Bill Summary – FastDemocracy

130th MAINE LEGISLATURE
                    FIRST SPECIAL SESSION-2021
Legislative Document                                                               No. 1413
S.P. 463                                                           In Senate, April 12, 2021
           An Act To Provide Equity in the State Income Tax Deduction for
           Certain Public Employees Retirement System Pensions
   Received by the Secretary of the Senate on April 8, 2021. Referred to the Committee on
Taxation pursuant to Joint Rule 308.2 and ordered printed.
                                                                      DAREK M. GRANT
                                                                     Secretary of the Senate
Presented by Senator RAFFERTY of York.
Cosponsored by Representative MILLETT of Cape Elizabeth and
Senator: BALDACCI of Penobscot, Representatives: BABBIDGE of Kennebunk, ROCHE of
Wells, STEARNS of Guilford.
                                       Printed on recycled paper
 Be it enacted by the People of the State of Maine as follows:
     Sec. 1. 36 MRSA §5122, sub-§2, ¶C-1 is enacted to read:
     C-1. For tax years beginning on or after January 1, 2021:
         (1) For each individual who is a primary recipient of civil service retirement plan
         benefits, the lesser of:
             (a) The aggregate of civil service retirement plan benefits included in the
             individual's federal adjusted gross income; and
             (b) The civil service pension deduction amount reduced by the total amount
             of the individual's social security benefits and railroad retirement benefits paid
             by the United States, but not less than $0;
         (2) For purposes of this paragraph, "civil service pension deduction amount"
         means:
             (a) For the tax year beginning in 2021, $15,000;
             (b) For the tax year beginning in 2022, $20,000;
             (c) For the tax year beginning in 2023, $25,000;
             (d) For the tax year beginning in 2024, $30,000; and
             (e) For tax years beginning on or after January 1, 2025, the maximum annual
             benefit that an individual retiring at the retirement age, as defined in 42 United
             States Code, Section 416(l), during January of the tax year may receive under
             the federal Social Security Act; and
         (3) For the purposes of this paragraph, "primary recipient" and "retirement plan
         benefits" have the same meanings as under paragraph M-2, subparagraph (2);
     Sec. 2. 36 MRSA §5122, sub-§2, ¶M-2, as amended by PL 2017, c. 170, Pt. H,
 §3, is further amended to read:
     M-2. For tax years beginning on or after January 1, 2016:
         (1) For each individual who is a primary recipient of retirement plan benefits, the
         reduction is the sum of:
             (a) Excluding military retirement plan benefits, an amount that is the lesser of:
                 (i) The aggregate of retirement plan benefits under employee retirement
                 plans or individual retirement accounts included in the individual’s federal
                 adjusted gross income; and
                 (ii) The pension deduction amount reduced by the total amount of the
                 individual’s social security benefits and railroad retirement benefits paid
                 by the United States and, for tax years beginning on or after January 1,
                 2021, also reduced by any civil service retirement plan benefits for which
                 a subtraction is allowed under paragraph C-1, but not less than $0; and
             (b) An amount equal to the aggregate of retirement benefits under military
             retirement plans included in the individual’s federal adjusted gross income;
             and
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         (2) For purposes of this paragraph, the following terms have the following
         meanings.
             (a) "Employee retirement plan" means a state, federal or military retirement
             plan or any other retirement benefit plan established and maintained by an
             employer for the benefit of its employees under the Code, Section 401(a),
             Section 403 or Section 457(b), except that distributions made pursuant to a
             Section 457(b) plan are not eligible for the deduction provided by this
             paragraph if they are made prior to age 55 and are not part of a series of
             substantially equal periodic payments made for the life of the primary recipient
             or the joint lives of the primary recipient and that recipient's designated
             beneficiary.
             (a-1) "Civil service retirement plan benefits" means:
                 (i) Retirement plan benefits received under Title 5, Part 20 excluding pick-
                 up contributions for which a subtraction is allowed under paragraph E; or
                 (ii) Retirement plan benefits received under a retirement plan of another
                 state government, local government or the Federal Government as a result
                 of service for that government.
             "Civil service retirement plan benefits" does not include benefits from a
             military retirement plan.
             (b) "Individual retirement account" means an individual retirement account
             under Section 408 of the Code, a Roth IRA under Section 408A of the Code,
             a simplified employee pension under Section 408(k) of the Code or a simple
             retirement account for employees under Section 408(p) of the Code.
             (c) "Military retirement plan" means retirement plan benefits received as a
             result of service in the active or reserve components of the United States Army,
             Navy, Air Force, Marines or Coast Guard.
             (d) "Pension deduction amount" means $10,000.
             (e) "Primary recipient" means the individual upon whose earnings or
             contributions the retirement plan benefits or civil service retirement plan
             benefits are based or the surviving spouse of that individual.
             (f) "Retirement plan benefits" means employee retirement plan benefits,
             except pick-up contributions for which a subtraction is allowed under
             paragraph E, reported as pension or annuity income for federal income tax
             purposes and individual retirement account benefits reported as individual
             retirement account distributions for federal income tax purposes. "Retirement
             plan benefits" does not include distributions that are subject to the tax imposed
             by the Code, Section 72(t) or, for tax years beginning on or after January 1,
             2021, civil service retirement plan benefits for which a subtraction is allowed
             under paragraph C-1;
                                       SUMMARY
      This bill establishes an income tax exemption for civil service retirement plan benefits
 for recipients who do not participate in the federal social security program in recognition
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 of the fact that the current law provides an income exemption for all social security benefits
44
 in addition to a $10,000 pension exemption for retirement plan benefits. The bill phases in
45
 greater parity in treatment of the 2 types of pension systems by increasing the civil service
46
 pension deduction amount by $5,000 per year until 2025 when it reaches the maximum
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 annual benefit that an individual retiring at retirement age would receive under the federal
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 Social Security Act.
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Statutes affected: 
Bill Text LD 1413, SP 463: 36.5122