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AN ACT relating to an exemption of income taxation for military pensions. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 141.019 is amended to read as follows: 3
In the case of taxpayers other than corporations: 4
(1) Adjusted gross income shall be calculated by subtracting from the gross income of 5
those taxpayers the deductions allowed individuals by Section 62 of the Internal 6
Revenue Code and adjusting as follows: 7
(a) Exclude income that is exempt from state taxation by the Kentucky 8
Constitution and the Constitution and statutory laws of the United States; 9
(b) Exclude income from supplemental annuities provided by the Railroad 10
Retirement Act of 1937 as amended and which are subject to federal income 11
tax by Pub. L. No. 89-699; 12
(c) Include interest income derived from obligations of sister states and political 13
subdivisions thereof; 14
(d) Exclude employee pension contributions picked up as provided for in KRS 15
6.505, 16.545, 21.360, 61.523, 61.560, 65.155, 67A.320, 67A.510, 78.610, 16
and 161.540 upon a ruling by the Internal Revenue Service or the federal 17
courts that these contributions shall not be included as gross income until such 18
time as the contributions are distributed or made available to the employee; 19
(e) Exclude Social Security and railroad retirement benefits subject to federal 20
income tax; 21
(f) Exclude any money received because of a settlement or judgment in a lawsuit 22
brought against a manufacturer or distributor of "Agent Orange" for damages 23
resulting from exposure to Agent Orange by a member or veteran of the 24
Armed Forces of the United States or any dependent of such person who 25
served in Vietnam; 26
(g) 1. a. For taxable years beginning after December 31, 2005, but before 27 UNOFFICIAL COPY 23 RS BR 211
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January 1, 2018, exclude up to forty-one thousand one hundred ten 1
dollars ($41,110) of total distributions from pension plans, annuity 2
contracts, profit-sharing plans, retirement plans, or employee 3
savings plans; [and] 4
b. For taxable years beginning on or after January 1, 2018, exclude 5
up to thirty-one thousand one hundred ten dollars ($31,110) of 6
total distributions from pension plans, annuity contracts, profit-7
sharing plans, retirement plans, or employee savings plans; and 8
c. For taxable years beginning on or after January 1, 2023, in 9
addition to the exclusion provided in subdivision b. of this 10
subparagraph, exclude all distributions for military pension 11
plans received by a: 12
i. Retired member of the active duty components of the 13
Armed Forces of the United States; 14
ii. Retired member of the reserve components of the Armed 15
Forces of the United States; 16
iii. Retired member of the National Guard; and 17
iv. Retired member's surviving spouse or former spouse under 18
a survivor benefit plan derived from the retired member's 19
military pension plan. 20
2. a. The purpose of the military pension deduction is to encourage 21
military personnel and military families to remain residents of 22
Kentucky after retirement. 23
b. The department shall provide the following information to the 24
Legislative Research Commission no later than December 1, 25
2024, and on or before December 1 thereafter as long as the 26
military pension deduction is claimed on any return filed: 27 UNOFFICIAL COPY 23 RS BR 211
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i. The number of tax returns claiming the deduction for each 1
taxable year; 2
ii. The total amount of the deductions claimed and the total 3
amount of the reduced tax liability for each taxable year; 4
iii. The cumulative total of the reduced tax liability by county, 5
based on the mailing address on the return claiming the 6
deduction, for each taxable year; and 7
iv. Based on ranges of adjusted gross income of no larger than 8
five thousand dollars ($5,000), the total amount of the 9
reduced tax liability for each adjusted gross income range 10
for each taxable year. 11
3[2]. As used in this paragraph: 12
a. "Annuity contract" has the same meaning as set forth in Section 13
1035 of the Internal Revenue Code; 14
b. "Distributions" includes but is not limited to any lump-sum 15
distribution from pension or profit-sharing plans qualifying for the 16
income tax averaging provisions of Section 402 of the Internal 17
Revenue Code; any distribution from an individual retirement 18
account as defined in Section 408 of the Internal Revenue Code; 19
and any disability pension distribution; and 20
c. "Pension plans, profit-sharing plans, retirement plans, or employee 21
savings plans" means any trust or other entity created or organized 22
under a written retirement plan and forming part of a stock bonus, 23
pension, or profit-sharing plan of a public or private employer for 24
the exclusive benefit of employees or their beneficiaries and 25
includes plans qualified or unqualified under Section 401 of the 26
Internal Revenue Code and individual retirement accounts as 27 UNOFFICIAL COPY 23 RS BR 211
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defined in Section 408 of the Internal Revenue Code; 1
(h) 1. a. Exclude the portion of the distributive share of a shareholder's net 2
income from an S corporation subject to the franchise tax imposed 3
under KRS 136.505 or the capital stock tax imposed under KRS 4
136.300; and 5
b. Exclude the portion of the distributive share of a shareholder's net 6
income from an S corporation related to a qualified subchapter S 7
subsidiary subject to the franchise tax imposed under KRS 8
136.505 or the capital stock tax imposed under KRS 136.300. 9
