OAR 150-316-0559: Modification of Federal Taxable Income: Previously Taxed Contributions to Pension or Annuity

If part of the contributions toward the purchase of a pension or annuity was taxed by the state of Oregon and not taxed by the federal government, that part taxed by Oregon shall be subtracted from federal taxable income on the Oregon return. The subtraction allowed by this section shall be taken each year to the extent any amount is included in federal taxable income until the total amount taxed by Oregon and not taxed by the federal government in years beginning prior to January 1, 1969, has been recovered. Thereafter, the distribution will be taxed for Oregon income tax purposes in the same manner and amount as taxed for federal purposes. Example: A retired employee began receiving benefits from a pension plan on January 1, 1975. In tax years beginning prior to January 1, 1969, Oregon taxed $3,000 of the contributions to the pension plan. None of the contributions were taxed for federal purposes. The taxpayer is receiving $2,000 each year, all of which is taxable for federal purposes. In 1975 the taxpayer will subtract $2,000 and in 1976 $1,000 from federal taxable income in arriving at Oregon taxable income. In subsequent years, Oregon will tax the same amount taxed for federal purposes. This section applies to tax years ending on or after September 13, 1975.