Reduce the Louisiana exempt income in 2021

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Reduce the Louisiana exempt income in 2021.

policyengine_us/parameters/gov/states/la/tax/income/exempt_income/reduction/in_effect.yaml

@@ -0,0 +1,16 @@
+description: Louisiana reduces the exempt adjusted gross income if this is true.
+
+values:
+  2021-01-01: true  
+  2022-01-01: false
+metadata:
+  unit: bool
+  period: year
+  label: Louisiana exempt adjusted gross income reduction in effect
+  reference:
+    - title: 2021 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540i(2021)%20Instructions.pdf#page=9
+    - title: 2022 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540iWEB(2022)D1.pdf#page=9
+    - title: 2023 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540i%20WEB(2023)%20INSTRUCTIONS.pdf#page=10

policyengine_us/parameters/gov/states/la/tax/income/exempt_income/reduction/rate.yaml

@@ -0,0 +1,29 @@
+description: Louisiana reduces the exempt adjusted gross income by this rate, based on the exempt income amount.
+
+brackets:
+  - threshold: 
+      2021-01-01: 0
+    rate: 
+      2021-01-01: 0
+  - threshold:
+      2021-01-01: 15_000
+    rate:
+      2021-01-01: 0.25
+  - threshold:
+      2021-01-01: 50_000
+    rate:
+      2021-01-01: 0.45
+
+metadata:
+  reference:
+    - title: 2021 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540i(2021)%20Instructions.pdf#page=9
+    - title: 2022 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540iWEB(2022)D1.pdf#page=9
+    - title: 2023 Louisiana Individual Income Tax Return IT-540 Instructions
+      href: https://revenue.louisiana.gov/TaxForms/IT540i%20WEB(2023)%20INSTRUCTIONS.pdf#page=10
+  threshold_unit: currency-USD
+  rate_unit: /1
+  type: marginal_rate
+  period: year
+  label: Louisiana exempt adjusted gross income reduction rate

policyengine_us/parameters/gov/states/la/tax/income/exempt_income/sources.yaml

@@ -1,10 +1,31 @@
 description: Louisiana exempts these sources from adjusted gross income.
 values:
   2021-01-01:
-    - la_military_pay_exclusion # 10E
-    - la_disability_income_exemption_person # 49E
+    - us_govt_interest # 01E
+    # Louisiana State Employees’ Retirement Benefits 02E
+    # Louisiana State Teachers’ Retirement Benefits 03E
+    - military_retirement_pay # 04E
+    # Other Retirement Benefits 05E
     - la_retirement_exemption_person # 06E
     - taxable_social_security # 07E
+    # Native American Income 08E
+    # START Savings Program Contributions 09E
+    - la_military_pay_exclusion # 10E
+    # Road Home 11E
+    # Recreation Volunteer 13E
+    # Volunteer Firefighter 14E
+    # Voluntary Retrofit Residential Structure 16E
+    # Elementary and Secondary School Tuition 17E
+    # Educational Expenses for Home-Schooled Children 18E
+    # Educational Expenses for a Quality Public Education 19E
+    # Capital Gain from Sale of Louisiana Business 20E
+    # Employment of Certain Qualified Disabled Individuals 21E
+    # S Bank Shareholder Income Exclusion 22E
+    # Entity Level Taxes Paid to Other States 23E
+    # Pass–Through Entity Exclusion 24E
+    # COVID-19 Relief Benefits 27E
+    - la_disability_income_exemption_person # 49E
+
 metadata:
   unit: list  
   label: Louisiana adjusted gross income exempt income

policyengine_us/tests/policy/baseline/gov/states/la/tax/income/integration.yaml

@@ -110,5 +110,25 @@
         members: [person1, person2, person3, person4]
         state_fips: 22  # LA
   output:  # expected results from patched TAXSIM35 2024-03-04 version
-    la_agi: 61020
-    la_income_tax: 1686.86
+    la_agi_exempt_income: 19_050
+    la_agi: 62_370
+    la_taxable_income: 54_297.6
+
+- name: Tax unit with taxsimid 48858 in f21.its.csv and f21.ots.csv
+  absolute_error_margin: 0.01
+  period: 2021
+  input:
+    people:
+      person1:
+        age: 67
+        employment_income: 29_010
+        taxable_interest_income: 11_010
+        taxable_private_pension_income: 12_000
+        social_security_retirement: 24_000
+    households:
+      household:
+        members: [person1]
+        state_fips: 22  # LA
+  output:  # expected results from patched TAXSIM35 2024-03-16 version
+    la_agi: 48_870
+    la_income_tax: 1_252.96

policyengine_us/tests/policy/baseline/gov/states/la/tax/income/la_agi_exempt_income.yaml

