as defined in the laws of the United States for the
taxable year with the modifications specified in this section.
(b) Modifications increasing federal adjusted gross income.
-- There shall be added to federal adjusted gross income unless
already included therein the following items:
(1) Interest income on obligations of any state other than
this state or of a political subdivision of any other state
unless created by compact or agreement to which this state is a
party;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States, which the laws of the United States exempt from federal
income tax but not from state income taxes;
(3) Any deduction allowed when determining federal adjusted
gross income for federal income tax purposes for the taxable year
that is not allowed as a deduction under this article for the
taxable year;
(4) Interest on indebtedness incurred or continued to
purchase or carry obligations or securities the income from which
is exempt from tax under this article, to the extent deductible in determining federal adjusted gross income;
(5) Interest on a depository institution tax-exempt savings
certificate which is allowed as an exclusion from federal gross
income under Section 128 of the Internal Revenue Code, for the
federal taxable year;
(6) The amount of a lump sum distribution for which the
taxpayer has elected under Section 402(e) of the Internal Revenue
Code of 1986, as amended, to be separately taxed for federal
income tax purposes; and
(7) Amounts withdrawn from a medical savings account
established by or for an individual under section twenty, article
fifteen or section fifteen, article sixteen, both of chapter
thirty-three of this code, that are used for a purpose other than
payment of medical expenses, as defined in those sections.
(c) Modifications reducing federal adjusted gross income. --
There shall be subtracted from federal adjusted gross income to
the extent included therein:
(1) Interest income on obligations of the United States and
its possessions to the extent includable in gross income for
federal income tax purposes;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States or of the state of West Virginia to the extent includable
in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States or of the
state of West Virginia, including federal interest or dividends
paid to shareholders of a regulated investment company, under
Section 852 of the Internal Revenue Code for taxable years ending
after the thirtieth day of June, one thousand nine hundred
eighty-seven;
(3) Any amount included in federal adjusted gross income for
federal income tax purposes for the taxable year that is not
included in federal adjusted gross income under this article for
the taxable year;
(4) The amount of any refund or credit for overpayment of
income taxes imposed by this state, or any other taxing
jurisdiction, to the extent properly included in gross income for
federal income tax purposes;
(5) Annuities, retirement allowances, returns of
contributions and any other benefit received under the West
Virginia public employees retirement system and the West
Virginia state teachers retirement system, and all forms of
military retirement, including regular armed forces, reserves and
national guard including any survivorship annuities derived
therefrom, to the extent includable in gross income for federal
income tax purposes: Provided, That notwithstanding any
provisions in this code to the contrary this modification shall
be limited to the first two thousand dollars of benefits received under the West Virginia public employees retirement system and
the West Virginia state teachers retirement system, and all forms
of military retirement including regular armed forces, reserves
and national guard including any survivorship annuities derived
therefrom, to the extent includable in gross income for federal
income tax purposes; for taxable years beginning after the
thirty-first day of December, one thousand nine hundred eighty- six; and
(6) The first two thousand dollars of benefits received
under any federal retirement system to which Title 4 U.S.C. §111
applies: Provided, however, That the total modification under
this paragraph shall not exceed two thousand dollars per person
receiving retirement benefits; and this limitation shall apply
to all returns or amended returns filed after the last day of
December, one thousand nine hundred eighty-eight
(7) In recognition of the distinct and sacrificial nature of
a career in military service, involving repetitive periods of
hazardous duty assignments, enduring numerous family separations
and being subjected to extreme personal hardships all forms of
military retirement income, including regular armed forces,
reserves and national guard and any survivorship annuities
derived therefrom to the extent includable in federal adjusted
gross income for any taxable year beginning after the
thirty-first day of December, one thousand nine hundred ninety-nine;
(6) (8) Retirement income received in the form of pensions
