Tax Roundup: The Latest From California, Other States on Retirement Exemptions

Tax Roundup: The Latest From California, Other States on Retirement Exemptions
Photo by Lan Kim/Air Force

MOAA National serves in an advisory capacity for state-specific issues such as income tax exemption. Please contact your local MOAA council as state legislation must originate at the state level.


A California bill exempting uniformed services retired pay and survivor benefits from state income taxes had its path to a final vote rerouted Aug. 14, and supporters will find out its ultimate fate in the coming weeks.

 

AB 46 cleared the state’s assembly by a 77-0 vote in May. Two Senate committees in subsequent months passed it unanimously. It went to the Senate Appropriations Committee, where members placed into a “suspense file,” a process the state uses for legislation it determines could cost $150,000 or more.

 

The committee will hold an upcoming hearing, which does not include public testimony, to determine which of the many bills in the file move on for full consideration.  Some news outlets have highlighted the process’s lack of transparency.

 

“The State Department of Finance is quick to put a cost on the loss revenue from exempting military retirement pay, but never provides an estimate on how many hundreds of millions of dollars California has already lost, due to the continued steady decline of the military retiree population in California, dating back to 2010,” said Lt. Cmdr. Jeff Breiten, USN (Ret), vice president of legislative affairs for MOAA's California Council of Chapters (CALMOAA), one of nearly 30 veterans organizations which support the measure alongside local chambers of commerce and the state’s largest law enforcement association.

 

[RELATED: Here’s How MOAA Can Help With Your Estate Planning]

 

California Gov. Gavin Newsom has yet to address the legislation, which has received increased media attention in recent weeks and would flip the Golden State from the bottom of the list on military retirement tax benefits to one of the many states with full exemptions. CALMOAA’s request for an audience with the governor’s economic advisers did not receive a response, Breiten said.

 

Lt. Cmdr. E. Fred Green Jr., USN (Ret), a past CALMOAA president and a member of MOAA’s national board of directors, credited Breiten for his work on bringing a groundswell of support to the measure from other advocacy groups, as well as his work with Assemblymember James Ramos (the bill’s initial sponsor) and his legislative team, plus other elected officials.

 

“It is way past due – it’s time to acknowledge Jeff Breiten for everything he has done,” Green said, while also highlighting the work of other members of the “AB 46 Team” – Capt. Steve Donlon, USN (Ret); Capt. Fred Jaffin, USN (Ret); Kathy Prout; Capt. Ramona Chavez, USAF (Ret); Col. James “Skip” Phair, USAR (Ret); Capt. Susan Stewart, USN (Ret); and Sue Story – whose contributions included analysis, research, assembly testimony on behalf of the legislation, and numerous interactions with state legislators.

 

[CONSIDERING A MOVE?: Check Out MOAA's Digital Retirement Guide]

 

Other State Situations

Many state legislatures in states taxing military pay, even partially, are out of session or in recess. This means a limited chance for change until the fall or later, depending on location.

 

States such as Maryland and Montana saw changes to their exemptions earlier in the legislative session, with Maryland Gov. Wes Moore signing the Keep Our Heroes Home Act on May 12 and Montana Gov. Greg Gianforte signing SB 104 a week later. The Maryland bill exempts $12,500 in state taxes for retirees under age 55 and $20,000 for those 55 and over starting in the 2023 tax year, while the Montana bill exempts up to 50% of military retired pay beginning with the 2024 tax year.

 

[LEARN MORE: Major Moves in 4 States on Exemptions for Retiree Pay]

 

In Vermont, a spring 2022 law exempted a portion of military retirement pay from state income tax. Bills in the state House and Senate would expand that exemption; both are in committee and can be considered once the legislature reconvenes in early 2024.

 

Stay Current

The recently updated MOAA Military State Report Card and Tax Guide includes information on retirement tax policies in all 50 states as well as the District of Columbia, along with details on property tax rates and relief programs, estate tax laws, and other details. While we strive to keep the information current and accurate, we welcome updates from across the nation – please send materials, including supporting documents and/or web links, to editor@moaa.org with “State Tax Report” in the email subject.

 

Want to know more about this and other advocacy issues in your state? Consider joining a MOAA chapter – get more information on the council and chapter system at this link, or click here to find a chapter in your area.

 

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About the Author

Kevin Lilley
Kevin Lilley

Lilley serves as MOAA's digital content manager. His duties include producing, editing, and managing content for a variety of platforms, with a concentration on The MOAA Newsletter and MOAA.org. Follow him on Twitter: @KRLilley