Count Alaska's energy relief payment in federal gross income from 2024

changelog.d/ak-energy-relief-gross-income.fixed.md

@@ -0,0 +1 @@
+Count Alaska's energy relief payment in federal gross income from 2024 on, through a new `taxable_ak_energy_relief` source (#9919). In Publication 525 for 2024, the IRS treats the entire $1,702 dividend as taxable, including the energy relief. The Permanent Fund Dividend Division says the same of the $1,200 dividend for 2026. Payments from the 2022 program stay out, whether recipients got them in 2022 or in 2023. In IR-2023-23, the IRS said it would not challenge a taxpayer who left out a payment that Alaska made in 2022. In section 4.03 of Notice 2023-56, it let a taxpayer who got nothing under the program in 2022 exclude a payment they got in 2023. A payment that a dataset or user supplies counts wherever the recipient lives.

docs/validation/alaska-pfd.md

@@ -53,13 +53,59 @@ the components and increase the modeled taxable amount. The split is described
 in [Alaska DOR's February 17, 2023
 release](https://dor.alaska.gov/docs/default-source/press-releases/2023_02_17-dor-response-to-irs-guidance-on-2022-pfd.pdf#page=1).
 
-The model excludes the separate energy payment from federal gross income. For
-2022, this follows [IRS IR-2023-23, including its Alaska
+## Energy relief in federal gross income
+
+`taxable_ak_energy_relief` holds the part of `ak_energy_relief` in federal gross
+income, and `gov.irs.gross_income.ak_energy_relief_excluded` sets that part by
+year.
+
+The model leaves the 2022 program's payment out. This follows [IRS IR-2023-23,
+including its Alaska
 footnote](https://www.irs.gov/newsroom/irs-issues-guidance-on-state-tax-payments-to-help-taxpayers):
 the IRS said it would not challenge exclusion of the supplemental energy
 payment, while the regular PFD remained taxable. This was a 2022 administrative
 nonchallenge policy, rather than a statutory determination for every recipient.
 An exclusion under IRC 139 depends on a qualifying disaster and the connection
 between the payment and that disaster; see [Notice 2023-56, section
 3.04](https://www.irs.gov/pub/irs-drop/n-23-56.pdf#page=6). This model convention
-does not establish those facts or extend the 2022 IRS policy to other years.
+does not establish those facts.
+
+The model also leaves out a payment from the 2022 program that a recipient got
+in 2023. In
+[section 4.03 of Notice 2023-56](https://www.irs.gov/pub/irs-drop/n-23-56.pdf#page=13),
+the IRS addresses the 2022 programs that the news release covered. It lets a
+taxpayer who got nothing under such a program in 2022 exclude a payment that
+they got under it in 2023. It repeats the rule in
+[Publication 525 for 2023](https://www.irs.gov/pub/irs-prior/p525--2023.pdf#page=37).
+
+Alaska paid the 2022 program's energy relief as part of
+[one \$3,284 disbursement per eligible Alaskan](https://dor.alaska.gov/docs/default-source/press-releases/2023_02_17-dor-response-to-irs-guidance-on-2022-pfd.pdf#page=1),
+so a recipient who got it in 2023 got nothing under the program in 2022. Alaska
+paid the \$1,312 dividend for 2023 from the dividend fund's balance and the
+Permanent Fund's earnings, with no energy relief
+([PFD Division annual report for 2023](https://dor.alaska.gov/docs/permanentfunddividendlibraries/annual-reports/2023-pfd-annual-report.pdf?sfvrsn=6f6d9c6c_1#page=4),
+page 4). It paid the relief that the Legislature
+[added in 2023](https://dor.alaska.gov/department-of-revenue/news-detail/2024/09/19/department-of-revenue-announces-2024-permanent-fund-dividend-amount-and-energy-relief)
+with the 2024 dividend, using \$190.3 million from the general fund
+([annual report for 2024](https://dor.alaska.gov/docs/permanentfunddividendlibraries/annual-reports/2024-pfd-annual-report.pdf?sfvrsn=214f2751_1#page=4),
+page 4). So every energy relief payment that a recipient got in 2023 came from
+the 2022 program, and the model leaves all of them out.
+
+The model counts every payment from 2024 on. In
+[section 2 of Notice 2023-56](https://www.irs.gov/pub/irs-drop/n-23-56.pdf#page=2),
+the IRS says the news release applied only to payments that states made in
+2022. In section 4.03, it adds only 2023 payments under 2022 programs. In
+[Publication 525 for 2024](https://www.irs.gov/pub/irs-prior/p525--2024.pdf#page=32),
+the IRS tells filers not to reduce Schedule 1 line 8g by the energy relief
+portion and treats the entire \$1,702 as taxable. The model's \$1,403.83 of PFD
+and \$298.17 of energy relief add up to that. The
+[PFD Division](https://pfd.alaska.gov/payments/tax-information) says the \$1,200
+dividend for 2026 includes the energy relief payment, and that dividends for
+adults "are taxable for federal income tax purposes". The model's \$1,000 and
+\$200 add up to that, so an Alaskan adult with \$50,000 of wages has federal AGI
+of \$51,200 in 2026.
+
+A payment counts wherever the recipient lives, though the model calculates
+`ak_energy_relief` only for Alaska residents. When a dataset or user supplies
+energy relief or a regular dividend for someone who has since moved, the amount
+stays in federal gross income.

