(j)__January 1, 2011 and ending December 31, 2011, $17,000.

For tax years beginning January 1, 2010, the deduction in subparagraph (1) is equal to the amount of social security income exempt from taxation under the Code reduced by the total amount of social security benefits and railroad retirement benefits paid by the United States, but not less than $0.__The State Tax Assessor by September 15th of each year shall determine the amount of the deduction and incorporate the change, if any, into the income tax forms, instructions and withholding tables for the taxable year; or

(2)__The aggregate of benefits received under employee retirement plans and included in federal adjusted gross income.

For purposes of this paragraph, "employee retirement plan" means a state, federal or military retirement plan or any other retirement benefit plan established and maintained by an employer for the benefit of its employees under Section 401(a), Section 403 or Section 457(b) of the Code.__"Employee retirement plan" does not include an individual retirement account under Section 408 of the Code, a Roth IRA under Section 408A of the Code, a rollover individual retirement account, a simplified employee pension under Section 408(k) of the Code or an ineligible deferred compensation plan under Section 457(f) of the Code.

Sec. 3. 36 MRSA §5122, sub-§2, śN is enacted to read:

N.__Interest or dividends on obligations or securities of this State and its political subdivisions and authorities to the extent included in federal adjusted gross income.

Sec. 4. Application. That section of this Act that repeals and replaces the Maine Revised Statutes, Title 36, section 5122, subsection 2, paragraph M applies to tax years beginning on or after January 1, 2002.

SUMMARY

Current law provides a deduction from the state income tax for the first $6,000 of income from certain public, private and military pensions.

This bill increases the deduction to $8,000 beginning January 1, 2002 and $1,000 each subsequent year until the amount of the deduction is $17,000; thereafter, the amount of the deduction is equal to the amount of the federal tax exemption for social security benefits.

This bill also corrects a conflict created by Public Law 1999, chapters 708 and 731, which each enacted the Maine Revised Statutes, Title 36, section 5122, subsection 2, paragraph M. This bill resolves the conflict by reallocating one of the new paragraphs to be Title 36, section 5122, subsection 2, paragraph N.