EGTRRA STATE TAX CONFORMITY UPDATE
Prepared by: Tilda Kaplan
Mercer Human Resource
Consulting
Atlanta, GA
This
information below is taken directly from the American Benefit Council’s website, last updated as of July 29,
2002.
Here
is the latest information, as of August 30, 2002, on state tax conformity with
the retirement provisions of the Economic Growth and Tax Relief Reconciliation
Act of 2001 (EGTRRA). Note: only nonconforming states (or states previously considered to be
nonconforming) are listed below – For all other states, either they
automatically conform to EGTRRA or conformity was never an issue (e.g. the
state does not have an income tax). Some states, notably Pennsylvania and New
Jersey generally do not track the federal tax code and are not included in this
list. The list also only focuses on the retirement savings provisions of EGTRRA
and does not track conformity with other provisions.
There
are only a few states that have not conformed and those states are highlighted.
Arizona – Arizona’s EGTRRA
conformity bill, H.B. 2712, passed both houses of the Arizona legislature and
was signed by Governor Jane Dee Hull on June 4.
Arkansas – The Arkansas state
legislature does not convene until 2003.
However, the Arkansas Department of Finance and Administration (DFA)
anticipates that the General Assembly will retroactively adopt these provisions
early during the 2003 legislative session.
As a result, DFA has developed the following plan to address conformity
to federal tax law changes: 2002 state income tax forms will be revised to
accommodate the retroactive adoption of these recent federal law changes; there
will be an aggressive taxpayer education program; the state will inform
taxpayers and tax professionals that the 2003 General Assembly may adopt
retroactively these federal law changes early in the 2003 legislative session;
the state will encourage taxpayers and tax professionals to refrain from filing
their 2002 tax returns until the General Assembly has addressed these federal
law changes; DFA will prepare a conformity bill that can be pre-filed and be
ready for consideration early in the 2003 legislative session; and, if the
General Assembly determines that certain provisions of the new federal law
should not be adopted retroactively, DFA will abate interest and penalty
assessed against taxpayers who followed the federal law changes when preparing
their return.
California – On May 8, Governor Davis
signed into law the two conformity bills, S.B. 657 and A.B. 1122.
Georgia – Georgia Governor Roy
Barnes signed H.B. 1026 on April 18 to bring the state into conformity with the
retirement savings provisions of EGTRRA.
Hawaii – On June 28, the Governor
of Hawaii signed Senate Bill 2824, into law. The bill provides for the Hawaii
state income tax code to conform to the pension provisions of EGTRRA.
Idaho – House Bill 492 was signed
by the Governor on March 4. The bill
amends the state tax code to refer to the Internal Revenue Code in existence as
of January 1, 2002.
Indiana – House Bill 1195 (which
included the original conformity bill H. B. 1356) – was approved by the
Governor on March 28.
Iowa – House File 2116,
providing for full conformity to the changes made by EGTRRA by conforming to
the Internal Revenue Code as of January 1, 2002, was signed by the Governor
into law on April 4.
Kentucky – On April 24, Governor
Patton signed into law the Kentucky conformity bill, H.B. 457.
Maine – On March 25, Maine
Governor King signed L.D. 2080, a supplemental budget law that included state
tax conformity.
Massachusetts – Massachusetts state
income tax laws now conform to federal income tax laws with respect to 401(a),
401(k), 403(b), 457, and 529 plans. The
tax package (H.B. 5250) that contains the retirement and education savings
measure was enacted by the Massachusetts Senate on July 25. The conformity provisions of the
legislation are effective as of January 1, 2002.
Minnesota – There were some
conflicting reports with regard to Minnesota, but it is understood that the
Governor signed conformity legislation, H.1, into law a year ago June. The Minnesota tax laws would follow the
Internal Revenue Code as amended through June 15, 2001.
North Carolina – The General Assembly will
not consider the conformity issue until it reconvenes on May 23, but key
legislators expressed doubts about the importance of conformity because of
budgetary pressures. However, the North
Carolina Department of Revenue announced on April 19 its support for conformity
legislation and provided guidance on dealing the differing federal and state
treatment of retirement contributions.
The department stated that if would revise tax forms and waive penalties
in certain cases.
South Carolina – On April 22, the Governor
approved H. 4695, which provides for the conformity of the South Carolina tax
code to the federal tax code.
Virginia – On April 2, Governor Warner signed a bill (S. B.
121) that brought the commonwealth’s retirement law in compliance with certain
provisions of EGTRRA. Previously,
Virginia did not permit trustee-to-trustee transfers or rollovers that would
match the internal Revenue Code Section 401(a). The measure, effective July 1,
also increased the maximum creditable compensation used for computing benefits
from $160,000 to $200,000 for calendar quarters beginning July 1, 2001.
West Virginia – On March 7, Governor Wise
signed into law S. 140, which amends the state tax code to conform to the
Internal Revenue Code as amended through December 31, 2001.
Wisconsin – On July 26, Governor
McCallum signed into law a budget bill that includes provisions that conform
the Wisconsin state tax law to the retirement savings provisions of EGTRRA.