LRB-3676/2
MES:jld:md
2009 - 2010 LEGISLATURE
April 20, 2010 - Introduced by Representatives Davis, Lothian, Kerkman, Nygren,
Pridemore, Suder, Townsend
and Kaufert, cosponsored by Senators Leibham
and Schultz. Referred to Joint Survey Committee on Tax Exemptions.
AB967,1,4 1An Act to amend 71.05 (1) (ae) (intro.), 71.05 (1) (am), 71.05 (1) (an), 71.05 (6)
2(b) 4. and 71.83 (1) (a) 6.; and to create 71.05 (1) (af) of the statutes; relating
3to:
expanding and increasing the tax exemption for retirement income received
4by 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.
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 and 2010.
Beginning with taxable year 2011, any amount of payment or distribution from a
qualified retirement plan under the Internal Revenue Code, or from certain
individual retirement accounts, are exempt from taxation, to the extent that such
amounts are not already exempt from taxation. Under the bill, 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.
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.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB967, s. 1 1Section 1. 71.05 (1) (ae) (intro.) of the statutes is amended to read:
AB967,2,82 71.05 (1) (ae) Pension, individual retirement income. (intro.) Except for a
3payment that is exempt under par. (a), (am), or (an), or that is exempt as a railroad
4retirement benefit, for taxable years beginning after December 31, 2008, and before
5January 1, 2011,
up to $5,000 of payments or distributions received each year by an
6individual from a qualified retirement plan under the Internal Revenue Code or from
7an individual retirement account established under 26 USC 408, if all of the
8following conditions apply:
AB967, s. 2 9Section 2. 71.05 (1) (af) of the statutes is created to read:
AB967,2,1410 71.05 (1) (af) Pension income. Except for a payment that is exempt under par.
11(a), (am), or (an), or that is exempt as a railroad retirement benefit, any amount of
12payment or distribution received each year by an individual from a qualified
13retirement plan under the Internal Revenue Code or from an individual retirement
14account established under 26 USC 408.
AB967, s. 3
1Section 3. 71.05 (1) (am) of the statutes is amended to read:
AB967,3,42 71.05 (1) (am) Military retirement systems. All retirement payments received
3from the U.S. military employee retirement system, to the extent that such payments
4are not exempt under par. (a) or, (ae) , or (af).
AB967, s. 4 5Section 4. 71.05 (1) (an) of the statutes is amended to read:
AB967,3,106 71.05 (1) (an) Uniformed services retirement benefits. All retirement payments
7received from the U.S. government that relate to service with the coast guard, the
8commissioned corps of the national oceanic and atmospheric administration, or the
9commissioned corps of the public health service, to the extent that such payments are
10not exempt under par. (a), (ae), (af), or (am).
AB967, s. 5 11Section 5. 71.05 (6) (b) 4. of the statutes is amended to read:
AB967,3,2312 71.05 (6) (b) 4. Disability payments other than disability payments that are
13paid from a retirement plan, the payments from which are exempt under sub. (1) (ae),
14(af), (am), and (an), if the individual either is single or is married and files a joint
15return, to the extent those payments are excludable under section 105 (d) of the
16Internal Revenue Code as it existed immediately prior to its repeal in 1983 by section
17122 (b) of P.L. 98-21, except that if an individual is divorced during the taxable year
18that individual may subtract an amount only if that person is disabled and the
19amount that may be subtracted then is $100 for each week that payments are
20received or the amount of disability pay reported as income, whichever is less. If the
21exclusion under this subdivision is claimed on a joint return and only one of the
22spouses is disabled, the maximum exclusion is $100 for each week that payments are
23received or the amount of disability pay reported as income, whichever is less.
AB967, s. 6 24Section 6. 71.83 (1) (a) 6. of the statutes is amended to read:
AB967,4,6
171.83 (1) (a) 6. `Retirement plans.' Any natural person who is liable for a
2penalty for federal income tax purposes under section 72 (m) (5), (q), (t), and (v), 4973,
34974, 4975, or 4980A of the Internal Revenue Code is liable for 33% of the federal
4penalty unless the income received is exempt from taxation under s. 71.05 (1) (a) or,
5(ae), or (af). The penalties provided under this subdivision shall be assessed, levied,
6and collected in the same manner as income or franchise taxes.
AB967, s. 7 7Section 7. Initial applicability.
AB967,4,88 (1) This act first applies to taxable years beginning on January 1, 2011.
AB967,4,99 (End)
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