SB 454 — Relating to: an income tax subtraction for certain overtime compensation. (FE)

- 2026 LEGISLATURE LRBs0393/1LRB-4460/1 KP:wlj&cdcKP:emw&cdc SENATE SUBSTITUTEBILL AMENDMENT454 1,September TO29, SENATE2025 BILL- 454Introduced Februaryby 16,SenatorsUTTON, 2026WANGGAARD -, OfferedBRADLEY, bOINTCABRAL COMMITTEE-GUEVARA, ONJACQUE, N ASS, QUINN and T OMCZYK , cosponsored by Representatives MELOTIK, D ONOVAN, F INANCE.RANKLIN, C ALLAHAN, D ITTRIC, GOEBEN , GREEN , B.

JACOBSON , KAUFERT, K NODL, K REIBIC, M URSAU, PENTERMAN , SORTWELL, STEFFEN, USLER, WICHGERS and STUBBS.

Referred to Committee on Agriculture and Revenue.

an income tax subtraction for qualifiedcertain overtime compensation.

Analysis by the Legislative Reference Bureau This bill creates an income tax subtraction for certain qualified overtime compensationcompensation. that a claimant may deduct on the claimant’s federal income tax return.

UnderThe currentbill federaluses law,the adefinition personof may“qualified deductovertime certaincompensation” from the Internal Revenue Code, which generally defines qualified overtime compensation fromas theovertime person’scompensation incomepaid forto a claimant under the federal incomeFair taxLabor purposes.Standards Act that is in excess of the claimant’s regular rate of pay.

FederalOnly lawqualified generallyovertime definescompensation “qualifiedthat overtimeis compensation”included ason overtimestatements compensationfurnished paid to athe personclaimant underpursuant theto federal Fairor Laborstate Standardstax Actlaw that is ineligible excessto ofbe thesubtracted person’sunder regularthe ratebill. of pay.

TheTo billclaim containsthe nosubtraction sunsetunder forthe bill, a claimant must include the subtractionclaimant’s social security number on the claimant’s tax return, and if the claimant is considered married for qualifiedfederal overtimetax compensation.purposes, the claimant must file a joint tax return.

UnderThe currentsubtraction federalunder law, the federalbill deductionis generally limited to $12,500 per tax year for qualifiedclaimants, overtimeexcept compensationthat sunsetsthe afterlimit is $25,000 per tax year 2028.for claimants who file a joint return.

Further, the subtraction phases out to zero for claimants as modified federal adjusted gross income increases from $150,000 to $275,000, except that for claimants who file a joint return, the subtraction phases out to zero as modified federal AGI increases from $300,000 to $550,000.

Because this bill relates to an exemption from state or local taxes, it may be - 2026 Legislature - 2 - LRB-4460/1 KP:emw&cdc SENATE BILL 454 S ECTION 1 referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

SECTIONS ECTION 1.

SubjectExcept toas provided in subd.

e.

and f., for taxable years beginning after December 31, 2024, the amount, up to the limit specified in subd.

57.

b., c., or d., whichever is applicable, of qualified overtime compensation received during the taxable year that is included on statements furnished to the claimant pursuant to section 6041 (d) (4) or 6051 (a) (19) of the Internal Revenue Code in effect for federal purposes or pursuant to s.

71.65 (1).

andExcept c.,as forprovided taxable years beginning - 2026 Legislature - 2 - LRBs0393/1 KP:wlj&cdc SECTION 1 after December 31, 2024, the amount that the claimant may deduct under section 225 of the Internal Revenue Code in effectsubd. for federal purposes on the claimant’s federal income tax return for the taxable year to which the claim under this subdivision relates.

b.57.

For an individual who is a part-year resident or nonresident of this state, the subtraction under this subdivision for the taxable year may not exceed the amount that is calculated by multiplying the amount that the individual may deduct under section 225 of the Internal Revenue Code in effect for federal purposes on the individual’s federal income tax return by a fraction the numerator of which is the individual’s qualified overtime compensation that is taxable by this state and the denominator of which is the individual’s total qualified overtime compensation.

Notwithstandingor 26d., USCthe 225amount (g),claimed forby taxablea yearsclaimant beginningunder afterthis Decembersubdivision 31,for 2028, a claimanttaxable year may claimnot theexceed subtraction$12,500, underexcept thisthat subdivision as if 26a USCclaimant 225files (g)a didjoint notreturn, prohibit the claimant from deducting an amount onclaimed theby claimant’sa federalclaimant incomeunder taxthis returnsubdivision for a taxable yearsyear beginningmay afternot Decemberexceed 31,$25,000. 2028.

c.

Except as provided in subd.

57.

d., the amount claimed by a claimant under this subdivision for a taxable year may not exceed the amount specified in subd.

57.

b.

reduced, but not below zero, by $100 for each $1,000 by which the claimant’s modified federal adjusted gross income exceeds $150,000.

InFor thisa subdivision,claimant “qualifiedwho overtimefiles compensation”a hasjoint return for a taxable year, the meaningamount givenclaimed inby sectionthe 225claimant (c)under ofthis subdivision for the Internaltaxable Revenueyear Codemay innot effectexceed forthe federalamount purposes.specified in subd.

57.

b.

reduced, but not below zero, by $100 for each - 2026 Legislature - 3 - LRB-4460/1 KP:emw&cdc SENATE BILL 454 SECTION 1 $1,000 by which the claimant’s modified federal adjusted gross income exceeds $300,000.

e.

No subtraction under this subdivision may be claimed for a taxable year unless the claimant includes on the claimant’s tax return the claimant’s social security number.

f.

No subtraction under this subdivision may be claimed for a taxable year by a person who is considered married under section 7703 of the Internal Revenue Code unless the person and the person’s spouse file a joint tax return for the taxable year.

g.

In this subdivision, “modified federal adjusted gross income” has the meaning given for “modified adjusted gross income” in section 225 (b) (2) (B) of the Internal Revenue Code in effect for federal purposes.