Representative Candice B. Pierucci proposes the following substitute bill:


1     
MILITARY RETIREMENT TAX AMENDMENTS

2     
2021 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Candice B. Pierucci

5     
Senate Sponsor: Wayne A. Harper

6     

7     LONG TITLE
8     General Description:
9          This bill creates a nonrefundable income tax credit for military retirement pay.
10     Highlighted Provisions:
11          This bill:
12          ▸     defines terms;
13          ▸     creates a nonrefundable income tax credit for military retirement pay;
14          ▸     provides for apportionment of the income tax credit;
15          ▸     provides that an individual who claims income the tax credit for military retirement
16     pay may not also claim the retirement tax credit; and
17          ▸     makes technical and conforming changes.
18     Money Appropriated in this Bill:
19          None
20     Other Special Clauses:
21          This bill provides retrospective operation.
22     Utah Code Sections Affected:
23     AMENDS:
24          59-10-1002.2, as last amended by Laws of Utah 2016, Chapter 263
25          59-10-1019, as renumbered and amended by Laws of Utah 2008, Chapter 389
26     ENACTS:
27          59-10-1042, Utah Code Annotated 1953
28     

29     Be it enacted by the Legislature of the state of Utah:
30          Section 1. Section 59-10-1002.2 is amended to read:
31          59-10-1002.2. Apportionment of tax credits.
32          (1) A nonresident individual or a part-year resident individual that claims a tax credit
33     in accordance with Section 59-10-1017, 59-10-1018, 59-10-1019, 59-10-1022, 59-10-1023,
34     59-10-1024, [or] 59-10-1028, or 59-10-1042 may only claim an apportioned amount of the tax
35     credit equal to:
36          (a) for a nonresident individual, the product of:
37          (i) the state income tax percentage for the nonresident individual; and
38          (ii) the amount of the tax credit that the nonresident individual would have been
39     allowed to claim but for the apportionment requirements of this section; or
40          (b) for a part-year resident individual, the product of:
41          (i) the state income tax percentage for the part-year resident individual; and
42          (ii) the amount of the tax credit that the part-year resident individual would have been
43     allowed to claim but for the apportionment requirements of this section.
44          (2) A nonresident estate or trust that claims a tax credit in accordance with Section
45     59-10-1017, 59-10-1020, 59-10-1022, 59-10-1024, or 59-10-1028 may only claim an
46     apportioned amount of the tax credit equal to the product of:
47          (a) the state income tax percentage for the nonresident estate or trust; and
48          (b) the amount of the tax credit that the nonresident estate or trust would have been
49     allowed to claim but for the apportionment requirements of this section.
50          Section 2. Section 59-10-1019 is amended to read:
51          59-10-1019. Definitions -- Nonrefundable retirement tax credits.
52          (1) As used in this section:
53          (a) "Eligible [age 65 or older retiree] claimant" means a claimant, regardless of whether
54     that claimant is retired, who[:] was born on or before December 31, 1952.
55          [(i) is 65 years of age or older; and]
56          [(ii) was born on or before December 31, 1952.]
57          [(b) (i) "Eligible retirement income" means income received by an eligible under age
58     65 retiree as a pension or annuity if that pension or annuity is:]
59          [(A) paid to the eligible under age 65 retiree or the surviving spouse of an eligible
60     under age 65 retiree; and]
61          [(B) (I) paid from an annuity contract purchased by an employer under a plan that
62     meets the requirements of Section 404(a)(2), Internal Revenue Code;]
63          [(II) purchased by an employee under a plan that meets the requirements of Section
64     408, Internal Revenue Code; or]
65          [(III) paid by:]
66          [(Aa) the United States;]
67          [(Bb) a state or a political subdivision of a state; or]
68          [(Cc) the District of Columbia.]
69          [(ii) "Eligible retirement income" does not include amounts received by the spouse of a
70     living eligible under age 65 retiree because of the eligible under age 65 retiree's having been
71     employed in a community property state.]
72          [(c) "Eligible under age 65 retiree" means a claimant, regardless of whether that
73     claimant is retired, who:]
74          [(i) is younger than 65 years of age;]
75          [(ii) was born on or before December 31, 1952; and]
76          [(iii) has eligible retirement income for the taxable year for which a tax credit is
77     claimed under this section.]
78          [(d)] (b) "Head of household filing status" [is as] means the same as that term is
79     defined in Section 59-10-1018.
80          [(e)] (c) "Joint filing status" [is as] means the same as that term is defined in Section
81     59-10-1018.
82          [(f)] (d) "Married filing separately status" means a married individual who:
83          (i) does not file a single federal individual income tax return jointly with that married
