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H.383

Introduced by   Representatives Metzger of Milton, Endres of Milton, Morrissey of Bennington and Wright of Burlington

Referred to Committee on

Date:

Subject:  Taxation; income tax; pension income exclusion

Statement of purpose:  This bill proposes to exclude Social Security, railroad retirement, and up to $20,000.00 annually of pension income from Vermont income tax.

AN ACT RELATING TO INCOME TAX EXCLUSION OF RETIREMENT INCOME

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  32 V.S.A. § 5823(a)(8) and (b)(6) are added to read:

§ 5823.  VERMONT INCOME OF INDIVIDUALS, ESTATES AND

              TRUSTS

(a)  For any taxable year, the Vermont income of a resident individual, estate or trust is the adjusted gross income of the taxpayers for that taxable year less:

* * *

(8)  Retirement income received under the federal Social Security Act or the federal Railroad Retirement Act; and up to $20,000.00 from pensions and annuities received by an individual who has attained the age of 59-1/2, to the extent includible in gross income for federal income tax purposes, which are periodic payments attributable to personal services performed by such individual prior to his or her retirement from employment, which arise (i) from an employer-employee relationship or (ii) from contributions to a retirement plan which are deductible for federal income tax purposes.  However, the term “pensions and annuities” shall also include distributions received by an individual who has attained the age of 59-1/2 from an individual retirement account or an individual retirement annuity, as defined in Section 408 of the Internal Revenue Code, and distributions received by an individual who has attained the age of 59-1/2 from self-employed individual and owner-employee retirement plans which qualify under Section 401 of the Internal Revenue Code, whether or not the payments are periodic in nature.  Nevertheless, the term “pensions and annuities” shall not include any lump sum distribution, as defined in Section 402(e)(4)(A) of the Internal Revenue Code.  Where a payment would otherwise come within the meaning of the term “pensions and annuities” as set forth in this subdivision, except that such individual is deceased, such payment shall, nevertheless, be treated as a pension or annuity for purposes of this subdivision if such payment is received by such individual’s beneficiary.

(b)  For any taxable year, the Vermont income of a nonresident individual, estate or trust is the sum of the following items of income to the extent they are required to be included in the adjusted gross income of the taxpayer for the taxable year:

* * *

(7)  Retirement income received under the federal Social Security Act or the federal Railroad Retirement Act; and up to $20,000.00 from pensions and annuities received by an individual who has attained the age of 59-1/2, to the extent includible in gross income for federal income tax purposes, which are periodic payments attributable to personal services performed by such individual prior to his or her retirement from employment, which arise (i) from an employer-employee relationship or (ii) from contributions to a retirement plan which are deductible for federal income tax purposes.  However, the term “pensions and annuities” shall also include distributions received by an individual who has attained the age of 59-1/2 from an individual retirement account or an individual retirement annuity, as defined in Section 408 of the Internal Revenue Code, and distributions received by an individual who has attained the age of 59-1/2 from self-employed individual and owner-employee retirement plans which qualify under Section 401 of the Internal Revenue Code, whether or not the payments are periodic in nature.  Nevertheless, the term “pensions and annuities” shall not include any lump sum distribution, as defined in Section 402(e)(4)(A) of the Internal Revenue Code.  Where a payment would otherwise come within the meaning of the term “pensions and annuities” as set forth in this subdivision, except that such individual is deceased, such payment shall, nevertheless, be treated as a pension or annuity for purposes of this subdivision if such payment is received by such individual’s beneficiary.

Sec. 2.  EFFECTIVE DATE

This act shall apply to taxable years beginning on or after January 1, 2005.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us