Tax Type
Individual Income Tax
Description
Pension income
Topic
Taxable Income
Date Issued
06-13-1989
June 13, 1989
Re: Request for Ruling/Individual Income Tax
Dear*****************
This will reply to your letter dated February 13, 1989 in which you request a ruling on the taxable status of pension benefits you receive from the********************and*********************.
FACTS
************* ("The Plan") is supported by the City of *************and employee contributions. The Plan, however, is not a part of the Virginia Supplemental Retirement System. The Plan is maintained by the which ********pays out benefits to***** and ********* department retirees on a monthly basis as requested by the City of*****************.
RULING
Virginia Code §58.1-322(C)(3) provides a subtraction from federal adjusted gross income for pension or retirement income "paid by the Commonwealth, or an agency or subdivision thereof." Based on an examination of the information presented, the Plan provides pensions to employees of a subdivision of this Commonwealth, with the acting as an agent for the City of*************. Thus, the amount of pension or retirement income received from the Plan is exempt from Virginia taxation under the above statute.
However, as a result of a United States Supreme Court decision requiring equal treatment of state and federal government retirement benefits for state income tax purposes, legislation was adopted by a special session of the 1989 General Assembly which repeals the existing provision exempting VSRS and local retirement benefits from state taxation for taxable years beginning on and after January 1, 1989.
The plan adopted by the 1989 special session of the General Assembly and signed into law by the Governor provides a retirement income subtraction from federal adjusted gross income of up to $16,000 for all retirees - federal, state and private aged 55 or older. I have enclosed a summary of the key provisions of this legislation for your perusal.
Thus, retirement benefits paid by the Plan are fully exempt for taxable years ending prior to December 31, 1988. Benefits paid by the Plan after January 1, 1989 will be governed by the new retirement income subtraction.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner