1     
MILITARY RETIREMENT INCOME TAX AMENDMENTS

2     
2021 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Wayne A. Harper

5     
House Sponsor: Candice B. Pierucci

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 that an individual who claims the tax credit for military retirement pay may
15     not also claim the retirement tax credit; and
16          ▸     makes technical and conforming changes.
17     Money Appropriated in this Bill:
18          None
19     Other Special Clauses:
20          This bill provides retrospective operation.
21     Utah Code Sections Affected:
22     AMENDS:
23          59-10-1002.2, as last amended by Laws of Utah 2016, Chapter 263
24          59-10-1019, as renumbered and amended by Laws of Utah 2008, Chapter 389
25     ENACTS:
26          59-10-1042, Utah Code Annotated 1953
27     

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