Current Status Bill Number:
4959Type of Legislation: General Bill GBIntroducing Body: HouseIntroduced Date: 19980402Primary Sponsor: ChellisAll Sponsors: Chellis, Knotts, McLeodDrafted Document Number: jic\5484htc.98Companion Bill Number: 892Residing Body: SenateCurrent Committee: Finance Committee 06 SFSubject: Income tax deductions, retirement income; maximum amount which may be deducted increased; Taxation, Aging
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ Senate 19980505 Introduced, read first time, 06 SF referred to Committee House 19980430 Read third time, sent to Senate House 19980429 Read second time House 19980429 Reconsidered vote whereby debate was adjourned until Thursday, 19980430 House 19980429 Debate adjourned until Thursday, 19980430 House 19980429 Co-Sponsor added (Rule 5.2) by Rep. McLeod House 19980428 Co-Sponsor added (Rule 5.2) by Rep. Knotts House 19980423 Committee report: Favorable 30 HWM House 19980402 Introduced, read first time, 30 HWM referred to CommitteeView additional legislative information at the LPITS web site.
Indicates Matter Stricken
Indicates New Matter
April 23, 1998
S. Printed 4/23/98--H.
Read the first time April 2, 1998.
To whom was referred a Bill (H. 4959), to amend Section 12-6-1140, as amended, and Section 12-6-1170, Code of Laws of South Carolina, 1976, relating to the retirement income deduction election, etc., respectfully
That they have duly and carefully considered the same, and recommend that the same do pass:
HENRY E. BROWN, JR., for Committee.
This bill would reduce general fund individual income tax revenue by an estimated $2.1 million in FY1998-99.
This bill allows individuals who are under age sixty-five a $3,000 deduction from retirement income and a $10,000 retirement income deduction when they become sixty-five. Currently, a taxpayer must elect an annual $3,000 retirement income deduction or defer any deduction until age sixty-five when a $10,000 annual deduction is allowed. When Section 12-6-1140 was amended by Act 155, Part II, Section 2A in 1997, it permitted those taxpayers over sixty-five years of age to take an $11,500 deduction from all taxable income reduced by the $3,000 or $10,000 deduction the taxpayer is eligible to deduct for that taxable year. The BEA, therefore, does not expect any revenue impact for those individuals over sixty-five years of age that previously elected to take the $3,000 deduction and are now eligible to take a $10,000 deduction, because current law allows an $11,500 retirement deduction from all income for all individuals over age sixty-five. This bill will allow taxpayers under age sixty-five with retirement income who irrevocably elected to defer taking a retirement income deduction until age sixty-five to take a $3,000 deduction beginning in 1998. The Department of Revenue estimates that 10,000 individuals would now take the $3,000 retirement election before reaching sixty-five years of age, and this would reduce individual income tax collections by an estimated $2.1 million in FY1998-99.
William C. Gillespie
Board of Economic Advisors
TO AMEND SECTION 12-6-1140, AS AMENDED, AND SECTION 12-6-1170, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE RETIREMENT INCOME DEDUCTION ELECTION AND THE TAXABLE INCOME EXCLUSION ALLOWED PERSONS SIXTY-FIVE YEARS OF AGE OR OLDER FOR PURPOSES OF THE STATE INDIVIDUAL INCOME TAX, SO AS TO ELIMINATE THE ELECTION AND ALLOW AN ANNUAL DEDUCTION OF UP TO THREE THOUSAND DOLLARS OF RETIREMENT INCOME AND UP TO TEN THOUSAND DOLLARS BEGINNING IN THE TAXABLE YEAR THE TAXPAYER ATTAINS AGE SIXTY-FIVE, AND TO ALLOW AN ANNUAL DEDUCTION OF ELEVEN THOUSAND FIVE HUNDRED DOLLARS OF SOUTH CAROLINA TAXABLE INCOME BEGINNING IN THE TAXABLE YEAR THE TAXPAYER ATTAINS THE AGE OF SIXTY-FIVE YEARS REDUCED BY THE RETIREMENT INCOME DEDUCTION, TO PROVIDE FOR CLAIMING THIS DEDUCTION ON JOINT RETURNS, AND TO DELETE PROVISIONS RELATING TO THE POSTPONEMENT OF THE MAXIMUM DEDUCTION UNDER THE PRIOR LAW.
