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West Virginia Exempts Military Retirement Pay from State Income Tax

Military retirement. Getty Images
Military retirement. Getty Images

CHARLESTON -- Both chambers passed a bill Tuesday that exempts military retirement from personal income tax.

Lawmakers passed House Bill 201 in its Tuesday's floor session. After a lengthy debate in the House of Delegates, the House overwhelmingly voted to pass the bill.

Delegates debated two similar amendments proposed by delegates Michael Folk, R-Berkeley, and Isaac Sponaugle, D-Pendleton, which would have broadened the class of people who would be exempt from personal income tax. Both sought to broaden the exemption to include people receiving Social Security.

"This exempts Social Security for those making less than $50,000 from this current egregious double taxation that occurs," Folk said. "We've been talking about that for years and both sides of the aisle has been wanting to do something about this for years."

House Speaker Tim Armstead ruled neither amendment was germane to the fundamental purpose of the bill.

"The fundamental purpose is to exclude veterans' pensions from taxation," Armstead said. "Both amendments were taking that direction beyond the fundamental purpose of this bill, which is exemption of veterans' pensions from taxation."

Folk challenged the ruling and the House recessed for about 15 minutes while Democrats and Republicans caucused.

After reconvening, legislators debated whether the ruling that the amendments were not germane should be upheld. Armstead defended his ruling, repeating that they went beyond the fundamental purpose of the bill.

"The bill introduced at the request by the governor has one specific purpose," Armstead said. "That is those who have served in the military will not have to pay income tax on their retirement. That's what the purpose of this bill is. There is no ambiguity."

Folk said to him, this issue was about principal, not party. He said the bill would have about a $24 million full financial effect on revenue if the exemption for Social Security were added.

The House upheld Armstead's ruling that the amendment was not germane to the purpose of the bill by a 63-33 vote.

The bill exempts all military pension income beginning Jan. 1, 2018. Delegate Eric Nelson, R-Kanawha, said the cost is an additional $3 million per year and would affect about 3,800 additional people.

He said 22 states, including bordering states of Ohio and Pennsylvania, fully exempt retirement income. He said 11 states, including Virginia, fully tax these benefits. The rest of the states, including West Virginia, exempt a portion of pensions.

"Taking this move will, in fact, be very positive at having more military people move into the area," Nelson said.

The House passed the bill in a 95-1 vote with Delegate Saira Blair, R-Berkeley, as the sole no vote.

The Senate unanimously passed the exemption bill Tuesday.

-- Lawmakers also passed House Bill 205 Tuesday. Delegate John Shott, R-Mercer, explained the bill amends the West Virginia Jobs Act to require 75 percent of all workers on public construction contracts valued at $500,000 or more to be drawn from the local labor market. The intent of the changes is to increase the enforcement capability and "add teeth to the act," Shott explained.

Currently, if a company is short of that 75 percent, it is penalized $100 a day. Under the bill, that penalty is increased to $250 per employee per day. After 14 days of noncompliance, that penalty is increased to $500 per day per employee. Shott said the additional penalties go toward the West Virginia Jobs Act special revenue account to go toward enforcing the law.

The House passed the bill in a 94-1 vote with Mercer County Delegate Marty Gearheart as the sole no vote. It passed the Senate unanimously.

-- The House and Senate also passed House Bill 203, which increases the amount of tax credits for qualified rehabilitation expenditures on historic structures to be used against personal and corporate net income taxes from 10 percent to 25 percent for expenditures made after the end of the year.

The bill provides use of the tax credit after Jan. 1, 2020. Under the bill, there is an annual cap of $30 million and a per-project cap of $5 million. There is a five-year sunset period on the historic tax credit.

Nelson's amendment, which was adopted, changed the bill with the intent that those who apply for the credit are current on all taxes

"This will increase and improve the development of all municipal areas in the state," Nelson said. "Most importantly, those who do apply for this must be current on all their taxes."

The bill passed in a 91-3 vote in the House and a 33-0 vote in the Senate.

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This article is written by Andrea Lannom from The Register-Herald, Beckley, W.Va. and was legally licensed via the Tribune Content Agency through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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