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Senate panel lays over bill to exempt rolled-over military pension portions from state income tax
Summary
A bill (SF 4) that would let Minnesotans who rolled military pension buybacks into federal civil service pensions claim the same state income-tax exclusion as direct military pensions was presented, discussed by the sponsor and a veteran witness, and laid over for omnibus consideration after the committee adopted an author’s amendment.
Senate File 4, presented Feb. 5 to the Minnesota Senate Taxes Committee, would let portions of federal civil service pensions that reflect prior military service (for example, military time an employee paid back to be credited toward a federal civil-service annuity) be excluded from Minnesota taxable income in the same way direct military retirement annuities are.
The bill’s sponsor, Senator Andrew Rarick, told the committee, “This is a pretty simple bill,” and said the measure applies where a veteran bought back military service and that military retirement amounts rolled into a Federal Employee Retirement System (FERS) or Civil Service Retirement System (CSRS) annuity should be excluded from state tax in the same way as stand-alone military pensions.
Why it matters: Supporters said the bill would correct a disparity created when an earlier law allowed a subtraction only for direct military retirement pay but not for military service that had been credited into a later federal civil-service pension. Testifier Corey Holm, a retired federal employee and Marine Corps veteran, described his case: after buying back four years of military service, his federal annuity reflected that service but, he said, Minnesota’s Department of Revenue advised him that the state treats the combined federal civil-service pension differently from a stand-alone military pension.
Discussion and context: Holm told the committee the bill would “resolve an existing disparity concerning some Minnesota veterans.” Department of Revenue staff, represented in the hearing by Ms. Pollock, advised they would provide the committee’s revenue estimate used for legislative budgeting; the chair noted the revenue estimate lists about 6,700 taxpayers affected with an average tax decrease of $524. Committee members asked whether other states have the same rule; staff said they would research that question.
Outcome and next steps: An author’s A1 amendment was moved by Senator Dibble and adopted by voice vote. After testimony and questions, Senator Rarick’s SF 4 as amended was laid over for possible inclusion in the omnibus tax bill.
Votes and formal actions: The A1 author’s amendment was moved by Senator Dibble and adopted by voice vote (recorded as “aye”/no recorded roll-call). The bill as amended was laid over for possible omnibus consideration (no roll-call vote recorded).
