The bill amends the Income Tax Act of 1967, specifically section 703, to clarify and update the withholding tax requirements for pension and annuity payments. It specifies that a person that disburses these payments may withhold tax based on the taxable portion of the payments, applying the rate prescribed in section 51. The bill also introduces new language regarding the calculation of withholding, stating that it should be based on the taxable disbursement after deducting a proportion of personal and dependency exemptions. Additionally, it clarifies that withholding is not required on distributions not expected to be included in the recipient's gross income.

Furthermore, the bill modifies the language regarding the responsibilities of employers and flow-through entities in withholding taxes. It establishes that every employer required to withhold tax must do so based on the compensation after accounting for personal and dependency exemptions. The bill also includes provisions for casino and race meeting licensees regarding tax withholding on winnings and specifies that certain entities, such as publicly traded partnerships, are exempt from withholding. The amendments take effect on January 1, 2026.

Statutes affected:
Senate Introduced Bill: 206.703