Tax Type
Individual Income Tax
Description
Disability pension benefits
Topic
Subtractions and Exclusions
Taxable Income
Date Issued
12-13-1989
December 13, 1989
Re: Request for Ruling/Individual Income Tax
Dear***************
This will reply to your letter dated May 4, 1989 in which you request a ruling on the taxability of disability pension benefits received by your client **********(the "Taxpayer") from the****** (the "Authority").
For taxable years prior to January 1, 1989, Virginia Code §58.1-322(C)(3) provided 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, I find that the disability pension benefits paid by the Authority prior to January 1, 1989 qualified for this subtraction.
However, the U. S. Supreme Court recently mandated equal treatment of state and federal government retirement benefits for state income tax purposes. In response to this decision, the 1989 special session of the General Assembly repealed the exemption from Virginia income taxation for benefits paid under the Virginia Supplemental Retirement System and local retirement benefits for taxable years beginning on and after January 1, 1989.
Furthermore, the 1989 special session enacted 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, to the extent that any disability retirement benefits paid by the Authority to the Taxpayer were taxable for federal income tax purposes, they qualified for the subtraction in former Virginia Code §58.1-322(C)(3) in taxable years ending before January 1, 1989. Any such benefits paid to the Taxpayer in taxable years beginning on and after January 1, 1989 will be governed by the new retirement income subtraction.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner