Add Montana's 2021–2023 partial pension, annuity, and IRA income exemption

changelog.d/mt-pension-exemption.added.md

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+Add Montana's 2021–2023 partial pension, annuity, and IRA income exemption.

policyengine_us/parameters/gov/states/mt/tax/income/subtractions/pension/cap.yaml

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+description: Montana caps the partial pension, annuity, and IRA income exemption at this amount for each taxpayer.
+values:
+  2021-01-01: 4_400
+  2022-01-01: 4_640
+  2023-01-01: 5_060
+metadata:
+  unit: currency-USD
+  period: year
+  label: Montana partial pension, annuity, and IRA income exemption cap
+  reference:
+    - title: Montana Code Annotated 2021, 15-30-2110(2)(c)(i) and (17)
+      href: https://web.archive.org/web/20220630022434/https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0100/0150-0300-0210-0100.html
+    - title: 2021 Montana Form 2 instructions, line 35, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2021_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=30
+    - title: 2022 Montana Form 2 instructions, line 34, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2022_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=31
+    - title: 2023 Montana Form 2 instructions, line 34, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2023_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=34

policyengine_us/parameters/gov/states/mt/tax/income/subtractions/pension/in_effect.yaml

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+description: Montana provides the partial pension, annuity, and IRA income exemption if this is true.
+values:
+  # The exemption also applied before 2021, at lower indexed amounts
+  # (MCA 15-30-2110(2)(c) and (17)). Those amounts are not listed, so earlier
+  # years use the 2021 cap and phase-out threshold.
+  2021-01-01: true
+  2024-01-01: false
+metadata:
+  unit: bool
+  period: year
+  label: Montana partial pension, annuity, and IRA income exemption in effect
+  reference:
+    - title: Montana Code Annotated 2021, 15-30-2110(2)(c), repealed effective January 1, 2024 (secs. 65, 70(1), Ch. 503, L. 2021)
+      href: https://web.archive.org/web/20220630022434/https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0100/0150-0300-0210-0100.html
+    - title: 2023 Montana Form 2 instructions, line 34, "Beginning in Tax Year 2024, this deduction is repealed"
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2023_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=35

policyengine_us/parameters/gov/states/mt/tax/income/subtractions/pension/phase_out/rate.yaml

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+description: Montana reduces the partial pension, annuity, and IRA income exemption by this amount for each dollar of federal adjusted gross income above the threshold.
+values:
+  2021-01-01: 2
+metadata:
+  unit: /1
+  period: year
+  label: Montana partial pension, annuity, and IRA income exemption phase-out rate
+  reference:
+    - title: Montana Code Annotated 2021, 15-30-2110(2)(c)(ii)
+      href: https://web.archive.org/web/20220630022434/https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0100/0150-0300-0210-0100.html
+    - title: 2023 Montana Form 2, Partial Pension, Annuity, and IRA Income Exemption Worksheet, line 6
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/2023_Montana_Individual_Income_Tax_Return_Form_2.pdf#page=6

policyengine_us/parameters/gov/states/mt/tax/income/subtractions/pension/phase_out/threshold.yaml

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+description: Montana reduces the partial pension, annuity, and IRA income exemption when federal adjusted gross income exceeds this amount.
+values:
+  2021-01-01: 36_700
+  2022-01-01: 38_660
+  2023-01-01: 42_140
+metadata:
+  unit: currency-USD
+  period: year
+  label: Montana partial pension, annuity, and IRA income exemption phase-out threshold
+  reference:
+    - title: Montana Code Annotated 2021, 15-30-2110(2)(c)(ii) and (17)
+      href: https://web.archive.org/web/20220630022434/https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0100/0150-0300-0210-0100.html
+    - title: 2021 Montana Form 2 instructions, line 35, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2021_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=30
+    - title: 2022 Montana Form 2 instructions, line 34, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2022_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=31
+    - title: 2023 Montana Form 2 instructions, line 34, Partial Pension, Annuity, and IRA Income Exemption
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2023_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=34

policyengine_us/parameters/gov/states/mt/tax/income/subtractions/pension/sources.yaml

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+description: Montana counts these sources as pension, annuity, and IRA income for the partial pension, annuity, and IRA income exemption.
+values:
+  2021-01-01:
+    # Form 2, page 1, lines 4b (IRA distributions) and 5b (pensions and
+    # annuities). Premature distributions do not qualify (MCA 15-30-2101(25)(d))
+    # but are not separately modeled.
+    - taxable_pension_income
+    - taxable_retirement_distributions
+    # Roth conversions are IRA or plan distributions included on line 4b or
+    # 5b (MCA 15-30-2101(25)(d)).
+    - taxable_roth_conversions
+    # Uniformed services retired pay and Survivor Benefit Plan annuities
+    # (MCA 15-30-2101(25)(b)), reported on line 5b. The line 34 instructions
+    # qualify Form 1099-R code 7 income, and the 1099-R instructions put
+    # military pensions and survivor benefit annuities on code 7. Death
+    # benefits (code 4) do not qualify.
+    - military_retirement_income
+metadata:
+  unit: list
+  period: year
+  label: Montana partial pension, annuity, and IRA income exemption sources
+  reference:
+    - title: Montana Code Annotated 2021, 15-30-2101(25), "Pension and annuity income"
+      href: https://web.archive.org/web/20220127192023/http://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0010/0150-0300-0210-0010.html
+    - title: 2023 Montana Form 2, Partial Pension, Annuity, and IRA Income Exemption Worksheet, line 2
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/2023_Montana_Individual_Income_Tax_Return_Form_2.pdf#page=6
+    - title: 2023 Montana Form 2 instructions, line 34, "Qualifying pension, annuity, and IRA income is reported on federal Form 1099-R with distribution code 7"
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2023_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=34
+    - title: 2023 Instructions for Forms 1099-R and 5498, Military retirement annuities, "Use Code 7 in box 7 for reporting military pensions or survivor benefit annuities"
+      href: https://www.irs.gov/pub/irs-prior/i1099r--2023.pdf#page=2

