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Approved: May 27, 1988
Note: This RAB was replaced by RAB 1989-57 on June 13, 1989
RAB-88-18. This Bulletin describes the Michigan Income Tax treatment of railroad employee benefits received by a resident taxpayer.
Beginning in tax year 1981, a portion of taxpayer’s “Tier 1 railroad retirement benefits” may be taxable and may be included in federal adjusted gross income under the Internal Revenue Code of 1986, Section 86.
To the extent that a taxpayer includes Tier 1 railroad retirement benefits in his or her federal adjusted gross income, he or she may deduct the same amount of determining Michigan taxable income under the Michigan Income Tax Act, MCL 206.30(1)(f)(iii).
Benefits provided under the Railroad Retirement Act (RRA) of 1974 (other than a Tier 1 railroad benefit) shall be treated as a benefit under an employer plan which meets the requirements of the Internal Revenue Code of 19865, Sections 72(r) and 401(a).
To the extent the taxpayer-retiree under the RRA has included RRA retirement benefits which are other than Tier 1 benefits (i.e. Tier 2 benefits) in his or her adjusted gross income, the taxpayer may claim a deduction of not more than $7,500 (if filing a single return) or a deduction of not more than $10,000 (if filing a joint return) when determining taxable income under Michigan’s Income Tax Act, MCL 206.30(1)(f)(iv).
For tax years ending before January 1, 1987, unemployment compensation benefits may be included in a taxpayer's gross income under the Internal Revenue Code of 1986 (lRC), Section 85(a).
For tax years ending before January 1, 1987, unemployment compensation benefits received under the Railroad-Unemployment Insurance Act (RUIA) or any other unemployment compensation law must be included in gross income either in whole or part according to a formula contained in IRC Section 85.
For tax years ending after December 31, 1986, IRC Section 85 has been amended, omitting the formula, to provide that gross income includes unemployment compensation. Accordingly, unemployment benefits received under RUIA will be reflected in adjusted gross income reported to the Internal Revenue Service.
Sick pay is included in a taxpayer's gross income, except to the extent such sickness is the result of on the job injury as defined under the IRC 105(a) and (c).
There is no provision in State law allowing a Michigan taxpayer to deduct from his or her Michigan taxable income any amount of unemployment compensation included in federal gross income for 1981 or any subsequent tax year.
Sick pay is taxable to Michigan to the extent such income has been included in arriving at federal adjusted gross income. There is no provision to allow for its subtraction on the Michigan return.
Benefits provided under Title VII are in the nature of unemployment compensation. They are paid to any employee considered deprived of employment if unable to obtain a position with an acquiring railroad or the corporation, the National Railroad Passenger Corporation, or a commuter authority through the normal exercise of seniority or, in the case of a non-agreement employee, by written application. (See prior discussion concerning treatment of unemployment compensation.)
These benefits are taxable in the same manner as unemployment compensation benefits described in "Unemployment and Sickness Benefits” above.
Under Michigan's Income Tax Act, MCL 206.30(2)(d), a taxpayer whose taxable income includes unemployment compensation that amounts to 50% or more than adjusted gross income may claim a single additional personal exemption allowance for tax years beginning after December 31, 1986.