Is a pension distribution from the Kansas National Education Association exempt from Kansas income tax?

Plain-English summary

A tax preparer asked whether a client's pension distribution from the Kansas National Education Association (KNEA) qualified for one of Kansas's subtractions for retirement income. The Department's answer: it is taxable unless the taxpayer can document that it fits a specific Kansas subtraction.

Kansas income tax uses federal adjusted gross income as the starting point and adjusts it only where K.S.A. 79-32,117 provides a modification. That statute lists no specific subtraction for KNEA pension distributions, and the Department was aware of none that would apply. So unless the taxpayer can provide proof that the distribution falls under an enumerated subtraction, it is included in Kansas adjusted gross income and subject to Kansas income tax.

What this means for you

Retirees and their advisers

Not every pension is exempt in Kansas. While Kansas provides subtractions for certain enumerated retirement income, a distribution from the Kansas National Education Association is not automatically among them — the burden is on the taxpayer to show it fits a listed subtraction.

Tax preparers

Before subtracting a pension on the Kansas return, confirm it maps to a specific modification in K.S.A. 79-32,117. If it does not, it stays in Kansas adjusted gross income. The Department will expect documentation supporting any claimed subtraction.

Common questions

Q: Is a KNEA pension distribution exempt from Kansas income tax?
A: Not by default. It has no specific subtraction modification, so it is taxable unless the taxpayer documents that it fits an enumerated Kansas subtraction.

Q: Why is it taxable?
A: Kansas starts from federal AGI and only subtracts items listed in K.S.A. 79-32,117; that statute does not enumerate KNEA pension distributions.

Q: Could it ever be subtracted?
A: Only if the taxpayer can provide proof or documentation that the distribution falls under a specific subtraction modification in the statute.

Q: Does this ruling apply to me?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows how the Department reasons.

Citations and references

• K.S.A. 79-32,117 — lists the additions and subtractions ("modifications") to federal adjusted gross income for Kansas income tax. The Department states it contains no specific subtraction modification for Kansas National Education Association pension distributions, so they remain in Kansas adjusted gross income absent documentation to the contrary.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2016-002

Original ruling text

Private Letter Ruling

Body:

July 19, 2016

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Re: Kansas Income Tax

Dear XXXXX:

Your correspondence of July 7, 2016, addressed to Mr. Bob Clelland has been referred to me for response. Thank you for your inquiry.

By your e-mail you have requested our advice regarding Kansas income tax. Specifically, your e-mail states, in pertinent part:

. . . . . I have a question that I thought maybe you could give me some guidance. Kansas allows a subtraction for personal income tax purposes for certain types of retirement income. I have an individual that received a pension distribution from the Kansas National Education Association. I'm not certain whether that falls in one of the enumerated categories of subtractions from income. Would you have any specific knowledge of this or at least be able to give me a statutory reference so that I could research it more thoroughly myself?

As you are no doubt aware, Kansas law requires the use of federal adjusted gross income as the starting point for computing the Kansas income tax. Then certain modifications, either additions or subtractions, may be required in accordance with K.S.A. 79-32,117. In the absence of a specific modification under K.S.A. 79-32,117 those items which are subject to federal tax will be subject to Kansas tax and those items which are exempt from federal tax will be exempt from Kansas tax.

K.S.A. 79-32,117 does not include a specific subtraction modification for pension distributions from the Kansas National Education Association. And we are not aware of any enumerated modification which would apply to such distributions. As a result, unless you (the taxpayer) are able to provide some proof or documentation that the distributions do fall under a specific subtraction modification listed in the statute these payments will be included in Kansas adjusted gross income and will be subject to Kansas income tax.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

JW:jw

NOTE: This opinion letter is based solely on the facts provided in your request for advice. If material facts or information were not disclosed this letter is null and void. This letter will be revoked without further action by the Department if the statutes, administrative regulations, published revenue rulings, or court decisions that materially affect this opinion are changed.

Date Composed: 09/16/2016 Date Modified: 09/16/2016

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