FIRST REGULAR SESSION
HOUSE BILL NO. 636
94TH GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVES DAY (Sponsor), JETTON, KRAUS, PEARCE, RICHARD,
WASSON, SMITH (150), DUSENBERG, COOPER (155), MAY, WELLS, McGHEE, LEMBKE,
WILSON (130), SCHOELLER, BRUNS, WALLACE, EMERY, MUNZLINGER, WHORTON,
WILSON (119), POLLOCK, NIEVES, ONDER, SALVA, FUNDERBURK, COOPER (158), DETHROW,
TILLEY, ST. ONGE, JONES (89), WRIGHT, STREAM, PRATT, STEVENSON, SCHNEIDER, SILVEY,
PAGE, WETER, SATER, DIXON, THRELKELD, NANCE, RUCKER, SMITH (14), PARSON,
BROWN (30), BEARDEN, DEMPSEY, MUSCHANY, MOORE, BRANDOM, SCHARNHORST, HUNTER,
AVERY, BIVINS, KELLY, CUNNINGHAM (145), CUNNINGHAM (86), JONES (117), SCHAAF,
DEEKEN, PORTWOOD, COX, RUZICKA, ERVIN, SCHAD, DAVIS, BAKER (25), HUGHES, LAMPE,
CORCORAN, BLAND, WOOD, LOW (39), HUBBARD, YOUNG, SCHLOTTACH, FLOOK, QUINN (7),
YAEGER, KRATKY, GRISAMORE, KINGERY AND STORCH (Co-sponsors).
Read 1st time January 29, 2007 and copies ordered printed.
D. ADAM CRUMBLISS, Chief Clerk
1482L.01I
AN ACT
To repeal sections 143.121 and 143.124, RSMo, and to enact in lieu thereof two new sections
relating to income tax exemptions for military pensions.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Sections 143.121 and 143.124, RSMo, are repealed and two new sections
enacted in lieu thereof, to be known as sections 143.121 and 143.124, to read as follows:
143.121. 1. The Missouri adjusted gross income of a resident individual shall be the
taxpayer's federal adjusted gross income subject to the modifications in this section.
2. There shall be added to the taxpayer's federal adjusted gross income:
(a) The amount of any federal income tax refund received for a prior year which resulted
in a Missouri income tax benefit;
(b) Interest on certain governmental obligations excluded from federal gross income by
Section 103 of the Internal Revenue Code. The previous sentence shall not apply to interest on
obligations of the state of Missouri or any of its political subdivisions or authorities and shall not
apply to the interest described in subdivision (a) of subsection 3 of this section. The amount
added pursuant to this paragraph shall be reduced by the amounts applicable to such interest that
would have been deductible in computing the taxable income of the taxpayer except only for the
application of Section 265 of the Internal Revenue Code. The reduction shall only be made if
it is at least five hundred dollars;
(c) The amount of any deduction that is included in the computation of federal taxable
income pursuant to Section 168 of the Internal Revenue Code as amended by the Job Creation
and Worker Assistance Act of 2002 to the extent the amount deducted relates to property
purchased on or after July 1, 2002, but before July 1, 2003, and to the extent the amount
deducted exceeds the amount that would have been deductible pursuant to Section 168 of the
Internal Revenue Code of 1986 as in effect on January 1, 2002; and
(d) The amount of any deduction that is included in the computation of federal taxable
income for net operating loss allowed by Section 172 of the Internal Revenue Code of 1986, as
amended, other than the deduction allowed by Section 172(b)(1)(G) and Section 172(i) of the
Internal Revenue Code of 1986, as amended, for a net operating loss the taxpayer claims in the
tax year in which the net operating loss occurred or carries forward for a period of more than
twenty years and carries backward for more than two years. Any amount of net operating loss
taken against federal taxable income but disallowed for Missouri income tax purposes pursuant
to this paragraph after June 18, 2002, may be carried forward and taken against any income on
the Missouri income tax return for a period of not more than twenty years from the year of the
initial loss.
