Give Michigan's qualified disabled veteran exemption to every veteran with a service-connected disability

changelog.d/fix-mi-disabled-veteran-exemption.fixed.md

@@ -0,0 +1 @@
+Give Michigan's qualified disabled veteran exemption to every veteran with a service-connected disability, at any rating, as MCL 206.30(3)(b) does, through a new `has_service_connected_disability` input; the home heating credit's exemption count follows.

policyengine_us/parameters/gov/states/mi/tax/income/exemptions/disabled/amount/veteran.yaml

@@ -1,4 +1,4 @@
-description: Michigan provides this exemption amount for each disabled veteran in the household.
+description: Michigan provides this exemption amount for each qualified disabled veteran in the household, a veteran with a service-connected disability at any rating.
 values:
   # Law specifies $250 as of 2008.
   # Tax guide specifies $400 since 2017.
@@ -22,5 +22,7 @@ metadata:
     href: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2023/BOOK_MI-1040.pdf#page=3
   - title: Michigan 2024 Individual Income Tax Instructions
     href: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2024/MI-1040-Instructions.pdf#page=3
+  - title: Michigan 2025 Individual Income Tax Instructions, line 9c
+    href: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=10
   - title: Michigan 2025 Income Tax Withholding Guide (Form 446)
     href: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/SUW/TY2025/446_Withholding-Guide_2025.pdf#page=2

policyengine_us/tests/core/test_state_tax_head_spouse_swap_invariance.py

@@ -116,6 +116,7 @@ def adults(draw):
         "pre_subsidy_care_expenses": draw(money(6_000)),
         "social_security_survivors": draw(money(20_000)),
         "is_fully_disabled_service_connected_veteran": draw(st.booleans()),
+        "has_service_connected_disability": draw(st.booleans()),
     }
 
 
@@ -190,6 +191,7 @@ def signed(low, high, p):
         "pre_subsidy_care_expenses": some(6_000, 0.05),
         "social_security_survivors": some(20_000, 0.05 if age >= 55 else 0.0),
         "is_fully_disabled_service_connected_veteran": bool(rng.random() < 0.03),
+        "has_service_connected_disability": bool(rng.random() < 0.05),
     }
 
 

policyengine_us/tests/policy/baseline/gov/states/mi/tax/income/exemptions/mi_exemptions.yaml

@@ -534,3 +534,73 @@
   output:
     # $1,500 claimable-filer allowance + $5,800 for their child.
     mi_exemptions: 7_300
+
+- name: 2026 veteran with a partial service-connected disability rating gets the qualified disabled veteran exemption
+  period: 2026
+  input:
+    people:
+      person1:
+        has_service_connected_disability: true
+        is_fully_disabled_service_connected_veteran: false
+    tax_units:
+      tax_unit:
+        mi_personal_exemptions: 5_900
+        members: [person1]
+    household:
+      members: [person1]
+      state_code: MI
+  output:
+    # MCL 206.30(3)(b) and MI-1040 line 9c: $5,900 personal + $500 qualified disabled veteran.
+    mi_exemptions: 6_400
+
+- name: 2026 fully disabled service-connected veteran gets the exemption once
+  period: 2026
+  input:
+    people:
+      person1:
+        is_fully_disabled_service_connected_veteran: true
+    tax_units:
+      tax_unit:
+        mi_personal_exemptions: 5_900
+        members: [person1]
+    household:
+      members: [person1]
+      state_code: MI
+  output:
+    mi_exemptions: 6_400
+
+- name: 2026 joint return where each spouse has a service-connected disability
+  period: 2026
+  input:
+    people:
+      person1:
+        has_service_connected_disability: true
+      person2:
+        has_service_connected_disability: true
+    tax_units:
+      tax_unit:
+        mi_personal_exemptions: 11_800
+        members: [person1, person2]
+    household:
+      members: [person1, person2]
+      state_code: MI
+  output:
+    # $11,800 personal + 2 x $500 qualified disabled veteran.
+    mi_exemptions: 12_800
+
+- name: 2026 veteran without a service-connected disability gets no veteran exemption
+  period: 2026
+  input:
+    people:
+      person1:
+        has_service_connected_disability: false
+        veterans_benefits: 1_000
+    tax_units:
+      tax_unit:
+        mi_personal_exemptions: 5_900
+        members: [person1]
+    household:
+      members: [person1]
+      state_code: MI
+  output:
+    mi_exemptions: 5_900

policyengine_us/tests/policy/baseline/gov/states/mi/tax/income/exemptions/mi_exemptions_count.yaml

