AR SB162

Increases the state income tax exemption for retirement and disability benefits from $6,000 to $7,500 for benefits received from individual retirement accounts and public or private employment-related retirement systems, plans, or programs.

Restricts individual retirement account exemptions before age 59½ to only distributions made on account of death or disability, excluding withdrawals for medical expenses, higher education, or first-time home purchases.

Establishes an annual cost-of-living adjustment to the exemption amount beginning in tax year 2013, calculated using the Consumer Price Index for All Urban Consumers and rounded to the nearest $100, with a floor preventing the exemption from decreasing.

Modifies the Internal Revenue Code reference date from January 1, 2009 to January 1, 2011 for determining cost basis deductions on retirement benefits.

Becomes effective for tax years beginning on or after January 1, 2011.