Increases the tax exemption for pensions and annuities for persons age fifty-nine and one-half or greater

35 Co-sponsors

• Susan Serino
• Fredrick J. Akshar II
• George Amedore
• Tony Avella
• John J. Bonacic
• Phil Boyle
• David Carlucci
• Thomas Croci
• John A. DeFrancisco
• Simcha Felder
• John J. Flanagan
• Rich Funke
• Patrick M. Gallivan
• Martin J. Golden
• Joseph A. Griffo
• Jeffrey D. Klein
• Andrew J. Lanza
• William J. Larkin Jr.
• Kenneth P. LaValle
• Betty Little
• Carl L. Marcellino
• Kathleen A. Marchione
• Jack M. Martins
• Terrence P. Murphy
• Michael F. Nozzolio
• Thomas F. O'Mara
• Robert Ortt
• Michael H. Ranzenhofer
• Patty Ritchie
• Joseph E. Robach
• Diane J. Savino
• James L. Seward
• David J. Valesky
• Michael Venditto
• Catharine Young

Title of bill

An act to amend the tax law, in relation to increasing the exemption for pensions and annuities for certain persons

Purpose

This bill will update the amount of private pension income which is exempt from the personal income tax.

Summary of provisions

Section 612(c)(3-a) of the Tax Law is amended to increase the amount of private pension and annuity income that is exempt from New York State income taxes. The current exemption level of $20,000 would be increased to $25,000 for the 2017 taxable year, to $30,000 for the 2018 taxable year, to $35,000 for the 2019 taxable year, and to $40,000 in the 2020 and subsequent taxable years.

Existing law

Government pensions (state, local, federal, military) are fully exempt from NYS income taxes. In contrast, only the first $20,000 of income from private pensions and annuities is tax exempt.

Justification

The current $20,000 tax exemption level for private pension income was established in 1981, and has not been adjusted during the intervening 35 years. This bill provides a much needed update in the amount.

The exemption was enacted in 1981 in an effort to assist senior citizens. The 1981 law also sought to help treat the recipients of private pensions more fairly in comparison to the treatment of persons who receive government pensions, which are fully exempt from state income taxes pursuant to the State Constitution.

The 1981 law compromised on a tax exemption level of $20,000 for private pensions. Based on the Consumer Price Index, the $20,000 level established in 1981 would be the equivalent of more than $52,000 in 2016.

This bill would enact the first increase in the exemption threshold since the law was passed in 1981. It would phase in the increase by $5,000 per year to a maximum exemption of $40,000.

An updated exemption level will help address the inequity in the tax treatment of private pensions and government pensions, which are tax exempt under the State Constitution.

In addition, reducing the tax burden on older New Yorkers will help encourage retirees to remain in New York State during their retirement years. The increase will also enable older New Yorkers to keep more of their income at a time when many find it difficult to return to the workforce in order to supplement their income. Increasing the tax-exempt amount may also encourage younger persons to save money for their retirement in pensions, 401(k)s, IRAs, etc.

Legislative history

The provisions of bill S.2903-B were included in the Senate's one-house budget proposal which was passed by the Senate in mid-March 2016. Bill S.2903-A was passed by the Senate in 2015.

Fiscal implications

None in the current 2016-17 SFY or in the 2017-18 SFY. The exemption increase will then phase in over a four-year period, with an anticipated impact of $275 million when fully phased in.

Effective date

Immediately