@@ -0,0 +1,52 @@
+- name: Unreduced exempt income
+  period: 2021
+  input:
+    state_code: LA
+    adjusted_gross_income: 30_000
+    la_retirement_exemption_person: 3_000
+    taxable_social_security: 1_000
+    tax_unit_itemizes: false
+    la_itemized_deductions: 0
+    la_federal_tax_deduction: 0
+  output:
+    la_agi_exempt_income: 4_000 
+
+- name: Reduced exempt income
+  period: 2021
+  input:
+    state_code: LA
+    adjusted_gross_income: 80_000
+    la_retirement_exemption_person: 20_000
+    taxable_social_security: 1_000
+    tax_unit_itemizes: false
+    la_itemized_deductions: 0
+    la_federal_tax_deduction: 0
+  output:
+    la_agi_exempt_income: 19_500 
+
+- name: After 2021, the exempt income will not be reduced
+  period: 2022
+  input:
+    state_code: LA
+    adjusted_gross_income: 80_000
+    la_retirement_exemption_person: 20_000
+    taxable_social_security: 1_000
+    tax_unit_itemizes: false
+    la_itemized_deductions: 0
+    la_federal_tax_deduction: 0
+  output:
+    la_agi_exempt_income: 21_000 
+
+- name: The second option is to reduce the exempt income by the tax
+  period: 2021
+  input:
+    state_code: LA
+    adjusted_gross_income: 80_000
+    la_retirement_exemption_person: 20_000
+    taxable_social_security: 1_000
+    tax_unit_itemizes: true
+    la_itemized_deductions: 20_000
+    la_federal_tax_deduction: 59_000
+  output:
+    la_agi_exempt_income: 20_737.5
+

policyengine_us/variables/gov/states/la/tax/income/exempt_income/la_agi_exempt_income.py

@@ -10,4 +10,36 @@ class la_agi_exempt_income(Variable):
     definition_period = YEAR
 
     # Functions as subtractions.
-    adds = "gov.states.la.tax.income.exempt_income.sources"
+    def formula(tax_unit, period, parameters):
+        p = parameters(period).gov.states.la.tax.income.exempt_income
+        total_exempt_income = add(tax_unit, period, p.sources)
+        if p.reduction.in_effect:
+            # Option 1
+            exempt_income_reduction = p.reduction.rate.calc(
+                total_exempt_income
+            )
+            # Option 2
+            agi = tax_unit("adjusted_gross_income", period)
+            exempt_income_rate = np.zeros_like(agi)
+            mask = agi != 0
+            exempt_income_rate[mask] = total_exempt_income[mask] / agi[mask]
+            itemizes = tax_unit("tax_unit_itemizes", period)
+            itemized_deductions = tax_unit("la_itemized_deductions", period)
+            claimed_itemized_deductions = itemizes * itemized_deductions
+            fed_tax_deduction = tax_unit("la_federal_tax_deduction", period)
+            pre_exempt_income_tax = max_(
+                agi - claimed_itemized_deductions - fed_tax_deduction, 0
+            )
+            income_tax_present = pre_exempt_income_tax > 0
+            exempt_income_tax_reduction = (
+                pre_exempt_income_tax * exempt_income_rate
+            )
+            # The smaller of the two options is applied
+            smaller_adjustment = min_(
+                exempt_income_tax_reduction, exempt_income_reduction
+            )
+            final_exempt_income_reduction = where(
+                income_tax_present, smaller_adjustment, exempt_income_reduction
+            )
+            return max_(total_exempt_income - final_exempt_income_reduction, 0)
+        return total_exempt_income