(2) The taxpayer's aggregate of interest, dividends, net capital gains taxable in this State and pension benefits received by as the primary recipient under employee retirement plans and included in federal adjusted gross income modified as otherwise provided by this section. Items of interest, dividends and net capital gains income from jointly owned accounts must be apportioned equally among owners of the accounts.

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. For purposes of this paragraph, "military retirement plan" means benefits received as a result of service in the active or reserve components of the Army, Navy, Air Force, Marines or Coast Guard.__For purposes of this paragraph, "primary recipient" means the pension recipient upon whose earnings the pension is based or the surviving spouse of such a person;

Sec. 2. Application. This Act applies to tax years beginning on or after January 1, 2003.

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 for tax years beginning January 1, 2003 and then by $1,000 each subsequent year until 2008. Beginning with tax years beginning January 1, 2008, the deduction is increased by $1,500 per year until 2012, when the amount of the deduction is $18,000. Beginning with tax years beginning January 1, 2012, the amount of the deduction is equal to the amount of the maximum federal tax exemption for social security benefits reduced by any social security benefits actually received by the taxpayer. This bill also includes