01-1649
Income Tax
Signed 12/30/02
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, )
) ORDER
Petitioner, )
) Appeal No. 01-1649
v. ) Account No. #####
)
AUDITING DIVISION OF ) Tax Type:
Income Tax
THE UTAH STATE TAX )
COMMISSION, ) Judge: Davis
)
Respondent. )
_____________________________________
Presiding:
G. Blaine Davis, Administrative Law Judge
Appearances:
For Petitioner: PETITIONER
For Respondent: Ms. Susan Barnham, Assistant Attorney
General
Mr. Brent Taylor, from the Auditing
Division
Mr. Frank Hales, from the Auditing
Division
Ms. Becky McKenzie, from the Auditing
Division
STATEMENT
OF THE CASE
This matter came before the
Utah State Tax Commission on May 01, 2002 for an Initial Hearing to be
conducted pursuant to the provisions of Utah Code Ann. §59-1-502.5.
Petitioner, PETITIONER
is retired under the COMPANY A and COMPANY B and receives disability payments
as wages. During the years at issue he
was ages 54 and 55, which was less than the normal retirement age required by
his retirement plan.
For 1998 and 1999,
Petitioner deducted an amount of $$$$$ each year as a retirement exemption or
deduction on line 14 of the Utah individual income tax return.
Disability payments are
paid by the New England Teamsters and Trucking Industry Pension Fund as wages
until the person has reached a minimum retirement age, at which time, the
person will be paid as a pension or annuity.
The amounts deducted by Petitioner were reported on a form 1099-R issued
by New England Teamsters and Trucking Industry Pension Fund. The distribution code was shown on the
1099-R as a “3-Disability”. The amounts
were not shown as retirement income, or payment of an annuity or pension.
The amounts deducted by
Petitioner were received by him due to his termination of employment before
reaching a normal retirement age as established under the COMPANY A and COMPANY
B. Petitioner did not present the actual
requirements for retirement under the fund, but it was represented that
Petitioner did not meet the service or age requirements set forth under the
plan to qualify for retirement.
Petitioner argued that
Utah Admin. Rule R865-9I-38 (A) (3) was vague and ambiguous because it states
that amounts received by taxpayers from pension or annuity plans are not
retirement income if they are received due to termination of employment prior
to reaching normal retirement age. He argued
that the Rule does not differentiate between voluntary or involuntary
termination of employment, but that the Rule only applies to voluntary
terminations of employment.
The amounts received by
Petitioner were disability income received by him as wages, and were not
retirement income. The retirement
income tax credit does not apply to disability income. Disability income is intended to compensate
the Petitioner for his inability to work until he can receive his retirement
benefits.
APPLICABLE
LAW
The relevant portions of Utah Code Ann.
§59-10-114 are as follows:
. . .
(2)
There
shall be subtracted from federal taxable income of a resident or nonresident
individual:
(d) amounts received by taxpayers under age 65 as retirement
income which, for purposes of this section, means pensions and annuities, paid
from an annuity contract purchased by an employer under a plan which meets the
requirements of Section 404(a)(2), Internal Revenue Code, or purchased by an
employee under a plan which meets the requirements of Section 408, Internal
Revenue Code, or paid by the United States, a state, or political subdivision
thereof, or the District of Columbia, to the employee involved or the surviving
spouse;
(e) for each taxpayer age 65 or over before the close of the
taxable years, a $$$$$ personal retirement exemption;
. . .
(3)(a) For purposes
of Subsection (2)(d), the amount of retirement income subtracted for taxpayers
under 65 shall be the lesser of the amount included in federal taxable income,
or $4,800, except that:
( i ) for married
taxpayers filing joint returns, for each $$of adjusted gross income earned over
$32,000, the amount of the retirement income exemption that may be subtracted
shall be reduced by 50 cents;
. . .
(b)
For
purposes of Subsection (2)(e), the amount of the personal retirement exemption
shall be further reduced according to the following schedule:
( i ) for married taxpayers filing joint returns, for each $$ of adjusted gross income earned over $$$$$, the amount of the personal retirement exemption shall be reduced by $$ cents;
. . .
The relevant portions of
Utah Administrative Code Rule R865-9I-38, provide as follows:
A.
Amounts
received by taxpayers from pension or annuity plans described in Section
59-10-114 are not retirement income for purposes of that section if:
. . .
3. The amounts
received are due to termination of employment before reaching a normal
retirement age as established under the qualifying plan.
DECISION
AND ORDER
Based upon the foregoing,
the Commission finds that the amounts deducted by Petitioner were not received
by him as retirement income, but were received by him as wages. These payments were based upon the
disability of Petitioner and were not based upon his retirement. Such payments were therefore received by him
due to his termination of employment before reaching a normal retirement age as
established under the qualifying plan, and are therefore not deductible. The determination of Respondent is hereby
affirmed, and the Petition for Redetermination of Petitioner is hereby
denied. It is so ordered.
This decision does not
limit a party's right to a Formal Hearing.
However, this Decision and Order will become the Final Decision and
Order of the Commission unless any party to this case files a written request
within thirty (30) days of the date of this decision to proceed to a Formal
Hearing. Such a request shall be mailed
to the address listed below and must include the Petitioner's name, address,
and appeal number:
Utah
State Tax Commission
Appeals
Division
210
North 1950 West
Salt
Lake City, Utah 84134
Failure to request a
Formal Hearing will preclude any further appeal rights in this matter.
DATED this 30th day of December
, 2002.
____________________________________
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX
COMMISSION.
The Commission has
reviewed this case and the undersigned concur in this decision.
DATED this 30th day of December , 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner