AN ACT to provide equal income tax treatment of government retirees' benefits.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑153.3 is amended by adding a new subdivision to read:

(15a)  Retirement plan. – A written retirement plan established by the employer to provide payments to an employee or the beneficiary of an employee after the end of the employee's employment with the employer where the right to receive the payments is based upon the employment relationship. With respect to a self‑employed individual or the beneficiary of a self‑employed individual, the term means a written retirement plan established by the individual to provide payments to the individual or the beneficiary of the individual after the end of the self‑employment. In addition, the term includes an individual retirement plan as defined in the Code and any plan treated as an individual retirement plan under the Code. For the purpose of this subdivision, the term employee includes a volunteer worker.

SECTION 2.  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:

…

(5a)      The amount received during the taxable year from one or more State, local, or federal government retirement plans, subject to the phase‑in provided in this subdivision:

Taxpayer Vested in the Plan

on or Before                                          Income Years Beginning

August 1992                                                          In 2021

August 1995                                                          In 2022

August 1998                                                          In 2023

August 2001                                                          In 2024

August 2004                                                          In 2025

August 2007                                                          In 2026

August 2010                                                          In 2027

August 2013                                                          In 2028

August 2017                                                          In 2029

August 2021                                                          In 2030.

….

SECTION 3.  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:

…

(5b)      The amount received during the taxable year under North Carolina State and local government retirement plans and under federal government retirement plans.

(5c)      The amount received during the taxable year under a state or local government retirement plan of a state other than North Carolina, to the extent that other state would not subject to individual income tax the equivalent amount received under a North Carolina State or local government retirement plan.

….

SECTION 4.  Section 2 of this act is effective for taxable years beginning on or after January 1, 2021, and is repealed for taxable years beginning on or after January 1, 2031, and Section 3 of this act is effective for taxable years beginning on or after January 1, 2031. The remainder of this act is effective when it becomes law.