| Date: | 01/10/1996 |
|---|---|
| Referenced Sources: | Massachusetts General Laws |
Personal Income Tax
This Technical Information Release announces the Department of Revenue's decision to acquiesce in the Appellate Tax Board's ruling in Pariser v. Commissioner of Revenue, A.T.B. Docket No. 215394 (March 1995) to the extent of the facts in the case.
Massachusetts General Laws chapter 62, section 3(B)(a)(4) provides a deduction from Massachusetts adjusted gross income of:
any income from a contributory annuity, pension, endowment or retirement fund of any other state or any political subdivision thereof, provided that income from any such similar fund established under the laws of the commonwealth is not subject to taxation in such other state or political subdivision.
Id. Thus, in general, a deduction is available to a Massachusetts resident who receives a contributory public pension from another state if the other state grants reciprocal treatment to retirees from Massachusetts. Before Pariser, the Department concluded that unless another state provides a blanket exemption for all Massachusetts contributory public employee pension income, there is no reciprocity, and income from a contributory public employee retirement plan of that state received by a Massachusetts resident may not be deducted from Massachusetts adjusted gross income. See Letter Rulings 81-91 and 85-12 which discussed income received from a New York State contributory public employee pension fund.
Section 617(c)(3-a) of the New York State Personal Income Tax Law permits New York residents to deduct from gross income:
Pensions and annuities received by an individual who has attained the age of fifty-nine and one-half, . . . to the extent includable in gross income for federal income tax purposes, but not in excess of twenty thousand dollars.
Id. Under this provision, New York still taxes income from Massachusetts contributory public employee retirement plans when the taxpayer is younger than 59 and one-half years old or to the extent pension income exceeds $20,000. In Letter Rulings 81-91 and 85-12 the Department held that because section 617(c)(3-a) of the New York State Personal Income Tax Law did not provide a blanket exemption for all Massachusetts contributory public employee pension income, a Massachusetts resident who receives income from a New York State contributory public employee pension fund was not entitled to a deduction pursuant to M.G.L. c. 62, § 3(B)(a)(4) for that income.
In Pariser, the taxpayer, a Massachusetts resident, appealed the Department's denial of his request for an abatement of tax paid on $11,322.00 of income received from a New York State contributory pension. The Appellate Tax Board ruled that M.G.L. c. 62, § 3(B)(a)(4) does not require that another state provide a blanket exemption for all Massachusetts pension income. The Board stated that the focus was on whether the taxpayer would have been taxed in the payor state if he were a resident of that state and the income had been paid by a Massachusetts pension. If not, his pension income from the payor state is not taxable in Massachusetts. Since Mr. Pariser was over 59½ years of age and the pension income was less than $20,000, he would not be taxed in New York on pension income paid by a similar Massachusetts pension fund. Thus, his pension income from New York was not taxable in Massachusetts.
The Department of Revenue acquiesces in the ATB's decision in Pariser to the extent of the facts in the case. The Department will no longer require that the laws of another state provide a blanket exemption for all Massachusetts pension income before recognizing such laws to be reciprocal. A Massachusetts resident will be allowed a deduction for income received from a contributory annuity, pension, endowment or retirement fund of another state or its political subdivisions if:
(1) that other state has a specific income exclusion for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
(2) that other state has a specific deduction or exemption for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
(3) that other state has no income tax.
The amount of the deduction allowed pursuant to M.G.L. c. 62, § 3(B)(a)(4) for income received by a Massachusetts resident from a contributory public employee annuity, pension, endowment or retirement fund of another state will equal the amount of the specific pension exclusion, deduction, or exemption that could be claimed by the taxpayer under the laws of the other state if the taxpayer were a resident of the other state and received the income from a Massachusetts state or local contributory pension. In the case of a state that has no income tax, all income from qualifying pensions of the other state or its subdivisions may be deducted under M.G.L. c. 62, § 3(B)(a)(4).
The following examples illustrate the rules announced in this TIR:
Example 1: A Massachusetts resident who is 62 years old receives $25,000 of pension income from a New York state contributory public employee pension fund. As set out above, New York allows a deduction for pension income provided the recipient is 59½ years old or older and the deduction is not in excess of $20,000. The Massachusetts resident is allowed a deduction in the amount of $20,000 for the New York pension income.
Example 2: A Massachusetts resident who is 55 years old receives $25,000 of pension income from a New York state contributory public employee pension fund. The taxpayer, who is not 59½ years old or older, is not allowed a deduction for any of the New York pension income.
Example 3: State A has a personal income tax with a standard personal exemption of $10,000 applicable to any type of income, but no specific exclusion, deduction or exemption related to pension income. A Massachusetts resident receives $20,000 in gross income, including $15,000 in pension income from a contributory public employee pension fund in State A. No part of the $15,000 of pension income is deductible under M.G.L. c. 62, § 3(B)(a)(4) because the $10,000 personal exemption in State A is not specifically related to pension income.
This TIR revokes Letter Rulings 81-91 and 85-12 and Technical Information Releases 80-4 and 89-10.
Mitchell Adams
Commissioner of Revenue
January 10, 1996
