• Summary date: Feb 3 2015 - More information
    Under current law, GS 105-153.5 provides that the amount a taxpayer receives during the taxable year from one or more state, local, or federal government retirement plans is exempt from North Carolina income tax to the extent that the amount is exempt from tax under a court order in settlement of one or more of the following cases, collectively referenced as the Bailey case: (1) Bailey v. State, 92 CVS 10221, 94 CVS 6904, 95 CVS 6625, 95 CVS 8230; (2) Emory v. State, 98 CVS 0738; and (3) Patton v. State, 95 CVS 04346. Current law makes this exemption applicable to any income distributed to the retiree from a supplemental retirement income plan. Changes in federal law in 2002 permitted rolling over distributions from non-qualifying retirement accounts into a qualifying Bailey retirement account, resulting in all distributions from a qualifying Bailey account, regardless of the source of the funds, being tax-exempt.
    Amends GS 105-153.5 to provide that only retirement plan distributions from a qualifying Baily retirement account and rollover distributions from another qualifying Bailey account are eligible for the tax exemption under this provision. Prohibits applying this tax-exemption to the portion of a distribution attributable to a rollover from a retirement account that is not a qualifying Bailey retirement account. Specifies that the portion of a distribution attributed to a rollover from a non-qualifying retirement plan is taxable in accordance with the methodology used by Superior Court Judge Jack A. Thompson in his Order Regarding the Optional Retirement Program for State Institutions for Higher Education, signed on November 19, 1999.
    Effective for taxable years beginning on or after January 1, 2016.

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