policyengine_us/parameters/gov/irs/gross_income/ak_energy_relief_excluded.yaml

@@ -0,0 +1,48 @@
+description: Taxpayers leave Alaska's energy relief payment out of federal gross income, if this is true.
+
+values:
+  2022-01-01: true
+  # Alaska paid no energy relief with the 2023 dividend. It paid the relief that
+  # the Legislature added in 2023 with the 2024 dividend, so any payment that a
+  # recipient got in 2023 came from the 2022 program. Alaska paid that program's
+  # relief as part of one disbursement per eligible Alaskan, so a recipient who
+  # got it in 2023 got nothing under the program in 2022. In section 4.03 of
+  # Notice 2023-56, the IRS lets that taxpayer exclude the payment.
+  2024-01-01: false
+
+metadata:
+  unit: bool
+  period: year
+  label: Alaska energy relief payment excluded from gross income
+  reference:
+    # The 2022 payment, footnote 1.
+    - title: IRS News Release IR-2023-23, IRS issues guidance on state tax payments to help taxpayers
+      href: https://www.irs.gov/newsroom/irs-issues-guidance-on-state-tax-payments-to-help-taxpayers
+    # Alaska paid the 2022 program's relief as part of one disbursement per
+    # eligible Alaskan.
+    - title: Alaska Department of Revenue, DOR Response to IRS Guidance on 2022 PFD
+      href: https://dor.alaska.gov/docs/default-source/press-releases/2023_02_17-dor-response-to-irs-guidance-on-2022-pfd.pdf#page=1
+    # Section 2: the news release applied only to payments that states made in
+    # 2022.
+    - title: IRS Notice 2023-56, Federal Income Tax Consequences of Certain State Payments, section 2
+      href: https://www.irs.gov/pub/irs-drop/n-23-56.pdf#page=2
+    # Section 4.03: a taxpayer who got no payment under a 2022 program that the
+    # news release covered may exclude a payment under it that they got in 2023.
+    - title: IRS Notice 2023-56, Federal Income Tax Consequences of Certain State Payments, section 4.03
+      href: https://www.irs.gov/pub/irs-drop/n-23-56.pdf#page=13
+    - title: IRS Publication 525 (2023), Spillover payments under certain 2022 state tax payment programs
+      href: https://www.irs.gov/pub/irs-prior/p525--2023.pdf#page=37
+    # Page 4: Alaska paid the 2023 dividend from the dividend fund's balance and
+    # the Permanent Fund's earnings, with no energy relief.
+    - title: Alaska Permanent Fund Dividend Division, Annual Report 2023, dividend calculation
+      href: https://dor.alaska.gov/docs/permanentfunddividendlibraries/annual-reports/2023-pfd-annual-report.pdf?sfvrsn=6f6d9c6c_1#page=4
+    # Alaska paid the relief that the Legislature added in 2023 with the 2024
+    # dividend.
+    - title: Alaska Department of Revenue, Department of Revenue Announces 2024 Permanent Fund Dividend Amount and Energy Relief
+      href: https://dor.alaska.gov/department-of-revenue/news-detail/2024/09/19/department-of-revenue-announces-2024-permanent-fund-dividend-amount-and-energy-relief
+    # The 2024 payment.
+    - title: IRS Publication 525 (2024), Taxable and Nontaxable Income
+      href: https://www.irs.gov/pub/irs-prior/p525--2024.pdf#page=32
+    # The 2026 payment.
+    - title: Alaska Permanent Fund Dividend Division, Tax Information
+      href: https://pfd.alaska.gov/payments/tax-information

policyengine_us/parameters/gov/irs/gross_income/sources.yaml

@@ -41,6 +41,8 @@ values:
     - miscellaneous_income
     # Listed separately on 1040 line 8g.
     - ak_permanent_fund_dividend
+    # Reported with the dividend on line 8g, except the 2022 payment.
+    - taxable_ak_energy_relief
     # Alimony from divorces executed before the TCJA cutoff (Schedule 1 line 2a).
     - taxable_alimony_income
     # Taxable state and local income tax refunds (Schedule 1 line 1 / IRC § 111).

policyengine_us/tests/policy/baseline/gov/irs/income/taxable_income/adjusted_gross_income/irs_gross_income/taxable_ak_energy_relief.yaml