SECTION 1. (A) Section 12-6-1140(3) of the 1976 Code, as
added by Act 76 of 1995, is amended to read:
"(3) a deduction for retirement income as provided in Section 12-6-1170;"
(B) Section 12-6-1140 of the 1976 Code, as last amended by Section 2, Part II of Act 155 of 1997, is further amended by deleting item (9) which reads:
"(9) South Carolina taxable income received by a resident individual taxpayer who before or during the applicable taxable year has attained the age of sixty-five. If a married taxpayer eligible for this deduction files a joint federal income tax return with a spouse who is not eligible for this deduction, then their joint income must be allocated between them on a pro-rata basis in the manner the department shall provide."
SECTION 2. Section 12-6-1170 of the 1976 Code, as added by Act 76 of 1995, is amended to read:
"Section 12-6-1170. (A)(1) An individual is allowed an annual deduction from South Carolina taxable income for of not more than three thousand dollars of retirement income received as follows:
(1) For taxable years after 1992, and beginning on the first taxable year a taxpayer receives retirement income, the taxpayer may:
(a) deduct up to three thousand dollars of retirement income that is included in South Carolina taxable income; or
(b) irrevocably elect to defer the annual retirement income deduction until the taxable year in which the taxpayer reaches age sixty-five. Beginning in the year in which the taxpayer reaches age sixty-five, the taxpayer may deduct up to not more than ten thousand dollars of retirement income that is included in South Carolina taxable income.
(2) Taxpayers are deemed to have made the election provided in subitem (1)(b) and may deduct up to ten thousand dollars of retirement income included in South Carolina taxable income if:
(a) the taxpayer does not claim a retirement income deduction before the taxable year he reaches age sixty-five; or
(b) the taxpayer reaches age sixty-five before 1994.
(3) As used in this section, all references to age sixty-five apply to taxpayers born before 1943. For taxpayers born in 1943 through 1959, the applicable age for determining the retirement income deduction is age sixty-six and age sixty-seven for taxpayers born after 1959.
(4) (2) The term 'retirement income', as used in this section subsection, means the total of all otherwise taxable income not subject to a penalty for premature distribution received by the taxpayer or the taxpayer's surviving spouse in a taxable year from qualified retirement plans which include those plans defined in Internal Revenue Code Sections 401, 403, 408, and 457, and all public employee retirement plans of the federal, state, and local governments, including military retirement.
(5)(3) A surviving spouse receiving retirement income that is attributable to the deceased spouse shall apply this deduction in the same manner that the deduction applied to the deceased spouse. If the surviving spouse also has another retirement income, an additional retirement exclusion is allowed.
(6)(4) The department shall prescribe the method of making the election to defer the retirement income deduction and may require the taxpayer to provide information necessary for proper administration of this election subsection.
(B) Beginning for the taxable year during which a resident individual taxpayer attains the age of sixty-five years, the resident individual taxpayer is allowed a deduction from South Carolina taxable income received in an amount not to exceed eleven thousand five hundred dollars reduced by any amount the taxpayer deducts pursuant to subsection (A) not including amounts deducted as a surviving spouse. If a married taxpayer eligible for this deduction files a joint federal income tax return, then the maximum deduction allowed is eleven thousand five hundred dollars in the case when only one spouse has attained the age of sixty-five years and twenty-three thousand dollars when both spouses have attained such age."
SECTION 3. Upon approval by the Governor, this act is effective for taxable years beginning after 1997.