3. There shall be subtracted from the taxpayer's federal adjusted gross income the
following amounts to the extent included in federal adjusted gross income:
(a) Interest or dividends on obligations of the United States and its territories and
possessions or of any authority, commission or instrumentality of the United States to the extent
exempt from Missouri income taxes pursuant to the laws of the United States. The amount
subtracted pursuant to this paragraph shall be reduced by any interest on indebtedness incurred
to carry the described obligations or securities and by any expenses incurred in the production
of interest or dividend income described in this paragraph. The reduction in the previous
sentence shall only apply to the extent that such expenses including amortizable bond premiums
are deducted in determining the taxpayer's federal adjusted gross income or included in the
taxpayer's Missouri itemized deduction. The reduction shall only be made if the expenses total
at least five hundred dollars;
(b) The portion of any gain, from the sale or other disposition of property having a higher
adjusted basis to the taxpayer for Missouri income tax purposes than for federal income tax
purposes on December 31, 1972, that does not exceed such difference in basis. If a gain is
considered a long-term capital gain for federal income tax purposes, the modification shall be
limited to one-half of such portion of the gain;
(c) The amount necessary to prevent the taxation pursuant to this chapter of any annuity
or other amount of income or gain which was properly included in income or gain and was taxed
pursuant to the laws of Missouri for a taxable year prior to January 1, 1973, to the taxpayer, or
to a decedent by reason of whose death the taxpayer acquired the right to receive the income or
gain, or to a trust or estate from which the taxpayer received the income or gain;
(d) Accumulation distributions received by a taxpayer as a beneficiary of a trust to the
extent that the same are included in federal adjusted gross income;
(e) The amount of any state income tax refund for a prior year which was included in the
federal adjusted gross income;
(f) The portion of capital gain specified in section 135.357, RSMo, that would otherwise
be included in federal adjusted gross income;
(g) The amount that would have been deducted in the computation of federal taxable
income pursuant to Section 168 of the Internal Revenue Code as in effect on January 1, 2002,
to the extent that amount relates to property purchased on or after July 1, 2002, but before July
1, 2003, and to the extent that amount exceeds the amount actually deducted pursuant to Section
168 of the Internal Revenue Code as amended by the Job Creation and Worker Assistance Act
of 2002;
(h) For all tax years beginning on or after January 1, 2005, the amount of any income
received for military service while the taxpayer serves in a combat zone which is included in
federal adjusted gross income and not otherwise excluded therefrom. As used in this section,
"combat zone" means any area which the President of the United States by Executive Order
designates as an area in which armed forces of the United States are or have engaged in combat.
Service is performed in a combat zone only if performed on or after the date designated by the
President by Executive Order as the date of the commencing of combat activities in such zone,
and on or before the date designated by the President by Executive Order as the date of the
termination of combatant activities in such zone; [and]
(i) For all tax years ending on or after July 1, 2002, with respect to qualified property that
is sold or otherwise disposed of during a taxable year by a taxpayer and for which an addition
modification was made under paragraph (c) of subsection 2 of this section, the amount by which
addition modification made under paragraph (c) of subsection 2 of this section on qualified
property has not been recovered through the additional subtractions provided in paragraph (g)
of this subsection;
(j) For all tax years beginning on or after January 1, 2007, the amount of any
military retirement benefits included in federal adjusted gross income and not otherwise
excluded therefrom.
4. There shall be added to or subtracted from the taxpayer's federal adjusted gross
income the taxpayer's share of the Missouri fiduciary adjustment provided in section 143.351.
5. There shall be added to or subtracted from the taxpayer's federal adjusted gross
income the modifications provided in section 143.411.
6. In addition to the modifications to a taxpayer's federal adjusted gross income in this
section, to calculate Missouri adjusted gross income there shall be subtracted from the taxpayer's
federal adjusted gross income any gain recognized pursuant to Section 1033 of the Internal
Revenue Code of 1986, as amended, arising from compulsory or involuntary conversion of
property as a result of condemnation or the imminence thereof.
143.124. 1. Other provisions of law to the contrary notwithstanding, the total amount
of all annuities, pensions, or retirement allowances above the amount of six thousand dollars
annually provided by any law of this state, the United States, or any other state to any person,
other than military retirement benefits specifically subtracted from federal adjusted gross
income under subsection 3 of section 143.121 and except as provided in subsection 4 of this
section, shall be subject to tax pursuant to the provisions of this chapter, in the same manner, to
the same extent and under the same conditions as any other taxable income received by the
person receiving it. For purposes of this section, annuity, pension, or retirement allowance shall
be defined as an annuity, pension or retirement allowance provided by the United States, this
state, any other state or any political subdivision or agency or institution of this or any other state.
For all tax years beginning on or after January 1, 1998, for purposes of this section, annuity,
pension or retirement allowance shall be defined to include 401(k) plans, deferred compensation
plans, self-employed retirement plans, also known as Keogh plans, annuities from a defined
pension plan and individual retirement arrangements, also known as IRAs, as described in the
Internal Revenue Code, but not including Roth IRAs, as well as an annuity, pension or retirement
allowance provided by the United States, this state, any other state or any political subdivision
or agency or institution of this or any other state. For all tax years beginning on or after
January 1, 2007, for purposes of this section, the terms annuity, pension, or retirement
allowance shall not be defined to include military retirement benefits specifically
subtracted from federal adjusted gross income under paragraph (j) subsection 3 of section
143.121. An individual taxpayer shall only be allowed a maximum deduction of six thousand
dollars pursuant to this section. Taxpayers filing combined returns shall only be allowed a
maximum deduction of six thousand dollars for each taxpayer on the combined return.
