House File 2105 - Introduced
HOUSE FILE 2105
BY JONES
A BILL FOR
1 An Act excluding nonqualified deferred compensation income
2 from the individual income tax, and including retroactive
3 applicability provisions.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 Section 1. Section 422.7, subsection 19, paragraph a, Code
2 2024, is amended to read as follows:
3 a. Subtract, to the extent included, the total amount
4 received from a governmental or other pension or retirement
5 plan, including defined benefit or defined contribution plans,
6 annuities, individual retirement accounts, plans maintained or
7 contributed to by an employer, or maintained or contributed
8 to by a self-employed person as an employer, and qualified
9 and nonqualified deferred compensation plans or any earnings
10 attributable to the such deferred compensation plans received
11 by a person who is disabled, or is fifty-five years of age
12 or older, or is the surviving spouse of an individual or is
13 a survivor having an insurable interest in an individual who
14 would have qualified for the exemption under this subsection
15 for the tax year.
16 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies
17 retroactively to January 1, 2024, for tax years beginning on
18 or after that date.
19 EXPLANATION
20 The inclusion of this explanation does not constitute agreement with
21 the explanation’s substance by the members of the general assembly.
22 Under current law, a taxpayer may exclude retirement
23 income from the computation of net income for purposes of
24 the individual income tax. In order to be eligible for
25 the retirement income exclusion, a person must be disabled,
26 at least 55 years of age, or be the surviving spouse of an
27 individual or be a survivor having an insurable interest in an
28 individual who would have qualified for the retirement income
29 exclusion.
30 This bill excludes nonqualified deferred compensation plan
31 income from the computation of net income for purposes of
32 the individual income tax under similar circumstances as the
33 retirement income exclusion. In order to be eligible for the
34 nonqualified deferred compensation plan income exclusion, the
35 taxpayer must be disabled, at least 55 years of age, or be the
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1 surviving spouse of an individual or be a survivor having an
2 insurable interest in an individual who would have qualified
3 for the income exclusion.
4 The bill also inserts the term “qualified” in Code section
5 422.7(19)(a) to ensure “qualified” deferred compensation plans
6 remain excludable from the computation of net income for
7 purposes of the individual income tax.
8 A nonqualified deferred compensation plan is deferred
9 compensation with no federal legal deferral limit that is
10 subject to tax at a later date, and is usually made available
11 to select employees.
12 A qualified deferred compensation plan is subject to
13 compensation deferral limits like 401(k) plans.
14 The bill applies retroactively to January 1, 2024, for tax
15 years beginning on or after that date.
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Statutes affected:
Introduced: 422.7