Senate Bill No. 204
(By Senator, Unger, Mitchell, Rowe, Edgell,
Boley, Deem, Minear, McKenzie, Minard,
Anderson, Sharpe, Caldwell, Bowman, Hunter, Oliverio, Ross,
Helmick, Fanning, Snyder, Kessler, Facemyer and Burnette)
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[Introduced January 14, 2002; referred to the Committee
on Military; and then 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 exempting
the first thirty thousand dollars in benefits derived from
military retirement from personal income tax obligations.
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, 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, 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) 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) 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), (6) and (7) 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), (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 limited to the difference between eight thousand
dollars and the sum of modifications under subdivisions (1),
(2), (5), (6) and (7) of this subsection;
(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 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), (7) and (8) 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), (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 subdivisions (1), (2), (5), (6), (7) and
(8) of this subsection;
(10) 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) 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 exempt the first
thirty thousand dollars in benefits derived from military
retirement from personal income tax obligations.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.