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State Bills Would Clarify Exemption of Federal Stimulus Checks

Posted on Apr. 13, 2020

The Arkansas legislature's Joint Budget Committee has approved a proposal to exempt federal coronavirus stimulus checks from state income taxes. Similar bills have been proposed in Pennsylvania.

The amendment to H.B. 1083 would exempt economic impact payments under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act from state income tax.

Under the CARES Act, individuals making up to $75,000 and joint filers earning up to $150,000 annually are eligible for $1,200 apiece, and those with dependents under the age of 17 will get an extra $500 per child. Taxpayers who earn more than those amounts will be eligible for payments reduced by $5 for each $100 in income above the thresholds. 

The amendment also stipulates that payments to farmers by the U.S. Department of Agriculture under the Market Facilitation Program would be exempt from state income tax.

The amendment was adopted by voice vote during the committee's April 9 meeting; the final vote tally was not available at press time. The revised bill won’t be engrossed until legislators reconvene on April 15, according to legislative analyst Kevin Anderson.

Rep. Joe Jett (R), who proposed the amendment, said during the committee’s meeting that although the state Department of Finance and Administration told him it is not planning to tax the payments, he wanted to codify that the money will not be taxed at the state level.

Department spokesman Scott Hardin said the economic impact checks would not be subject to tax, regardless of the amendment, but that the payments to farmers would have been taxable.


Meanwhile, legislation has been introduced in Pennsylvania to clarify that the state will not subject the rebate checks to state income tax. The Pennsylvania Department of Revenue has posted guidance on its website explaining that the checks are not subject to personal income tax.

S.B. 1104 was introduced April 3 by Sen. James Brewster (D), and a companion bill was introduced in the House on April 9 by Rep. Brandon Markosek (D).

In the bill’s memo, Brewster said his proposal “would ensure that these payments are exempt from both state and local taxes.”

“In these trying times, individuals should be able to use their payment to buy food, pay for medication or rent or mortgages, not worrying about saving a portion to pay taxes,” Brewster said.

In his bill's memo, Markosek said that “while these dollars are exempt from federal taxes, it is up to Pennsylvania to decide whether they are subject to tax under our law.”

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