The bill amends the Income Tax Act of 1967, specifically section 703, to clarify and modify the withholding tax requirements for pension, annuity, and other income payments. It specifies that a person that disburses pension or annuity payments may withhold tax based on the taxable portion of those payments, and outlines the calculation method for withholding, including the deduction of personal and dependency exemptions. The bill also establishes that withholding is not required for distributions not expected to be included in the recipient's gross income or that are deductible from adjusted gross income.

Additionally, the bill revises the language regarding the responsibilities of employers and flow-through entities in withholding taxes, including the timing of tax accruals and payments to the state. It introduces new provisions regarding exemption certificates for members of flow-through entities and clarifies the conditions under which withholding is not required. The amendments take effect on January 1, 2026.

Statutes affected:
Senate Introduced Bill: 206.703