Bills › 91st General Assembly
Relating to individual income taxation by exempting certain amounts received from nonqualified deferred compensation plans and including retroactive applicability provisions
Sponsored by Rep. Megan Jones (R)
Topics:Taxes
Where it is now
- Done: IntroducedJanuary 21, 2025
- Done: SubcommitteeJanuary 23, 2025
- Done: House committeeMarch 13, 2025
- Skipped: Passes the HouseContinued as HF 961
- Next: Senate committee
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Became HF 961 → Its progress continues under the new number. Go to HF 961 What’s a funnel?
What’s in it
AI summary People who are disabled, elderly, or surviving a spouse could stop paying state income tax on up to $500,000 from certain deferred compensation plans. This change applies to specific types of retirement pay that are usually only available to certain employees. The new rule would go into effect for tax years starting on or after January 1, 2025.1
Read the official explanation
Under current law, a taxpayer may exclude retirement income from the computation of net income for purposes of the individual income tax. In order to be eligible for the retirement income exclusion, a person must be disabled, at least years of age, or be the surviving spouse of an individual or be a survivor having an insurable interest in an individual who would have qualified for the retirement income exclusion. circumstances as the retirement income exclusion. In order to be eligible for the nonqualified deferred compensation plan income exclusion, the taxpayer must be disabled, at least years of age, or be the surviving spouse of an individual or be a survivor having an insurable interest in an individual who would have qualified for the income exclusion. A nonqualified deferred compensation plan is deferred compensation with no federal legal deferral limit that is subject to tax at a later date, and is usually made available to select employees. The bill applies retroactively to January 1, 2025, for tax years beginning on or after that date.
House subcommittee
Named January 23, 2025. On January 28, 2025 it recommended passage.
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Fiscal note
AI summary This bill excludes up to $500,000 each year from individual income tax for certain people receiving nonqualified deferred compensation, including those who are disabled, age 55 or older, or surviving spouses. It is estimated to decrease General Fund revenue by $3.1 million in fiscal year 2026, $3.2 million in fiscal year 2027, $3.3 million in fiscal years 2028 and 2029, $3.4 million in fiscal year 2030, and $3.5 million in fiscal year 2031. The bill is also estimated to decrease the statewide local option income surtax for schools by amounts ranging from $78,000 in fiscal year 2026 to $87,000 in fiscal year 2031.3
From the note: The exemption in House File 961 is estimated to decrease revenue to the General Fund by the following amounts: • FY 2026 = $3.1 million • FY 2027 = $3.2 million • FY 2028 = $3.3 million • FY 2029 = $3.3 million • FY 2030 = $3.4 million • FY 2031 = $3.5 million The decrease in tax liability is also estimated to decrease the statewide local option income surtax for schools by the following amounts: • FY 2026 = $78,000 • FY 2027 = $80,000 • FY 2028 = $81,000 • FY 2029 = $83,000 • FY 2030 = $85,000 • FY 2031 = $87,000 3
- Nonqualified Deferred Compensation Plans, Income Tax Exclusion · March 21, 2025 · $3.5M
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Tried before
Earlier and later bills are matched by wording or an identical title.
Tried before
This idea has been filed in an earlier General Assembly. None became law, though one got through a chamber.
- HF 2638 Excluding nonqualified deferred compensation income from the individual income tax, and in…90th General Assembly · Passed House · very similarPassed a chamber
Matched by wording or an identical title.