State Tax Conformity Update
Arizona - Arizona's EGTRRA conformity bill, S.B. 1071, was approved by the Senate Finance Committee and now moves onto consideration by the full state Senate. If approved, the Arizona House of Representatives would then take up the legislation.
Arkansas - The Arkansas state legislature does not convene until 2003. However, the Arkansas Department of Finance and Administration (DFA) anticipates that the General Assembly will retroactively adopt these provisions early during the 2003 legislative session. As a result, DFA has developed the following plan to address conformity to federal tax law changes: 2002 state income tax forms will be revised to accommodate the retroactive adoption of these recent federal law changes; there will be an aggressive taxpayer education program; the state will inform taxpayers and tax professionals that the 2003 General Assembly may adopt retroactively these federal law changes early in the 2003 legislative session; the state will encourage taxpayers and tax professionals to refrain from filing their 2002 tax returns until the General Assembly has addressed these federal law changes; DFA will prepare a conformity bill that can be pre-filed and be ready for consideration early in the 2003 legislative session; and, if the General Assembly determines that certain provisions of the new federal law should not be adopted retroactively, DFA will abate interest and penalty assessed against taxpayers who followed the federal law changes when preparing their return.
California - On February 19, the California state Assembly's Revenue and Taxation Committee approved proposed conformity legislation in the form of two bills, A.B. 1744 and S. 657, both of which provide for full conformity with the IRA and pension provisions of EGTRRA. Another conformity bill, A.B. 1743, by Assemblyman Campbell, is still in committee. In addition, on February 12 the state Senate's Revenue and Taxation Committee approved A.B. 1122, which is nearly identical to S. 657. There are differences in the bills, particularly as to how to pay for conformity. While sentiment for conformity remains strong, these differences will have to be reconciled.
Georgia - House Bill 1026, which was introduced on January 15, would update the Georgia Public Revenue Code to reference the Internal Revenue Code as enacted or in existence as of January 1, 2002. H.B. 1026 was approved in committee in the state House of Representatives on February 7 and moves onto consideration by the full House.
Hawaii - On January 23, Senate Bill 2824, which would conform the Hawaiian income tax code to the Internal Revenue Code in existence as of December 31, 2001, was introduced. The bill was approved unanimously by the Senate Committee on Ways & Means on February 11 and is being considered on the floor of the state Senate. The House Finance Committee approved a separate conforming bill, HB 2566, on February 7. The estimated cost of conformity is $3.4 million.
Idaho - Idaho is a conforming state! House Bill 492 was signed by the governor on March 4. The bill amends the state tax code to refer to the Internal Revenue Code in existence as of January 1, 2002.
Indiana - Proposed conformity legislation in Indiana - House Bill 1356 - was introduced on January 15 and passed by the state House of Representatives on February 5 by a vote of 94 to 0. The Indiana Senate Committee on Finance is now taking up the bill.
Iowa - House File 2116 provides for full conformity to the changes made by EGTRRA by conforming to the Internal Revenue Code as of January 1, 2002. The bill passed the Iowa House 94 to 0 on January 31 and is now being reviewed by the Senate Ways & Means Committee. The bill is expected to pass the full legislature easily.
Kentucky - On February 15, the Kentucky House of Representatives passed H.B. 457, which provides for conformity to the Internal Revenue Code, without objection. The bill is now under consideration by the state Senate's Appropriations and Revenue Committee. A companion Senate bill, S. 122, was introduced and would provide that the state tax code would follow the Internal Revenue Code as amended through December 31, 2001.
Maine - According the Bureau of National Affairs, a brighter state revenue forecast (with an additional $91 million more than originally anticipated) is allowing Maine Gov. King to support immediate full conformity with all federal tax law changes. Conformity is expected to cost the state $17 million.
Massachusetts - On March 1, the Massachusetts Department of Revenue released an analysis of the impact of conformity with the changes made by EGTRRA. The midpoint estimate for conformity cost is $6.4 million in 2002, with the cost increasing to $27.5 million for 2009. No legislation has been introduced at this time.
Minnesota - Minnesota is a conforming state! There were some conflicting reports with regard to Minnesota, but we now understand that the Governor signed conformity legislation, H. 1, into law last June. The Minnesota tax laws would follow the Internal Revenue Code as amended through June 15, 2001.
North Carolina - The General Assembly will not consider the conformity issue until it reconvenes on May 23, but key legislators expressed doubts about the importance of conformity because of budgetary pressures.
South Carolina - Conforming legislation (H. 4695) was introduced on February 7.
West Virginia - West Virginia is a conforming state! On March 7, Governor Wise signed into law S. 140, which amends the state tax code to conform to the Internal Revenue Code as amended through December 31, 2001.
Wisconsin - The Milwaukee Journal Sentinel (Jan. 9) reported that the state of Wisconsin would lose $33 million in revenue over a two-year period if there is full conformity with EGTRRA's retirement provisions. The state is facing a $1.3 billion shortfall over the same period. Governor McCallum announced his support for conformity legislation on January 23.
Note: While Virginia is a conforming state, it is considering legislation that would partially de-couple the Virginia state tax code from the Internal Revenue Code. S.B. 30 and H.B. 30 would fix the state tax code's reference to the federal law as of June 8, 2001. While this does not affect conformity to EGTRRA, which passed on June 7, it would affect conformity to subsequent legislation, such as the Victims of Terrorism Tax Relief Act of 2001.
For more information, contact John C. Scott, the Council's director, retirement policy, at jscott@abcstaff.org or at (202) 289-6700.