The bill amends the Income Tax Act of 1967 to update tax withholding requirements for pension, annuity, and other income payments. It introduces a new withholding rate of 3% for taxable disbursements from retirement plans and clarifies that withholding is not necessary for distributions not expected to be included in the recipient's gross income. Additionally, the bill specifies that withholding calculations should be based on taxable disbursements after accounting for personal and dependency exemptions. It also revises provisions for flow-through entities, stating that they are not required to withhold taxes if they receive an exemption certificate from a member under certain conditions.

Moreover, the bill changes references from "part" to "chapter" in various sections related to tax withholding and reporting. It clarifies that all provisions concerning the administration, collection, and enforcement of the act apply to individuals required to withhold taxes. The Department of Treasury is empowered to mandate more frequent tax returns and payments if there are reasonable grounds to suspect non-payment of withheld taxes. Employers with over 250 employees are required to file annual returns electronically and differentiate between state and community college tax payments. The bill also outlines the responsibilities of individuals receiving income subject to withholding, requiring accurate information for tax purposes, and stipulates that failure to provide necessary information will result in withholding at the full tax rate. The enactment of this bill is contingent upon the passage of Senate Bill No. 425 of the 103rd Legislature.

Statutes affected:
Senate Introduced Bill: 206.703