4 U.S.C. § 114 — Limitation on State income taxation of certain pension income

submitted 30 years ago by Pub. L. 104-95 to r/title-4-FLAG-AND-SEAL-SEAT-OF-GOVERNMENT-AND-THE-STATES · 533 words · no verdicts yet

in plain englishAI-generated · not legal advice

This law stops states from taxing certain retirement income. A state can't tax retirement income paid to someone who isn't a resident of that state. It defines "retirement income" as payouts from a long list of qualified pension and retirement plans. The supplied text skips from subsection (b) to (e), so subsections (c) and (d) are not included here.

(a) No state may tax the retirement income of someone who is not a resident or domiciliary of that state, as decided under that state's own laws. (b) This subsection defines key terms. (1) "Retirement income" covers a long list of income sources. It includes money from: a qualified trust exempt from tax under the tax code; a simplified employee pension; an annuity plan or annuity contract under specific tax-code sections; an individual retirement plan; an eligible deferred compensation plan; a governmental plan; certain other trusts; and other written retirement arrangements providing prior-service retirement payments to a retired partner. That income only counts as "retirement income" if it is paid either (i) as part of a series of substantially equal payments, made at least once a year, for the recipient's life or life expectancy (or the joint lives or joint life expectancies of the recipient and a named beneficiary), or for a period of at least 10 years; or (ii) as a payment received after the person's employment ends, under a plan meant to provide retirement benefits beyond what certain federal tax-code limits normally allow. Even if payments get adjusted over time — for example, to apply a predetermined formula, or to add cost-of-living or similar adjustments — they still count as "substantially equal periodic payments." This definition also includes any retired or retainer pay of a member or former member of a uniformed service, computed under chapter 71 of title 10. (2) "Income tax" has the meaning given that term by section 110(c). (3) "State" includes a state's political subdivisions, the District of Columbia, and the possessions of the United States. (4) A "retired partner" is an individual described as a partner under section 7701(a)(2) of the Internal Revenue Code of 1986, who has retired under that individual's partnership agreement. Note on completeness: the supplied text does not include subsections (c) or (d). It jumps directly from subsection (b) to subsection (e), so this translation cannot cover whatever those missing subsections say. (e) Nothing in this section changes how section 514 of the Employee Retirement Income Security Act of 1974 (ERISA) applies.

the actual law source: uscode.house.gov ↗public domain

(a)

No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State).

(b)

For purposes of this section—

(1)

The term “retirement income” means any income from—

(A)

a qualified trust under section 401(a) of the Internal Revenue Code of 1986 that is exempt under section 501(a) from taxation;

(B)

a simplified employee pension as defined in section 408(k) of such Code;

(C)

an annuity plan described in section 403(a) of such Code;

(D)

an annuity contract described in section 403(b) of such Code;

(E)

an individual retirement plan described in section 7701(a)(37) of such Code;

(F)

an eligible deferred compensation plan (as defined in section 457 of such Code);

(G)

a governmental plan (as defined in section 414(d) of such Code);

(H)

a trust described in section 501(c)(18) of such Code; or

(I)

any plan, program, or arrangement described in section 3121(v)(2)(C) of such Code (or any plan, program, or arrangement that is in writing, that provides for retirement payments in recognition of prior service to be made to a retired partner, and that is in effect immediately before retirement begins), if such income—

(i)

is part of a series of substantially equal periodic payments (not less frequently than annually which may include income described in subparagraphs (A) through (H)) made for—

(I)

the life or life expectancy of the recipient (or the joint lives or joint life expectancies of the recipient and the designated beneficiary of the recipient), or

(II)

a period of not less than 10 years, or

(ii)

is a payment received after termination of employment and under a plan, program, or arrangement (to which such employment relates) maintained solely for the purpose of providing retirement benefits for employees in excess of the limitations imposed by 1 or more of sections 401(a)(17), 401(k), 401(m), 402(g), 403(b), 408(k), or 415 of such Code or any other limitation on contributions or benefits in such Code on plans to which any of such sections apply.

The fact that payments may be adjusted from time to time pursuant to such plan, program, or arrangement to limit total disbursements under a predetermined formula, or to provide cost of living or similar adjustments, will not cause the periodic payments provided under such plan, program, or arrangement to fail the “substantially equal periodic payments” test.

Such term includes any retired or retainer pay of a member or former member of a uniform service computed under chapter 71 of title 10, United States Code.

(2)

The term “income tax” has the meaning given such term by section 110(c).

(3)

The term “State” includes any political subdivision of a State, the District of Columbia, and the possessions of the United States.

(4)

For purposes of this section, the term “retired partner” is an individual who is described as a partner in section 7701(a)(2) of the Internal Revenue Code of 1986 and who is retired under such individual’s partnership agreement.

(e)

1 Nothing in this section shall be construed as having any effect on the application of section 514 of the Employee Retirement Income Security Act of 1974.

Source credit: (Added Pub. L. 104–95, § 1(a), Jan. 10, 1996, 109 Stat. 979; amended Pub. L. 109–264, § 1(a), Aug. 3, 2006, 120 Stat. 667.)

history & why it existsrecord from the source credit

1996Enacted · Pub. L. 104-95 · 109 Stat. 979
2006Amended · Pub. L. 109-264 · 120 Stat. 667

A history note hasn’t been published yet. The record shows enactment by Pub. L. 104-95 on 1996-01-10.

all 0 arguments · sorted by: best

no arguments yet — make the first case