Nonresident partners' retirement income.

• Author: Laffie, Lesli S.

On Aug. 3, 2006, President Bush signed a bill extending to nonresident retired partners the exemption nonresident retired employees have from state taxation of retirement income.

P.L. 109-284 clarifies the original intent of a 1996 law (EL. 104-95) that prohibits states from taxing nonresident employees' retirement income. The 1996 law eliminated state taxation of nonresident retirement income received from qualified retirement plans, simplified employee pensions, annuity contracts, individual retirement plans, eligible deferred-compensation plans, governmental plans or other retirement plans or masts that provided benefits as a series of "substantially equal periodic payments."

The bill was introduced in 2005 to deflect action that New York had taken to tax nonresident partners' retirement income. The state had said partners were not included in the tax exemption created by P.L. 104-95.

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