AN ACT to make income received from a north carolina state or local government retirement plan, or a federal government retirement plan, exempt from income tax.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑153.5(b) reads as rewritten:

(b)      Other Deductions. – In calculating North Carolina taxable income, a taxpayer may deduct from the taxpayer's adjusted gross income any of the following items that are included in the taxpayer's adjusted gross income:

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(5)        The amount received during the taxable year from one or more State, local, or federal government retirement plans to the extent the amount is exempt from tax under this Part pursuant to a court order in settlement of any of the following cases:of the following:

a.         Bailey v. State, 92 cvs 10221, 94 cvs 6904, 95 cvs 6625, 95 cvs 8230.

b.         Emory v. State, 98 CVS 0738.

c.         Patton v. State, 95 CVS 04346.

d.         A North Carolina State government retirement plan.

e.         A North Carolina local government retirement plan.

f.          A federal government retirement plan not included within subdivision (5a) of this subsection.

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SECTION 2.  This act is effective for taxable years beginning on or after January 1, 2026.