Are BNSF retirement plan pensions and Railroad Retirement Board (RRB) pensions exempt from Kansas income tax?

Plain-English summary

A taxpayer asked whether a BNSF (railroad) retirement plan pension and a Railroad Retirement Board (RRB) pension are exempt from Kansas income tax.

Kansas income tax starts from your federal adjusted gross income and then applies additions or subtractions only where Kansas law provides one; without a specific modification, whatever is taxable federally is taxable in Kansas.

Applying that framework, the Department explained:

• Kansas has a subtraction modification for pensions from the Railroad Retirement Board (RRB), so RRB benefits are exempt from Kansas income tax.
• There is no specific modification for a BNSF retirement plan pension, so if those benefits are included in federal adjusted gross income they are subject to Kansas income tax.

What this means for you

Railroad retirees

Your federal Railroad Retirement Board (RRB) benefits are exempt from Kansas income tax. A separate employer or company railroad pension — such as a BNSF retirement plan — does not get that exemption and is taxable in Kansas to the extent it is in your federal income.

Tax preparers

Distinguish RRB benefits (exempt via a Kansas subtraction) from a private railroad-employer pension plan (no subtraction, taxable). The exemption follows the source of the pension, not the industry.

Common questions

Q: Are Railroad Retirement Board benefits taxed in Kansas?
A: No. Kansas provides a subtraction for RRB pensions, so they are exempt.

Q: Is a BNSF retirement plan pension exempt?
A: No. There is no Kansas modification for a BNSF plan, so it is taxable if included in your federal AGI.

Q: Is there a list of all Kansas-exempt pensions?
A: The letter does not provide one; it addresses RRB and BNSF specifically. Exemption depends on whether a Kansas subtraction modification applies to the particular pension.

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

• Kansas income tax uses federal adjusted gross income as its starting point, with additions or subtractions only where Kansas law provides one. The ruling relies on the Kansas subtraction modification for Railroad Retirement Board pensions and does not cite a specific statute section.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2016-007

Original ruling text

Private Letter Ruling

Body:

August 16, 2016

XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Income Tax

Dear XXXXX

Your correspondence of August 11, 2016, 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:

Can't seem to find any information on this. Wondering if the BNSF Retirement Plan pension is exempt from Kansas state tax as well as a pension from the RRB Railroad Retirement Board? Is there a list somewhere listing all allowable exempt pensions to Kansas?

As you may be 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 the absence of a specific modification 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.

There is a subtraction modification permitted under Kansas law that relates to pensions from the Railroad Retirement Board. As a result, these benefits are exempt from Kansas income tax. However, there is no specific modification for retirement benefits received from a BNSF retirement plan. As a result, if these benefits are included in federal adjusted gross income they 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

Table 1

| Ruling Number: | P-2016-007 |

Table 2

| Tax Type: | Individual Income Tax |
| Brief Description: | Taxation of BNSF Retirement Plan Pensions |
| Keywords: | |
| Effective Date: | 08/16/2016 |
| Approval Date: | 08/16/2016 |