Bill S1066-2013

Grants a state personal income tax deduction for retirement plan distributions used to purchase long-term care insurance

Grants a state personal income tax deduction for retirement plan distributions used to purchase long-term care insurance; exempts distributions from individual retirement accounts and individual retirement annuities from state personal income taxation when such distributions are used to purchase long-term health care insurance.

Details

Actions

  • Jan 8, 2014: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • Jan 9, 2013: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Memo

BILL NUMBER:S1066

TITLE OF BILL: An act to amend the tax law, in relation to exempting distributions from individual retirement accounts and individual retirement annuities from state personal income taxation when such distributions are used to purchase long-term health care insurance

PURPOSE: Allows tax free withdrawals from retirement IRA's and retirement annuities for the purchase of the premiums for long-term care insurance.

SUMMARY OF PROVISIONS: Section 1 amends section 612 of the tax law by adding a new subsection 3-d which exempts distributions from individual retirement accounts and individual retirement annuities from state personal taxation when such distributions are used to purchase long-term health care insurance.

JUSTIFICATION: Planning for future long-term care needs is a goal that New York State continues to support as a way to save Medicaid dollars and as a way for individuals to be able to manage their own care and improve outcomes. Different strategies and ideas need to be explored to encourage individuals to think in advance and to plan for their personal long-term care needs.

This legislation provides one more tool for individuals to accomplish this goal by allowing retirement IRA's and retirement annuities to be tapped tax free for the purpose of purchasing long-term care insurance. Long-term care insurance can be prohibitively costly for some individuals yet these individuals may have a retirement IRA or retirement annuity that would afford them an opportunity to purchase a long-term care insurance. Authorizing tax free withdrawals from these accounts to cover the costs of long-term care insurance premiums complies with the interest and goals of the state, and opens up an avenue of planning and affording long-term care insurance should one's monthly income not be sufficient to afford the premiums.

LEGISLATIVE HISTORY: S.107/A.918 of 2007/2008: Referred to Senate Investigations and Government Operations Committee. S.1397/A.2155 of 2009/2010: Referred to Senate Investigations and Government Operations Committee. S.228A/A4149A of 2011/2012; Referred to Investigations and Government Operations.

FISCAL IMPLICATIONS:

EFFECTIVE DATE: Immediately and shall apply to taxable years commencing on the first of January in the year in which the act shall take effect.


Text

STATE OF NEW YORK ________________________________________________________________________ 1066 2013-2014 Regular Sessions IN SENATE (PREFILED) January 9, 2013 ___________
Introduced by Sens. MAZIARZ, BONACIC, DeFRANCISCO, LARKIN -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations AN ACT to amend the tax law, in relation to exempting distributions from individual retirement accounts and individual retirement annuities from state personal income taxation when such distributions are used to purchase long-term health care insurance THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subsection (c) of section 612 of the tax law is amended by adding a new paragraph 3-d to read as follows: (3-D) DISTRIBUTIONS RECEIVED BY AN INDIVIDUAL, NOT OTHERWISE EXCLUDED PURSUANT TO PARAGRAPH THREE OR THREE-A OF THIS SUBSECTION, TO THE EXTENT INCLUDABLE IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES, WHICH ARE ATTRIBUTABLE TO PERSONAL SERVICES PERFORMED BY SUCH INDIVIDUAL FROM EMPLOYMENT, WHICH ARISE (I) FROM AN EMPLOYER-EMPLOYEE RELATIONSHIP OR (II) FROM CONTRIBUTIONS TO A RETIREMENT PLAN WHICH ARE DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES, TO THE EXTENT SUCH DISTRIBUTIONS ARE USED DURING THE TAXABLE YEAR TO PURCHASE A POLICY OF LONG-TERM CARE INSUR- ANCE, AS DEFINED IN SECTION ELEVEN HUNDRED SEVENTEEN OF THE INSURANCE LAW, FOR SUCH INDIVIDUAL OR A DEPENDENT OF SUCH INDIVIDUAL. SUCH DISTRIBUTIONS SHALL INCLUDE DISTRIBUTIONS FROM AN INDIVIDUAL RETIREMENT ACCOUNT OR AN INDIVIDUAL RETIREMENT ANNUITY, AS DEFINED IN SECTION FOUR HUNDRED EIGHT OF THE INTERNAL REVENUE CODE, AND DISTRIBUTIONS FROM SELF-EMPLOYED INDIVIDUAL AND OWNER-EMPLOYEE RETIREMENT PLANS WHICH QUAL- IFY UNDER SECTION FOUR HUNDRED ONE OF THE INTERNAL REVENUE CODE. PROVIDED, HOWEVER, THAT ANY DISTRIBUTIONS EXCLUDED PURSUANT TO THIS PARAGRAPH SHALL BE SUBTRACTED FROM THE TOTAL AMOUNT OF PREMIUMS PAID WHEN COMPUTING THE AMOUNT OF ALLOWABLE CREDIT PURSUANT TO SUBSECTION (AA) OF SECTION SIX HUNDRED SIX OF THIS ARTICLE.
S 2. Subsection (aa) of section 606 of the tax law, as amended by section 1 of part P of chapter 61 of the laws of 2005, is amended to read as follows: (aa) Long-term care insurance credit. (1) Residents. A taxpayer shall be allowed a credit against the tax imposed by this article equal to twenty percent of the premium paid during the taxable year for long-term care insurance, PROVIDED THAT ANY AMOUNT SUBTRACTED FROM FEDERAL ADJUSTED GROSS INCOME PURSUANT TO PARAGRAPH THREE-D OF SECTION SIX HUNDRED TWELVE OF THIS ARTICLE SHALL BE SUBTRACTED FROM THE AMOUNT OF PREMIUM PAID DURING THE TAXABLE YEAR AND THE TWENTY PERCENT CREDIT SHALL BE BASED UPON SUCH RECOMPUTED AMOUNT OF PREMIUM PAID. In order to qual- ify for such credit, the taxpayer's premium payment must be for the purchase of or for continuing coverage under a long-term care insurance policy that qualifies for such credit pursuant to section one thousand one hundred seventeen of the insurance law. If the amount of the credit allowable under this subsection for any taxable year shall exceed the taxpayer's tax for such year, the excess may be carried over to the following year or years and may be deducted from the taxpayer's tax for such year or years. (2) Nonresidents and part-year residents. In the case of a nonresident taxpayer or a part-year resident taxpayer, the credit determined under this subsection shall be limited to the amount determined by multiplying the amount of such credit by the New York source fraction as set forth in paragraph three of subsection (e) of section six hundred one of this article. The credit as so limited shall be applied as provided in para- graph one of this subsection, PROVIDED THAT ANY AMOUNT SUBTRACTED FROM FEDERAL ADJUSTED GROSS INCOME PURSUANT TO PARAGRAPH THREE-D OF SECTION SIX HUNDRED TWELVE OF THIS ARTICLE AND SECTION SIX HUNDRED THIRTY-ONE OF THIS ARTICLE SHALL BE SUBTRACTED FROM THE AMOUNT OF PREMIUM PAID DURING THE TAXABLE YEAR AND THE TWENTY PERCENT CREDIT SHALL BE BASED UPON SUCH RECOMPUTED AMOUNT OF PREMIUM PAID. S 3. This act shall take effect immediately and shall apply to taxable years commencing on January first in the year in which this act shall take effect and all subsequent taxable years.

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