An Act To Exempt from the Income Tax Military Death Payments and Employment-based Retirement Income of Persons Who Are 65 Years of Age or Older
Sec. 1. 36 MRSA §5122, sub-§2, ¶M, as amended by PL 2005, c. 218, §53, is further amended to read:
(1) Six thousand dollars reduced by the total amount of the individual's social security benefits and railroad retirement benefits paid by the United States, but not less than $0. The reduction does not apply to benefits paid under a military retirement plan; or
(2) The aggregate of pension benefits under employee retirement plans included in the individual's federal adjusted gross income.
For purposes of this paragraph, the following terms have the following meanings. "Primary recipient" means the individual upon whose earnings the employee retirement plan benefits are based or the surviving spouse of that individual. "Pension benefits" means employee retirement plan benefits reported as pension or annuity income for federal income tax purposes. "Employee retirement plan" means a state, federal or military retirement plan or any other retirement benefit plan established and maintained by an employer for the benefit of its employees under the Code, Section 401(a), Section 403 or Section 457(b), except that distributions made pursuant to a Section 457(b) plan are not eligible for the deduction provided by this paragraph if they are made prior to age 55 and are not part of a series of substantially equal periodic payments made for the life of the primary recipient or the joint lives of the primary recipient and that recipient's designated beneficiary. "Employee retirement plan" does not include an individual retirement account under Section 408 of the Code, a Roth IRA under Section 408A of the Code, a rollover individual retirement account, a simplified employee pension under Section 408(k) of the Code or an ineligible deferred compensation plan under Section 457(f) of the Code. Pension benefits under an employee retirement plan do not include distributions that are subject to the tax imposed by the Code, Section 72(t). "Military retirement plan" means benefits received as a result of service in the active or reserve components of the Army, Navy, Air Force, Marines or Coast Guard;
Sec. 2. 36 MRSA §5122, sub-§2, ¶FF, as corrected by RR 2009, c. 2, §112, is amended to read:
Sec. 3. 36 MRSA §5122, sub-§2, ¶GG, as reallocated by RR 2009, c. 2, §113, is amended to read:
Sec. 4. 36 MRSA §5122, sub-§2, ¶HH is enacted to read:
For purposes of this paragraph, the following terms have the following meanings. "Primary recipient" means the individual upon whose earnings the employee retirement plan benefits are based or the surviving spouse of that individual. "Pension benefits" means employee retirement plan benefits reported as pension or annuity income for federal income tax purposes. "Employee retirement plan" means a state, federal or military retirement plan or any other retirement benefit plan established and maintained by an employer for the benefit of its employees under the Code, Section 401(a), Section 403 or Section 457(b), an individual retirement account under Section 408 of the Code, a Roth IRA under Section 408A of the Code, a rollover individual retirement account, a simplified employee pension under Section 408(k) of the Code or an ineligible deferred compensation plan under Section 457(f) of the Code. "Military retirement plan" means benefits received as a result of service in the active or reserve components of the Army, Navy, Air Force, Marines or Coast Guard; and
Sec. 5. 36 MRSA §5122, sub-§2, ¶II is enacted to read:
Sec. 6. Application. This Act applies to tax years beginning on or after January 1, 2011.
SUMMARY
This bill provides an income tax exemption to persons who are 65 years of age or older for retirement income from an employment-based retirement plan and maintains the current limited retirement benefit exemption for person under 65 years of age. The bill also provides an income tax exemption for military death payments.