Apply Delaware's 2027-2029 military pension caps and the 60+ choice

changelog.d/fix-de-military-pension-cap-2027.fixed.md

@@ -0,0 +1 @@
+Raise Delaware's military pension exclusion cap to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029, let filers age 60 or older take the greater of the $12,500 pension exclusion and the military pension exclusion from 2027, and apply the domicile requirement for filers 60 or older from 2027, under 30 Del. C. § 1106(b)(3) as 85 Del. Laws c. 426 amended it.

policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/cap/military.yaml

@@ -1,6 +1,11 @@
 description: Delaware caps the military pension income exclusion at this amount.
 values:
+  # 30 Del. C. 1106(b)(3)b, for 2022 through 2026.
   2022-01-01: 12_500
+  # 1106(b)(3)c, d and e.
+  2027-01-01: 15_000
+  2028-01-01: 20_000
+  2029-01-01: 25_000
 metadata:
   unit: currency-USD
   period: year
@@ -17,5 +22,7 @@ metadata:
       href: https://revenuefiles.delaware.gov/2022/PIT-RES_TY22_2022-02_Instructions.pdf#page=6
     - title: The Delaware Code - Title 30 - Chapter 11 - Subchapter II - § 1106 - (b) - (3)
       href: https://delcode.delaware.gov/title30/c011/sc02/index.html
+    - title: 30 Del. C. § 1106(b)(3)c-e, military pension caps for 2027, 2028 and 2029 on
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html
     - title: Delaware Individual Income Tax Return Line 6
       href: https://revenuefiles.delaware.gov/2023/PIT-RES_TY23_2023-01_Instructions.pdf#page=6

policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/domicile_requirement_applies.yaml

@@ -0,0 +1,19 @@
+description: Delaware limits the pension exclusion for filers at or above the age threshold to those who meet its domicile requirement, if this is true.
+values:
+  2007-01-01: false
+  # 30 Del. C. 1106(b)(3)f.4, added by 85 Del. Laws c. 426 (Senate Bill 219
+  # with Senate Amendment 1). The act took effect when the Governor signed it
+  # on August 17, 2026 and names no first tax year for this rule; its fiscal
+  # note applies the act from tax year 2027.
+  2027-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Delaware pension exclusion domicile requirement applies
+  reference:
+    - title: 30 Del. C. § 1106(b)(3)f.4
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html
+    - title: Senate Amendment 1 to Senate Bill 219, 153rd General Assembly
+      href: https://legis.delaware.gov/json/BillDetail/GenerateHtmlDocument?legislationId=143006&legislationTypeId=5&docTypeId=2&legislationName=SA1
+    - title: Senate Bill 219 fiscal note, assumption 1
+      href: https://legis.delaware.gov/json/BillDetail/GetPdfDocument?fileAttachmentId=653814#page=1

policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/military_retirement_exclusion_available_at_age_threshold.yaml

@@ -0,0 +1,15 @@
+description: Delaware lets filers at or above the pension exclusion age threshold take the greater of the pension exclusion and the military pension exclusion, if this is true.
+values:
+  # 30 Del. C. 1106(b)(3)b.2: for 2022 through 2026, filers age 60 or older
+  # exclude up to $12,500 of pensions and eligible retirement income.
+  2022-01-01: false
+  # 1106(b)(3)c.2, d.2 and e.2: from 2027 they exclude the greater of that
+  # amount and their United States military pension, up to the military cap.
+  2027-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Delaware military pension exclusion available at or above the age threshold
+  reference:
+    - title: 30 Del. C. § 1106(b)(3)b-e
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html

