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Second Regular Session

Sixty-first General Assembly

LLS NO. M98­0354.01 DLC

STATE OF COLORADO

BY SENATOR Coffman

SENATE JOINT MEMORIAL 98-001

MEMORIALIZING CONGRESS TO ENACT LEGISLATION THAT PROHIBITS STATES FROM IMPOSING AN INCOME TAX ON SEVERANCE PAYMENTS AND TERMINATION PAYMENTS TO NONRESIDENT INDIVIDUALS.

WHEREAS, In 1996, the Congress of the United States enacted Public Law 95­104, which amended title 4 of the United States Code to limit state taxation of certain pension income; and

WHEREAS, Section (1) (a) of Public Law 95-104, codified at 4 U.S.C. sec. 114, prohibits states from imposing an income tax on any retirement payments made by an employer of such state to an individual who has terminated employment in and who is not a resident of such state; and

WHEREAS, Severance payments and termination payments made by an employer to a nonresident individual are not accorded the same tax treatment as retirement income under 4 U.S.C. sec. 114 and are therefore subject to the income tax of the state where the employer making such severance payments and termination payments is located; and

WHEREAS, The result of this inconsistent tax treatment of similar retirement payments is that severance payments and termination payments may be taxable to the employee in both the state of the employee's former residence and the state in which the employee currently resides; and

WHEREAS, Subjecting severance payments and termination payments to different tax treatment than other retirement payments and income results in inconsistent and inequitable treatment of severance payments and termination payments to taxpayers that have relocated to another state after terminating their employment; and

WHEREAS, The enactment of federal legislation that prohibits a state from imposing an income tax on severance payments and termination payments to an individual that is not a resident of that state will result in the tax treatment of such payments that is consistent with the tax treatment of other retirement income; now, therefore,

Be It Resolved by the Senate of the Sixty­first General Assembly of the State of Colorado, the House of Representatives concurring herein:

That the Congress of the United States is hereby memorialized to adopt legislation amending 4 U.S.C. sec. 114 to include severance payments and termination payments within the retirement income of a nonresident individual upon which states may not impose income tax.

Be It Further Resolved, That copies of this Joint Memorial be sent to the President of the United States Senate, to the Speaker of the United States House of Representatives, and to each member of Colorado's congressional delegation.