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2023 - 2024 LEGISLATURE
2023 ASSEMBLY BILL 285
May 17, 2023 - Introduced by Representatives ARMSTRONG, OHNSTAD, MCGUIRE,
BROOKS, CABRERA, DITTRICH, DOYLE, GREEN, JOERS, KITCHENS, MURSAU,
O'CONNOR, ORTIZ-VELEZ, PALMERI, SHANKLAND, SINICKI, SNODGRASS, SPIROS,
STUBBS, SUBECK and VANDERMEER, cosponsored by Senators WANGGAARD,
WIRCH, HESSELBEIN, NASS, SPREITZER and TAYLOR. Referred to Committee on
Ways and Means.
***AUTHORS SUBJECT TO CHANGE***
AN ACT to amend 71.05 (1) (an), 71.05 (6) (b) 4. (intro.), 71.05 (6) (b) 54. (intro.)
and 71.83 (1) (a) 6.; and to create 71.05 (1) (ad) of the statutes; relating to:
exempting from taxation the pension benefits of certain federal employees.
Analysis by the Legislative Reference Bureau
This bill exempts from taxation up to $8,000 in payments received in 2023 by
an individual from the U.S. Civil Service Retirement System and the full amount of
such payments received in 2024 and beyond. Under the bill, the exemption applies
without regard to when the individual became a member of or retired under CSRS,
which was the retirement system used by the federal government until 1984. In
1984, the federal government established a new retirement system, but federal
employees covered by CSRS were allowed to choose to stay in CSRS.
Under current law, payments received from CSRS are exempt from Wisconsin
income taxes but generally only if the individual was a member of or retired under
CSRS as of December 31, 1963. Similarly, payments received from other retirement
systems, such as payments received from Milwaukee city and county retirement
systems, are exempt from taxation for individuals who were members of or retired
from the systems as of December 31, 1963. Current law also provides a tax
exemption for payments received from the U.S. Military Employee Retirement
System and retirement payments that relate to service with the U.S. Coast Guard,
the commissioned corps of the National Oceanic and Atmospheric Administration,
and the commissioned corps of the U.S. Public Health Service. Also under current
law, an individual may subtract up to $5,000 of payments or distributions received
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ASSEMBLY BILL 285
from a qualified retirement plan or individual retirement account if the individual
is at least 65 years old and has federal adjusted gross income of less than $15,000,
or $30,000 if married.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SECTION 1. 71.05 (1) (ad) of the statutes is created to read:
71.05 (1) (ad) Federal employee pension income. One of the following amounts
of payments received from the U.S. civil service retirement system, to the extent that
the payments are not exempt under par. (a) or (an):
1. For taxable years beginning after December 31, 2022, and before January
1, 2024, up to $8,000 of the payments received during the taxable year.
2. For taxable years beginning after December 31, 2023, the amount of the
payments received during the taxable year.
SECTION 2. 71.05 (1) (an) of the statutes is amended to read:
71.05 (1) (an) Uniformed services retirement benefits. All retirement payments
received from the U.S. government that relate to service with the coast guard, the
commissioned corps of the national oceanic and atmospheric administration, or the
commissioned corps of the public health service, to the extent that such payments are
not exempt under par. (a), (ad), or (am) or sub. (6) (b) 54.
SECTION 3. 71.05 (6) (b) 4. (intro.) of the statutes is amended to read:
71.05 (6) (b) 4. (intro.) Disability payments other than disability payments that
are paid from a retirement plan, the payments from which are exempt under subd.
54. and sub. (1) (ad), (am), and (an), if the individual either is single or is married and
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files a joint return and is under 65 years of age before the close of the taxable year
to which the subtraction relates, retired on disability, and, when the individual
retired, was permanently and totally disabled. In this subdivision, “permanently
and totally disabled" means an individual who is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months. An individual
shall not be considered permanently and totally disabled for purposes of this
subdivision unless proof is furnished in such form and manner, and at such times,
as prescribed by the department. The exclusion under this subdivision shall be
determined as follows:
SECTION 4. 71.05 (6) (b) 54. (intro.) of the statutes is amended to read:
71.05 (6) (b) 54. (intro.) Except for a payment that is exempt under sub. (1) (a),
(ad), (am), or (an), or that is exempt as a railroad retirement benefit, for taxable years
beginning after December 31, 2020, up to $5,000 of payments or distributions
received each year by an individual from a qualified retirement plan under the
Internal Revenue Code or from an individual retirement account established under
26 USC 408, if all of the following conditions apply:
SECTION 5. 71.83 (1) (a) 6. of the statutes is amended to read:
71.83 (1) (a) 6. `Retirement plans.' Any natural person who is liable for a
penalty for federal income tax purposes under section 72 (m) (5), (q), (t), and (v), 4973,
4974, 4975, or 4980A of the Internal Revenue Code is liable for 33 percent of the
federal penalty unless the income received is exempt from taxation under s. 71.05
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SECTION 5 ASSEMBLY BILL 285
(1) (a) or (ad) or (6) (b) 54. The penalties provided under this subdivision shall be
assessed, levied, and collected in the same manner as income or franchise taxes.
(END)
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