84     individual's spouse for the taxable year; and
85          (ii) files a single federal individual income tax return for the taxable year.
86          [(g)] (e) "Modified adjusted gross income" means the sum of an eligible [age 65 or
87     older retiree's or eligible under age 65 retiree's] claimant's:
88          (i) adjusted gross income for the taxable year for which a tax credit is claimed under
89     this section;
90          (ii) [any] interest income that is not included in adjusted gross income for the taxable
91     year described in Subsection (1)[(g)](e)(i); and
92          (iii) [any] addition to adjusted gross income required by Section 59-10-114 for the
93     taxable year described in Subsection (1)[(g)](e)(i).
94          [(h)] (f) "Single filing status" means a single individual who files a single federal
95     individual income tax return for the taxable year.
96          (2) Except as provided in Section 59-10-1002.2 and [subject to Subsections (3) through
97     (5): (a)] Subsections (3) and (4), each eligible [age 65 or older retiree] claimant may claim a
98     nonrefundable tax credit of $450 against taxes otherwise due under this part[; or].
99          [(b) each eligible under age 65 retiree may claim a nonrefundable tax credit against
100     taxes otherwise due under this part in an amount equal to the lesser of:]
101          [(i) $288; or]
102          [(ii) the product of:]
103          [(A) the eligible under age 65 retiree's eligible retirement income for the taxable year
104     for which the eligible under age 65 retiree claims a tax credit under this section; and]
105          [(B) 6%.]
106          [(3) A tax credit under this section may not be carried forward or carried back.]
107          (3) (a) An eligible claimant may not:
108          (i) carry forward or carry back the amount of a tax credit under this section that
109     exceeds an eligible claimant's tax liability for the taxable year; or
110          (ii) claim a tax credit under this section and Section 59-10-1042 for the same taxable
111     year.
112          (b) An eligible claimant who qualifies for a tax credit under this section and a tax
113     credit under Section 59-10-1042 may elect whether to claim a tax credit under this section or a
114     tax credit under Section 59-10-1042.
115          (4) The [sum of the tax credits] tax credit allowed by Subsection (2) claimed on [one] a
116     return filed under this part shall be reduced by $.025 for each dollar by which modified
117     adjusted gross income for purposes of the return exceeds:
118          (a) for a federal individual income tax return that is allowed a married filing separately
119     status, $16,000;
120          (b) for a federal individual income tax return that is allowed a single filing status,
121     $25,000;
122          (c) for a federal individual income tax return that is allowed a head of household filing
123     status, $32,000; or
124          (d) for a return under this chapter that is allowed a joint filing status, $32,000.
125          [(5) For purposes of determining the ownership of items of retirement income under
126     this section, common law doctrine shall be applied in all cases even though some items of
127     retirement income may have originated from service or investments in a community property
128     state.]
129          Section 3. Section 59-10-1042 is enacted to read:
130          59-10-1042. Nonrefundable income tax credit for military retirement pay.
131          (1) As used in this section:
132          (a) (i) "Military retirement pay" means retirement pay, including survivor benefits, that
133     relates to service in the armed forces, including service in the Reserves or the National Guard.
134          (ii) "Military retirement pay" does not include:
135          (A) social security income; or
136          (B) 401(k) or IRA distributions.
137          (b) "Survivor benefits" means the retired pay portion of the benefits described in 10
138     U.S.C. Secs. 1447 through 1455.
139          (2) Except as provided in Section 59-10-1002.2, a claimant who receives military
140     retirement pay may claim a nonrefundable tax credit against taxes equal to the product of:
141          (a) the percentage listed in Subsection 59-10-104(2); and
142          (b) the amount of military retirement pay that is included in adjusted gross income on
143     the claimant's federal income tax return for the taxable year.
144          (3) (a) A claimant may not:
145          (i) carry forward or carry back the amount of the tax credit that exceeds the claimant's
146     tax liability for the taxable year; or
147          (ii) claim a tax credit under this section and Section 59-10-1019 for the same taxable
148     year.
149          (b) A claimant that qualifies for a tax credit under this section and a tax credit under
150     Section 59-10-1019 may elect whether to claim a tax credit under this section or a tax credit
151     under Section 59-10-1019.
152          Section 4. Retrospective operation.
153          This bill has retrospective operation for a taxable year beginning on or after January 1,
154     2021.