and annuities after the thirty-first day of December, one
thousand nine hundred seventy-nine, under any West Virginia
police, West Virginia firemen's retirement system or the West
Virginia department of public safety state police death,
disability and retirement fund, including any survivorship
annuities derived therefrom, to the extent includable in gross
income for federal income tax purposes;
(7) (9) Federal adjusted gross income in the amount of eight
thousand dollars received from any source after the thirty-first
day of December, one thousand nine hundred eighty-six, by any
person who has attained the age of sixty-five on or before the
last day of the taxable year, or by any person certified by
proper authority as permanently and totally disabled, regardless
of age, on or before the last day of the taxable year, to the
extent includable in federal adjusted gross income for federal
tax purposes: Provided, That if a person has a medical
certification from a prior year and he or she is still
permanently and totally disabled, a copy of the original
certificate is acceptable as proof of disability. A copy of the
form filed for the federal disability income tax exclusion is
acceptable: Provided, however, That:
(i) Where the total modification under subdivisions (1),
(2), (5), and (6), (7) and (8) of this subsection is eight
thousand dollars per person or more, no deduction shall be
allowed under this subdivision; and
(ii) Where the total modification under subdivisions (1),
(2), (5), and (6), (7) and (8) of this subsection is less than
eight thousand dollars per person, the total modification allowed
under this subdivision for all gross income received by that
person shall be limited to the difference between eight thousand
dollars and the sum of modifications under subdivisions (1), (2),
(5), and (6), (7) and (8) of this subsection;
(8) (10) Federal adjusted gross income in the amount of
eight thousand dollars received from any source after the
thirty-first day of December, one thousand nine hundred
eighty-six, by the surviving spouse of any person who had
attained the age of sixty-five or who had been certified as
permanently and totally disabled, to the extent includable in
federal adjusted gross income for federal tax purposes:
Provided, That:
(i) Where the total modification under subdivisions (1),
(2), (5), (6), and (7), (8) and (9) of this subsection is eight
thousand dollars or more, no deduction shall be allowed under
this subdivision; and
(ii) Where the total modification under subdivisions (1), (2), (5), (6), and (7), (8) and (9) of this subsection is less
than eight thousand dollars per person, the total modification
allowed under this subdivision for all gross income received by
that person shall be limited to the difference between eight
thousand dollars and the sum of subdivisions (1), (2), (5), (6),
and (7), (8) and (9) of this subsection;
(9) (11) Contributions from any source to a medical savings
account established by or for the individual pursuant to section
twenty, article fifteen or section fifteen, article sixteen,
chapter thirty-three of this code, plus interest earned on the
account, to the extent includable in federal adjusted gross
income for federal tax purposes: Provided, That the amount
subtracted pursuant to this subdivision for any one taxable year
may not exceed two thousand dollars plus interest earned on the
account. For married individuals filing a joint return, the
maximum deduction is computed separately for each individual; and
(10) (12) Any other income which this state is prohibited
from taxing under the laws of the United States.
(d) Modification for West Virginia fiduciary adjustment. --
There shall be added to or subtracted from federal adjusted gross
income, as the case may be, the taxpayer's share, as beneficiary
of an estate or trust, of the West Virginia fiduciary adjustment
determined under section nineteen of this article.
(e) Partners and S corporation shareholders. -- The amounts
of modifications required to be made under this section by a
partner or an S corporation shareholder, which relate to items of
income, gain, loss or deduction of a partnership or an S
corporation, shall be determined under section seventeen of this
article.
(f) Husband and wife. -- If husband and wife determine their
federal income tax on a joint return but determine their West
Virginia income taxes separately, they shall determine their West
Virginia adjusted gross incomes separately as if their federal
adjusted gross incomes had been determined separately.
(g) Effective date. -- Changes in the language of this
section enacted in the year one thousand nine hundred ninety-six
ninety-eight shall apply to taxable years beginning after
the thirty-first day of December, one thousand nine hundred
ninety-five ninety-nine.
NOTE: The purpose of this bill is to exempt from tax all
military retirement income received after December 31, 1999.
Strike-throughs indicate language in current law that would
be deleted; underscoring indicates new language that would be
added.