@@ -0,0 +1,217 @@
+- name: Case 1, the 2022 payment stays out of gross income (IR-2023-23, footnote 1).
+  period: 2022
+  input:
+    state_code: AK
+  output:
+    ak_energy_relief: 662
+    taxable_ak_energy_relief: 0
+
+- name: Case 2, the 2024 payment counts in full (Publication 525 for 2024).
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    state_code: AK
+  output:
+    ak_energy_relief: 298.17
+    taxable_ak_energy_relief: 298.17
+
+- name: Case 3, Alaska paid no energy relief in 2025.
+  period: 2025
+  input:
+    state_code: AK
+  output:
+    ak_energy_relief: 0
+    taxable_ak_energy_relief: 0
+
+- name: Case 4, the 2026 payment counts in full (PFD Division tax information).
+  period: 2026
+  input:
+    state_code: AK
+  output:
+    ak_energy_relief: 200
+    taxable_ak_energy_relief: 200
+
+- name: Case 5, the model calculates no payment for someone living outside Alaska.
+  period: 2026
+  input:
+    state_code: WA
+  output:
+    ak_energy_relief: 0
+    taxable_ak_energy_relief: 0
+
+- name: Case 6, a 2022 payment that a user supplies stays out.
+  period: 2022
+  input:
+    state_code: AK
+    ak_energy_relief: 1_000
+  output:
+    taxable_ak_energy_relief: 0
+
+- name: Case 7, a 2026 payment that a user supplies counts in full.
+  period: 2026
+  input:
+    state_code: AK
+    ak_energy_relief: 1_000
+  output:
+    taxable_ak_energy_relief: 1_000
+
+- name: Case 8, nothing counts before 2022.
+  period: 2021
+  input:
+    state_code: AK
+  output:
+    taxable_ak_energy_relief: 0
+
+- name: Case 9, a 2022 filer reports the $2,622 regular dividend and not the $662 payment.
+  period: 2022
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: AK
+  output:
+    ak_permanent_fund_dividend: 2_622
+    taxable_ak_energy_relief: 0
+    irs_gross_income: 52_622
+    adjusted_gross_income: 52_622
+
+- name: Case 10, a 2024 filer reports the entire $1,702 from Publication 525.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: AK
+  output:
+    ak_permanent_fund_dividend: 1_403.83
+    taxable_ak_energy_relief: 298.17
+    irs_gross_income: 51_702
+    adjusted_gross_income: 51_702
+
+- name: Case 11, a 2025 filer reports the $1,000 dividend, which held no energy relief.
+  period: 2025
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: AK
+  output:
+    ak_permanent_fund_dividend: 1_000
+    taxable_ak_energy_relief: 0
+    irs_gross_income: 51_000
+    adjusted_gross_income: 51_000
+
+- name: Case 12, a 2026 filer reports the $1,200 dividend and pays tax on all of it.
+  period: 2026
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: AK
+  output:
+    ak_permanent_fund_dividend: 1_000
+    taxable_ak_energy_relief: 200
+    irs_gross_income: 51_200
+    adjusted_gross_income: 51_200
+    # Rev. Proc. 2025-32: taxable income of 51,200 - 16,100 = 35,100.
+    # 10% of 12,400 + 12% of (35,100 - 12,400) = 1,240 + 2,724.
+    income_tax: 3_964
+
+- name: Case 13, a dependent child's 2026 dividend counts as the child's own gross income.
+  period: 2026
+  input:
+    people:
+      parent:
+        age: 40
+        employment_income: 50_000
+      child:
+        age: 5
+    tax_units:
+      tax_unit:
+        members: [parent, child]
+    households:
+      household:
+        members: [parent, child]
+        state_code: AK
+  output:
+    is_tax_unit_dependent: [false, true]
+    taxable_ak_energy_relief: [200, 200]
+    irs_gross_income: [51_200, 0]
+    dependent_gross_income: [0, 1_200]
+
+- name: Case 14, Alaska paid no energy relief with the 2023 dividend.
+  period: 2023
+  input:
+    state_code: AK
+  output:
+    ak_energy_relief: 0
+    taxable_ak_energy_relief: 0
+
+- name: Case 15, a 2022-program payment that the recipient got in 2023 stays out (Notice 2023-56, section 4.03).
+  period: 2023
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+        ak_energy_relief: 662
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: AK
+  output:
+    taxable_ak_energy_relief: 0
+    # 50,000 of wages and the $1,312 regular dividend for 2023.
+    irs_gross_income: 51_312
+
+- name: Case 16, a 2026 payment and dividend that a user supplies count for a recipient who now lives outside Alaska.
+  period: 2026
+  input:
+    people:
+      person:
+        age: 40
+        employment_income: 50_000
+        ak_permanent_fund_dividend: 1_000
+        ak_energy_relief: 200
+    tax_units:
+      tax_unit:
+        members: [person]
+    households:
+      household:
+        members: [person]
+        state_code: WA
+  output:
+    taxable_ak_energy_relief: 200
+    irs_gross_income: 51_200