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/subtractions/pension/integration.yaml

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+# Single filer, 20,000 of taxable pension income, no other income, 2023
+# Form 2. Montana AGI: 20,000 - 5,060 = 14,940. Standard deduction: 20% of
+# 14,940 = 2,988. Exemptions: 2,960 each.
+- name: Single filer aged 60 with a pension
+  period: 2023
+  input:
+    age: 60
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # Taxable income 14,940 - 2,988 - 2,960 = 8,992; tax 8,992 x 3% - 99.
+    mt_income_tax: 170.76
+
+- name: Single filer aged 70 with a pension
+  period: 2023
+  input:
+    age: 70
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # Taxable income 14,940 - 2,988 - 2 x 2,960 = 6,032; tax 6,032 x 2% - 36.
+    mt_income_tax: 84.64
+
+- name: Single filer aged 60 with military retired pay
+  period: 2023
+  input:
+    age: 60
+    military_retirement_pay: 20_000
+    state_code: MT
+  output:
+    # MCA 15-30-2101(25)(b): the same Montana AGI (14,940) and tax as the
+    # pension case above.
+    mt_income_tax: 170.76
+
+- name: Single filer aged 60 with a Survivor Benefit Plan annuity
+  period: 2023
+  input:
+    age: 60
+    military_retirement_pay_survivors: 20_000
+    state_code: MT
+  output:
+    # Form 1099-R code 7: the same Montana AGI (14,940) and tax as the
+    # pension case above.
+    mt_income_tax: 170.76

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/subtractions/pension/mt_pension_exemption_before_phase_out.yaml

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+- name: Pension above the 2023 cap is capped at 5,060
+  period: 2023
+  input:
+    taxable_private_pension_income: 25_000
+    state_code: MT
+  output:
+    mt_pension_exemption_before_phase_out: 5_060
+
+- name: Pension and IRA income below the 2023 cap are exempt in full
+  period: 2023
+  input:
+    taxable_private_pension_income: 1_000
+    taxable_ira_distributions: 1_300
+    state_code: MT
+  output:
+    mt_pension_exemption_before_phase_out: 2_300
+
+- name: Military retired pay qualifies
+  period: 2023
+  input:
+    military_retirement_pay: 20_000
+    state_code: MT
+  output:
+    # MCA 15-30-2101(25)(b), capped at 5,060.
+    mt_pension_exemption_before_phase_out: 5_060
+
+- name: Survivor Benefit Plan annuities qualify
+  period: 2023
+  input:
+    military_retirement_pay_survivors: 20_000
+    state_code: MT
+  output:
+    # Form 1099-R code 7 (1099-R instructions, Military retirement
+    # annuities), which the line 34 instructions qualify; capped at 5,060.
+    mt_pension_exemption_before_phase_out: 5_060
+
+- name: Roth conversions qualify
+  period: 2023
+  input:
+    taxable_roth_conversions: 3_000
+    state_code: MT
+  output:
+    # Included on Form 2, page 1, line 4b (worksheet line 2).
+    mt_pension_exemption_before_phase_out: 3_000
+
+- name: A dependent's pension does not qualify
+  period: 2023
+  input:
+    people:
+      head:
+        is_tax_unit_head: true
+      dependent:
+        is_tax_unit_dependent: true
+        taxable_private_pension_income: 3_000
+    tax_units:
+      tax_unit:
+        members: [head, dependent]
+    households:
+      household:
+        members: [head, dependent]
+        state_code: MT
+  output:
+    mt_pension_exemption_before_phase_out: [0, 0]
+
+- name: The exemption is repealed from 2024
+  period: 2024
+  input:
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    mt_pension_exemption_before_phase_out: 0

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/subtractions/pension/mt_pension_exemption_indiv.yaml

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+# Expected values are the examples in the Form 2 instructions: 2021 line 35
+# (PDF page 30), 2022 line 34 (PDF pages 31-32), 2023 line 34 (PDF pages 34-35).
+- name: 2021 instructions example, federal AGI of 37,400
+  period: 2021
+  input:
+    employment_income: 17_400
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # 4,400 - (700 x 2) = 3,000
+    mt_pension_exemption_indiv: 3_000
+
+- name: 2022 instructions example, federal AGI of 39,400
+  period: 2022
+  input:
+    employment_income: 19_400
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # 4,640 - (740 x 2) = 3,160
+    mt_pension_exemption_indiv: 3_160
+
+- name: 2023 instructions example, federal AGI of 43,000
+  period: 2023
+  input:
+    employment_income: 23_000
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # 5,060 - (860 x 2) = 3,340
+    mt_pension_exemption_indiv: 3_340
+
+- name: No exemption at the 2023 federal AGI of 44,670
+  period: 2023
+  input:
+    employment_income: 24_670
+    taxable_private_pension_income: 20_000
+    state_code: MT
+  output:
+    # 5,060 - (2,530 x 2) = 0
+    mt_pension_exemption_indiv: 0
+
+- name: On separate returns each spouse uses their own federal AGI
+  period: 2023
+  input:
+    people:
+      head:
+        is_tax_unit_head: true
+        employment_income: 40_000
+      spouse:
+        is_tax_unit_spouse: true
+        taxable_private_pension_income: 20_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: MT
+  output:
+    # The spouse's separately stated federal AGI, 20,000, is below 42,140.
+    mt_pension_exemption_indiv: [0, 5_060]
+    mt_agi_indiv: [40_000, 14_940]