SB 29

Under current law, the pension benefits of certain public employees are exempt

from state taxation. The pensions that are exempt include payments received from

the U.S. Civil Service Retirement System, the U.S. Military Employee Retirement

System, the Milwaukee City and County Retirement Systems, the Police Officer's

Annuity and Benefit Fund of Milwaukee, the Milwaukee Public School Teachers'

Retirement Fund, the Wisconsin State Teachers' Retirement Fund, and the Sheriff's

Annuity and Benefit Fund of Milwaukee County. For most of these pension plans,

the exemption applies only to persons who were members of or retired from the plans

as of December 31, 1963, although this limitation does not apply to retirement

payments received from the U.S. Military Employee Retirement System or from

payments received from the U.S. government that relate to service with the U.S.

Coast Guard, the commissioned corps of the National Oceanic and Atmospheric

Administration, or the commissioned corps of the U.S. Public Health Service.

Also under current law, up to $5,000 of payments or distributions received by

certain individuals from a qualified retirement plan under the Internal Revenue

Code, or from certain individual retirement accounts, are exempt from taxation. To

be eligible, the individual must be at least 65 years old and have federal adjusted

gross income (FAGI) under $15,000, or under $30,000 if married.

Under this bill, the $5,000 exemption for certain individuals who are at least

65 years old and have limited FAGI applies only for taxable years 2009 to 2012.

Beginning with taxable year 2013, the $5,000 exemption for payments or

distributions received from a qualified retirement plan or from certain individual

retirement accounts may still be claimed, to the extent that such amounts are not

already exempt from taxation, but the exemption is not limited to individuals who

are at least 65 years old and have FAGI of less than $15,000, or less than $30,000 if

married. Under the bill, the exemption amount increases from $5,000 to $10,000 in

2014, to $15,000 in 2015, and to $20,000 in 2016 and thereafter.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.