policyengine_us/tests/core/test_de_military_pension_exclusion_properties.py

@@ -0,0 +1,139 @@
+"""Properties of Delaware's pension exclusion for military pensions, 2022-2031.
+
+30 Del. C. 1106(b)(3) subtracts, for 2022 through 2026, the greater of
+pensions up to $2,000 and a United States military pension up to $12,500 for
+a person under 60, and pensions and eligible retirement income up to $12,500
+for a person 60 or older. For 2027, 2028 and from 2029 ((b)(3)c, d and e) the
+military cap is $15,000, $20,000 and $25,000, and a person 60 or older takes
+the greater of the $12,500 exclusion and the military pension up to that cap.
+From 2027 ((b)(3)f.4), a person 60 or older who fails the domicile requirement
+gets no subtraction.
+
+The reference below restates those rules from the statute, not from the
+model's parameters. Hypothesis draws batches of single filers (any age;
+military retired pay, survivor benefits, other pensions, IRA distributions,
+interest, capital gains or losses, and the domicile requirement), runs each
+batch as one simulation with the same inputs in every year, and checks for
+every filer and year:
+
+1. The exclusion equals the reference amount.
+2. It is never negative and never exceeds the military pension plus the
+   pension basket floored at zero.
+3. From 2027, a filer 60 or older who meets the domicile requirement never
+   gets less than the 2026 rule gives.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_us import Simulation
+
+YEARS = tuple(range(2022, 2032))
+MILITARY_CAP = {2027: 15_000, 2028: 20_000}
+
+
+def military_cap(year):
+    if year <= 2026:
+        return 12_500
+    return MILITARY_CAP.get(year, 25_000)
+
+
+def basket(filer):
+    """Pensions and eligible retirement income, with the $3,000 loss limit."""
+    gains = max(filer["long_term_capital_gains"], -3_000)
+    return (
+        filer["military_retirement_pay"]
+        + filer["military_retirement_pay_survivors"]
+        + filer["taxable_pension_income"]
+        + filer["taxable_ira_distributions"]
+        + filer["taxable_interest_income"]
+        + gains
+    )
+
+
+def reference(year, filer):
+    military = min(military_cap(year), filer["military_retirement_pay"])
+    if (
+        year >= 2027
+        and filer["age"] >= 60
+        and not filer["de_pension_exclusion_domicile_requirement_met"]
+    ):
+        return 0
+    if filer["age"] < 60:
+        pensions = (
+            filer["taxable_pension_income"]
+            + filer["military_retirement_pay"]
+            + filer["military_retirement_pay_survivors"]
+        )
+        return max(min(2_000, max(pensions, 0)), military)
+    general = min(12_500, max(basket(filer), 0))
+    if year <= 2026:
+        return general
+    return max(general, military)
+
+
+filers = st.fixed_dictionaries(
+    {
+        "age": st.integers(30, 90),
+        "military_retirement_pay": st.sampled_from(
+            [0, 1_000, 12_500, 15_000, 18_000, 20_000, 25_000, 40_000]
+        ),
+        "military_retirement_pay_survivors": st.sampled_from([0, 3_000]),
+        "taxable_pension_income": st.sampled_from([0, 1_500, 20_000]),
+        "taxable_ira_distributions": st.sampled_from([0, 5_000, 20_000]),
+        "taxable_interest_income": st.sampled_from([0, 2_000]),
+        "long_term_capital_gains": st.sampled_from([-10_000, -2_000, 0, 4_000]),
+        "de_pension_exclusion_domicile_requirement_met": st.booleans(),
+    }
+)
+
+
+def simulate(batch):
+    people, tax_units, households = {}, {}, {}
+    groups = {"marital_units": {}, "spm_units": {}, "families": {}}
+    for i, filer in enumerate(batch):
+        name = f"filer_{i}"
+        people[name] = {k: {y: v for y in YEARS} for k, v in filer.items()}
+        tax_units[f"tax_unit_{i}"] = {
+            "members": [name],
+            "filing_status": {y: "SINGLE" for y in YEARS},
+        }
+        households[f"household_{i}"] = {
+            "members": [name],
+            "state_code": {y: "DE" for y in YEARS},
+        }
+        for group in groups:
+            groups[group][f"{group}_{i}"] = {"members": [name]}
+    return Simulation(
+        situation={
+            "people": people,
+            "tax_units": tax_units,
+            "households": households,
+            **groups,
+        }
+    )
+
+
+@settings(
+    max_examples=6,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+@given(batch=st.lists(filers, min_size=10, max_size=30))
+def test_military_pension_exclusion(batch):
+    simulation = simulate(batch)
+    for year in YEARS:
+        exclusion = np.asarray(simulation.calculate("de_pension_exclusion", year))
+        for filer, amount in zip(batch, exclusion):
+            assert amount == reference(year, filer), (year, filer, amount)
+            assert (
+                0 <= amount <= filer["military_retirement_pay"] + max(basket(filer), 0)
+            )
+            if (
+                year >= 2027
+                and filer["age"] >= 60
+                and filer["de_pension_exclusion_domicile_requirement_met"]
+            ):
+                assert amount >= reference(2026, filer)