@@ -56,3 +56,22 @@
       state_code: MI
   output: # 6 + 0
     mi_exemptions_count: 6
+
+- name: 2026 a veteran with a partial service-connected disability rating adds an exemption to the count
+  period: 2026
+  input:
+    people:
+      person1:
+        mi_disabled_exemption_eligible_person: false
+        has_service_connected_disability: true
+      person2:
+        mi_disabled_exemption_eligible_person: false
+        has_service_connected_disability: false
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    household:
+      members: [person1, person2]
+      state_code: MI
+  output: # 2 people + 1 qualified disabled veteran
+    mi_exemptions_count: 3

policyengine_us/tests/policy/baseline/household/demographic/person/has_service_connected_disability.yaml

@@ -0,0 +1,21 @@
+- name: A fully disabled service-connected veteran has a service-connected disability.
+  period: 2026
+  input:
+    is_fully_disabled_service_connected_veteran: true
+  output:
+    has_service_connected_disability: true
+
+- name: Without either input, the person has no service-connected disability.
+  period: 2026
+  input:
+    is_fully_disabled_service_connected_veteran: false
+  output:
+    has_service_connected_disability: false
+
+- name: A veteran with a partial rating sets the input directly.
+  period: 2026
+  input:
+    is_fully_disabled_service_connected_veteran: false
+    has_service_connected_disability: true
+  output:
+    has_service_connected_disability: true

policyengine_us/variables/gov/states/mi/tax/income/exemptions/mi_exemptions.py

@@ -27,10 +27,9 @@ def formula(tax_unit, period, parameters):
         )
         disabled_exemption = disabled_people * p.disabled.amount.base
 
-        # Disabled veteran exemptions
-        disabled_veterans = add(
-            tax_unit, period, ["is_fully_disabled_service_connected_veteran"]
-        )
+        # MCL 206.30(3)(b): each qualified disabled veteran, a veteran with
+        # a service-connected disability at any rating, adds an exemption.
+        disabled_veterans = add(tax_unit, period, ["has_service_connected_disability"])
         disabled_veteran_exemption = disabled_veterans * p.disabled.amount.veteran
 
         # MCL 206.30(4): an individual who can be claimed as a dependent on

policyengine_us/variables/gov/states/mi/tax/income/exemptions/mi_exemptions_count.py

@@ -17,5 +17,5 @@ class mi_exemptions_count(Variable):
     adds = [
         "tax_unit_size",
         "mi_disabled_exemption_eligible_person",
-        "is_fully_disabled_service_connected_veteran",
+        "has_service_connected_disability",
     ]

policyengine_us/variables/household/demographic/person/has_service_connected_disability.py

@@ -0,0 +1,20 @@
+from policyengine_us.model_api import *
+
+
+class has_service_connected_disability(Variable):
+    value_type = bool
+    entity = Person
+    label = "Is a veteran with a service-connected disability"
+    documentation = (
+        "Whether the person is a veteran with a disability incurred or "
+        "aggravated in the line of duty in the active military, naval, air, "
+        "or space service (38 U.S.C. 101(16)), at any disability rating. "
+        "Defaults to is_fully_disabled_service_connected_veteran, since a "
+        "fully disabled service-connected veteran has such a disability; set "
+        "it to true for a veteran with a partial rating."
+    )
+    definition_period = YEAR
+    reference = "https://www.law.cornell.edu/uscode/text/38/101#16"
+
+    def formula(person, period, parameters):
+        return person("is_fully_disabled_service_connected_veteran", period)