2. The shareholder's basis of stock held in an S corporation where the S 10
corporation or its qualified subchapter S subsidiary is subject to the 11
franchise tax imposed under KRS 136.505 or the capital stock tax 12
imposed under KRS 136.300 shall be the same as the basis for federal 13
income tax purposes; 14
(i) Exclude income received for services performed as a precinct worker for 15
election training or for working at election booths in state, county, and local 16
primaries or regular or special elections; 17
(j) Exclude any capital gains income attributable to property taken by eminent 18
domain; 19
(k) 1. Exclude all income from all sources for members of the Armed Forces 20
who are on active duty and who are killed in the line of duty, for the year 21
during which the death occurred and the year prior to the year during 22
which the death occurred. 23
2. For the purposes of this paragraph, "all income from all sources" shall 24
include all federal and state death benefits payable to the estate or any 25
beneficiaries; 26
(l) Exclude all military pay received by members of the Armed Forces while on 27 UNOFFICIAL COPY 23 RS BR 211
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active duty; 1
(m) 1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 2
or 168; and 3
2. Exclude the amounts allowed by KRS 141.0101 for depreciation; 4
(n) Include the amount deducted under 26 U.S.C. sec. 199A; 5
(o) Ignore any change in the cost basis of the surviving spouse's share of property 6
owned by a Kentucky community property trust occurring for federal income 7
tax purposes as a result of the death of the predeceasing spouse; and 8
(p) Allow the same treatment allowed under Pub. L. No. 116-260, secs. 276 and 9
278, related to the tax treatment of forgiven covered loans, deductions 10
attributable to those loans, and tax attributes associated with those loans for 11
taxable years ending on or after March 27, 2020, but before January 1, 2022; 12
and 13
(2) Net income shall be calculated by subtracting from adjusted gross income all the 14
deductions allowed individuals by Chapter 1 of the Internal Revenue Code, as 15
modified by KRS 141.0101, except: 16
(a) Any deduction allowed by 26 U.S.C. sec. 164 for taxes; 17
(b) Any deduction allowed by 26 U.S.C. sec. 165 for losses, except wagering 18
losses allowed under Section 165(d) of the Internal Revenue Code; 19
(c) Any deduction allowed by 26 U.S.C. sec. 213 for medical care expenses; 20
(d) Any deduction allowed by 26 U.S.C. sec. 217 for moving expenses; 21
(e) Any deduction allowed by 26 U.S.C. sec. 67 for any other miscellaneous 22
deduction; 23
(f) Any deduction allowed by the Internal Revenue Code for amounts allowable 24
under KRS 140.090(1)(h) in calculating the value of the distributive shares of 25
the estate of a decedent, unless there is filed with the income return a 26
statement that the deduction has not been claimed under KRS 140.090(1)(h); 27 UNOFFICIAL COPY 23 RS BR 211
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(g) Any deduction allowed by 26 U.S.C. sec. 151 for personal exemptions and 1
any other deductions in lieu thereof; 2
(h) Any deduction allowed for amounts paid to any club, organization, or 3
establishment which has been determined by the courts or an agency 4
established by the General Assembly and charged with enforcing the civil 5
rights laws of the Commonwealth, not to afford full and equal membership 6
and full and equal enjoyment of its goods, services, facilities, privileges, 7
advantages, or accommodations to any person because of race, color, religion, 8
national origin, or sex, except nothing shall be construed to deny a deduction 9
for amounts paid to any religious or denominational club, group, or 10
establishment or any organization operated solely for charitable or educational 11
purposes which restricts membership to persons of the same religion or 12
denomination in order to promote the religious principles for which it is 13
established and maintained; and 14
(i) A taxpayer may elect to claim the standard deduction allowed by KRS 15
141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 16
and as modified by this section. 17
Section 2. KRS 131.190 is amended to read as follows: 18
(1) No present or former commissioner or employee of the department, present or 19
former member of a county board of assessment appeals, present or former property 20
valuation administrator or employee, present or former secretary or employee of the 21
Finance and Administration Cabinet, former secretary or employee of the Revenue 22
Cabinet, or any other person, shall intentionally and without authorization inspect or 23
divulge any information acquired by him or her of the affairs of any person, or 24
information regarding the tax schedules, returns, or reports required to be filed with 25
the department or other proper officer, or any information produced by a hearing or 26
investigation, insofar as the information may have to do with the affairs of the 27 UNOFFICIAL COPY 23 RS BR 211
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person's business. 1
(2) The prohibition established by subsection (1) of this section shall not extend to: 2
(a) Information required in prosecutions for making false reports or returns of 3
property for taxation, or any other infraction of the tax laws; 4
(b) Any matter properly entered upon any assessment record, or in any way made 5
a matter of public record; 6
(c) Furnishing any taxpayer or his or her properly authorized agent with 7
information respecting his or her own return; 8
(d) Testimony provided by the commissioner or any employee of the department 9
in any court, or the introduction as evidence of returns or reports filed with the 10