2. For the period beginning July 1, 1989, and ending December 31, 1989, there shall be
subtracted from Missouri adjusted gross income for that period, determined pursuant to section
143.121, the first three thousand dollars of retirement benefits received by each taxpayer:
(1) If the taxpayer's filing status is single, head of household or qualifying widow(er) and
the taxpayer's Missouri adjusted gross income is less than twelve thousand five hundred dollars;
or
(2) If the taxpayer's filing status is married filing combined and their combined Missouri
adjusted gross income is less than sixteen thousand dollars; or
(3) If the taxpayer's filing status is married filing separately and the taxpayer's Missouri
adjusted gross income is less than eight thousand dollars.
3. For the tax years beginning on or after January 1, 1990, there shall be subtracted from
Missouri adjusted gross income, determined pursuant to section 143.121, a maximum of the first
six thousand dollars of retirement benefits received by each taxpayer from sources other than
privately funded sources, and for tax years beginning on or after January 1, 1998, there shall be
subtracted from Missouri adjusted gross income, determined pursuant to section 143.121, a
maximum of the first one thousand dollars of any retirement allowance received from any
privately funded source for tax years beginning on or after January 1, 1998, but before January
1, 1999, and a maximum of the first three thousand dollars of any retirement allowance received
from any privately funded source for tax years beginning on or after January 1, 1999, but before
January 1, 2000, and a maximum of the first four thousand dollars of any retirement allowance
received from any privately funded source for tax years beginning on or after January 1, 2000,
but before January 1, 2001, and a maximum of the first five thousand dollars of any retirement
allowance received from any privately funded source for tax years beginning on or after January
1, 2001, but before January 1, 2002, and a maximum of the first six thousand dollars of any
retirement allowance received from any privately funded sources for tax years beginning on or
after January 1, 2002. A taxpayer shall be entitled to the maximum exemption provided by this
subsection:
(1) If the taxpayer's filing status is single, head of household or qualifying widow(er) and
the taxpayer's Missouri adjusted gross income is less than twenty-five thousand dollars; or
(2) If the taxpayer's filing status is married filing combined and their combined Missouri
adjusted gross income is less than thirty-two thousand dollars; or
(3) If the taxpayer's filing status is married filing separately and the taxpayer's Missouri
adjusted gross income is less than sixteen thousand dollars.
4. If a taxpayer's adjusted gross income exceeds the adjusted gross income ceiling for
such taxpayer's filing status, as provided in subdivisions (1), (2) and (3) of subsection 3 of this
section, such taxpayer shall be entitled to an exemption equal to the greater of zero or the
maximum exemption provided in subsection 3 of this section reduced by one dollar for every
dollar such taxpayer's income exceeds the ceiling for his or her filing status.
5. For purposes of this section, any Social Security benefits otherwise included in
Missouri adjusted gross income shall be subtracted; but Social Security benefits shall not, except
as otherwise provided in section 143.121, be subtracted for purposes of other computations
pursuant to this chapter, and are not to be considered as retirement benefits for purposes of this
section.
6. The provisions of subdivisions (1) and (2) of subsection 3 of this section shall apply
during all tax years in which the federal Internal Revenue Code provides exemption levels for
calculation of the taxability of Social Security benefits that are the same as the levels in
subdivisions (1) and (2) of subsection 3 of this section. If the exemption levels for the
calculation of the taxability of Social Security benefits are adjusted by applicable federal law or
regulation, the exemption levels in subdivisions (1) and (2) of subsection 3 of this section shall
be accordingly adjusted to the same exemption levels.
7. The portion of a taxpayer's lump sum distribution from an annuity or other retirement
plan not otherwise included in Missouri adjusted gross income as calculated pursuant to this
chapter but subject to taxation under Internal Revenue Code Section 402 shall be taxed in an
amount equal to ten percent of the taxpayer's federal liability on such distribution for the same
tax year.
8. For purposes of this section, retirement benefits received shall not include any
withdrawals from qualified retirement plans which are subsequently rolled over into another
retirement plan.
9. The exemptions provided for in this section shall not affect the calculation of the
income to be used to determine the property tax credit provided in sections 135.010 to 135.035,
RSMo.
10. The exemptions provided for in this section shall apply to any annuity, pension, or
retirement allowance as defined in subsection 1 of this section to the extent that such amounts
are included in the taxpayer's federal adjusted gross income and not otherwise deducted from the
taxpayer's federal adjusted gross income in the calculation of Missouri taxable income. This
subsection shall not apply to any individual who qualifies under federal guidelines to be one
hundred percent disabled.
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