Senate Bill No. 445
(By Senator Chafin)
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[Introduced March 8, 2001; referred to the Committee on Finance.]
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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 to providing a two
thousand dollar exclusion from federal adjusted gross income
received by retirees for West Virginia personal income tax
purposes.
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:
PART II. RESIDENTS.
ARTICLE 21. PERSONAL INCOME TAX.
§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 the 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) The first two thousand dollars received annually from
annuities, retirement allowances, returns of contributions and any
other benefit received under the West Virginia public employees
retirement system, the West Virginia state teachers retirement system and all forms of military retirement, including regular
armed forces, reserves and national guard on account of retirement,
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, the West Virginia state
teachers retirement system and, 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 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;
(6) 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 state police
death, disability and retirement fund, the West Virginia state
police retirement system, or the West Virginia deputy sheriff
retirement system, including any survivorship annuities derived
from any of these programs, to the extent includable in gross
income for federal income tax purposes
(7) (6) An amount equal to two percent multiplied by the
number of years of active duty in the armed forces of the United
States of America with the product thereof multiplied by the first
thirty thousand dollars of military retirement income, including
retirement income from the regular armed forces, reserves and
national guard paid by the United States or by this state after the
thirty-first day of December, two thousand including any
survivorship annuities, to the extent included in gross income for
federal income tax purposes for the taxable year: Provided, That
in the event that any of the provisions of this subdivision are
found by a court of competent jurisdiction to violate either the
constitution of this state or of the United States, or is held to
be extended to persons other than specified in this subdivision,
this subdivision shall become null and void by operation of law.
(8) (7) 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 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) (A) Where the total modification under subdivisions (1),
(2), (5) and (6) and (7) of this subsection is eight thousand
dollars per person or more, no deduction shall be is allowed under
this subdivision; and
(ii) (B) Where the total modification under subdivisions (1),
(2), (5) and (6) and (7) 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 is limited to the difference between eight thousand dollars and
the sum of modifications under subdivisions (1), (2), (5) and (6)
and (7) of this subsection;
(9) (8) 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) (A) Where the total modification under subdivisions (1),
(2), (5), (6) and (7) and (8) of this subsection is eight thousand
dollars or more, no deduction shall be is allowed under this
subdivision; and
(ii) (B) Where the total modification under subdivisions (1),
(2), (5), (6) and (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 is limited to the difference between eight thousand dollars and
the sum of subdivisions (1), (2), (5), (6) and (7) and (8) of this
subsection;
(10) (9) 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
(11) (10) 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 two thousand one shall apply to taxable years
beginning after the thirty-first day of December, two thousand.
NOTE: The purpose of this bill is to provide all retirees a
$2,000 exclusion from income for West Virginia personal income tax
purposes.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.