department, in an action for violation of state or federal tax laws or in any 11
action challenging state or federal tax laws; 12
(e) Providing an owner of unmined coal, oil or gas reserves, and other mineral or 13
energy resources assessed under KRS 132.820, or owners of surface land 14
under which the unmined minerals lie, factual information about the owner's 15
property derived from third-party returns filed for that owner's property, under 16
the provisions of KRS 132.820, that is used to determine the owner's 17
assessment. This information shall be provided to the owner on a confidential 18
basis, and the owner shall be subject to the penalties provided in KRS 19
131.990(2). The third-party filer shall be given prior notice of any disclosure 20
of information to the owner that was provided by the third-party filer; 21
(f) Providing to a third-party purchaser pursuant to an order entered in a 22
foreclosure action filed in a court of competent jurisdiction, factual 23
information related to the owner or lessee of coal, oil, gas reserves, or any 24
other mineral resources assessed under KRS 132.820. The department may 25
promulgate an administrative regulation establishing a fee schedule for the 26
provision of the information described in this paragraph. Any fee imposed 27 UNOFFICIAL COPY 23 RS BR 211
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shall not exceed the greater of the actual cost of providing the information or 1
ten dollars ($10); 2
(g) Providing information to a licensing agency, the Transportation Cabinet, or 3
the Kentucky Supreme Court under KRS 131.1817; 4
(h) Statistics of gasoline and special fuels gallonage reported to the department 5
under KRS 138.210 to 138.448; 6
(i) Providing any utility gross receipts license tax return information that is 7
necessary to administer the provisions of KRS 160.613 to 160.617 to 8
applicable school districts on a confidential basis; 9
(j) Providing documents, data, or other information to a third party pursuant to an 10
order issued by a court of competent jurisdiction; or 11
(k) Providing information to the Legislative Research Commission under: 12
1. KRS 139.519 for purposes of the sales and use tax refund on building 13
materials used for disaster recovery; 14
2. KRS 141.436 for purposes of the energy efficiency products credits; 15
3. KRS 141.437 for purposes of the ENERGY STAR home and the 16
ENERGY STAR manufactured home credits; 17
4. KRS 141.383 for purposes of the film industry incentives; 18
5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization 19
tax credits and the job assessment fees; 20
6. KRS 141.068 for purposes of the Kentucky investment fund; 21
7. KRS 141.396 for purposes of the angel investor tax credit; 22
8. KRS 141.389 for purposes of the distilled spirits credit; 23
9. KRS 141.408 for purposes of the inventory credit; 24
10. KRS 141.390 for purposes of the recycling and composting credit; 25
11. KRS 141.3841 for purposes of the selling farmer tax credit; 26
12. KRS 141.4231 for purposes of the renewable chemical production tax 27 UNOFFICIAL COPY 23 RS BR 211
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credit; 1
13. KRS 141.524 for purposes of the Education Opportunity Account 2
Program tax credit; 3
14. KRS 141.398 for purposes of the development area tax credit; 4
15. KRS 139.516 for the purposes of the sales and use tax exemption on the 5
commercial mining of cryptocurrency; [and] 6
16. KRS 141.419 for purposes of the decontamination tax credit; and 7
17. Section 1 of this Act for purposes of the adjusted gross income 8
deduction for distributions from military pension plans. 9
(3) The commissioner shall make available any information for official use only and on 10
a confidential basis to the proper officer, agency, board or commission of this state, 11
any Kentucky county, any Kentucky city, any other state, or the federal government, 12
under reciprocal agreements whereby the department shall receive similar or useful 13
information in return. 14
(4) Access to and inspection of information received from the Internal Revenue Service 15
is for department use only, and is restricted to tax administration purposes. 16
Information received from the Internal Revenue Service shall not be made available 17
to any other agency of state government, or any county, city, or other state, and shall 18
not be inspected intentionally and without authorization by any present secretary or 19
employee of the Finance and Administration Cabinet, commissioner or employee of 20
the department, or any other person. 21
(5) Statistics of crude oil as reported to the department under the crude oil excise tax 22
requirements of KRS Chapter 137 and statistics of natural gas production as 23
reported to the department under the natural resources severance tax requirements 24
of KRS Chapter 143A may be made public by the department by release to the 25
Energy and Environment Cabinet, Department for Natural Resources. 26
(6) Notwithstanding any provision of law to the contrary, beginning with mine-map 27 UNOFFICIAL COPY 23 RS BR 211
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submissions for the 1989 tax year, the department may make public or divulge only 1
those portions of mine maps submitted by taxpayers to the department pursuant to 2
KRS Chapter 132 for ad valorem tax purposes that depict the boundaries of mined-3
out parcel areas. These electronic maps shall not be relied upon to determine actual 4
boundaries of mined-out parcel areas. Property boundaries contained in mine maps 5
required under KRS Chapters 350 and 352 shall not be construed to constitute land 6
surveying or boundary surveys as defined by KRS 322.010 and any administrative 7
regulations promulgated thereto. 8