LRBs0025/1
MES:jld:rs
2007 - 2008 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
TO 2007 ASSEMBLY BILL 28
March 1, 2007 - Offered by Representative Lothian.
AB28-ASA1,1,3 1An Act to amend 71.05 (1) (am), 71.05 (1) (an), 71.05 (6) (b) 4. and 71.83 (1) (a)
26.; and to create 71.05 (1) (ae) of the statutes; relating to: exempting from
3taxation retirement plan income received by an individual.
Analysis by the Legislative Reference Bureau
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.
This substitute amendment exempts from taxation certain amounts of
payments or distributions received each year by an individual from a qualified
retirement plan under the Internal Revenue Code, if such payments are not already

exempt from taxation. The substitute amendment first applies to taxable year 2008,
and the maximum allowable exemption is $2,500. The exemption amount increases
each year from $2,500 to $5,000 in 2009, $10,000 in 2010, $15,000 in 2011, and
$20,000 in 2012 and thereafter.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB28-ASA1, s. 1 1Section 1. 71.05 (1) (ae) of the statutes is created to read:
AB28-ASA1,2,52 71.05 (1) (ae) Pension income. Except for a payment that is exempt under par.
3(a), (am), or (an), or that is exempt as a railroad retirement benefit, one of the
4following amounts of payments or distributions received each year by an individual
5from a qualified retirement plan under the Internal Revenue Code:
AB28-ASA1,2,76 1. For taxable years beginning after December 31, 2007, and before January
71, 2009, $2,500.
AB28-ASA1,2,98 2. For taxable years beginning after December 31, 2008, and before January
91, 2010, $5,000.
AB28-ASA1,2,1110 3. For taxable years beginning after December 31, 2009, and before January
111, 2011, $10,000.
AB28-ASA1,2,1312 4. For taxable years beginning after December 31, 2010, and before January
131, 2012, $15,000.
AB28-ASA1,2,1414 5. For taxable years beginning after December 31, 2011, $20,000.
AB28-ASA1, s. 2 15Section 2. 71.05 (1) (am) of the statutes is amended to read:
AB28-ASA1,2,1816 71.05 (1) (am) Military retirement systems. All retirement payments received
17from the U.S. military employee retirement system, to the extent that such payments
18are not exempt under par. (a) or (ae).
AB28-ASA1, s. 3 19Section 3. 71.05 (1) (an) of the statutes is amended to read:
AB28-ASA1,3,5
171.05 (1) (an) Uniformed services retirement benefits. All retirement payments
2received from the U.S. government that relate to service with the coast guard, the
3commissioned corps of the national oceanic and atmospheric administration, or the
4commissioned corps of the public health service, to the extent that such payments are
5not exempt under par. (a), (ae), or (am).
AB28-ASA1, s. 4 6Section 4. 71.05 (6) (b) 4. of the statutes is amended to read:
AB28-ASA1,3,197 71.05 (6) (b) 4. Disability payments other than disability payments that are
8paid from a retirement plan, the payments from which are exempt under sub. (1) (ae),
9(am), and (an)
, if the individual either is single or is married and files a joint return,
10to the extent those payments are excludable under section 105 (d) of the internal
11revenue code
Internal Revenue Code as it existed immediately prior to its repeal in
121983 by section 122 (b) of P.L. 98-21, except that if an individual is divorced during
13the taxable year that individual may subtract an amount only if that person is
14disabled and the amount that may be subtracted then is $100 for each week that
15payments are received or the amount of disability pay reported as income, whichever
16is less. If the exclusion under this subdivision is claimed on a joint return and only
17one of the spouses is disabled, the maximum exclusion is $100 for each week that
18payments are received or the amount of disability pay reported as income, whichever
19is less.
AB28-ASA1, s. 5 20Section 5. 71.83 (1) (a) 6. of the statutes is amended to read:
AB28-ASA1,4,221 71.83 (1) (a) 6. `Retirement plans.' Any natural person who is liable for a
22penalty for federal income tax purposes under section 72 (m) (5), (q), (t), and (v), 4973,
234974, 4975, or 4980A of the internal revenue code Internal Revenue Code is liable
24for 33% of the federal penalty unless the income received is exempt from taxation

1under s. 71.05 (1) (a) or (ae). The penalties provided under this subdivision shall be
2assessed, levied, and collected in the same manner as income or franchise taxes.
AB28-ASA1, s. 6 3Section 6. Initial applicability.
AB28-ASA1,4,44 (1) This act first applies to taxable years beginning on January 1, 2008.
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