Apply MT taxable Social Security base amounts once per return (#9011)

changelog.d/mt-taxable-ss-thresholds-9011.fixed.md

@@ -0,0 +1 @@
+Fixed the Montana taxable Social Security schedule to apply the filing-status base amounts once per return rather than in full per spouse, using the half-of-joint amounts per column for married filers and the full joint amounts for the single-column joint computation.

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

@@ -511,3 +511,31 @@
     mt_regular_income_tax_joint: 1_918
     mt_capital_gains_tax_joint: 1_022.8
     mt_income_tax: 2_940.8
+
+- name: MT 2021 joint elderly couple taxable SS uses the schedule thresholds once, not per spouse (taxsim 1078)
+  period: 2021
+  absolute_error_margin: 5
+  input:
+    people:
+      head:
+        age: 70
+        employment_income: 22_432.51
+        taxable_interest_income: 18_181.87
+        taxable_private_pension_income: 4_484.76
+        social_security_retirement: 40_195.39
+      spouse:
+        age: 71
+        employment_income: 670.88
+        taxable_interest_income: 18_181.86
+        taxable_private_pension_income: 4_484.75
+        social_security_retirement: 40_195.38
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: MT
+  output:
+    # TaxAct status 2a columns: 34,166 + 20,539
+    mt_taxable_social_security: [34_166, 20_539]

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/mt_taxable_social_security.yaml

@@ -1,4 +1,7 @@
-- name: Test case 1, filing jointly, uses amount on line 18.  
+# Married filers compute the schedule per column (married filing separately
+# on the same form), so each spouse's column uses the half-of-joint base
+# amounts ($16,000/$6,000), fully taxing this benefit at 85% ($850).
+- name: Test case 1, married per-column computation uses the separate base amounts.
   period: 2021
   input:
     social_security: 1_000
@@ -11,7 +14,24 @@
     filing_status: JOINT
     state_code: MT
   output:
-    mt_taxable_social_security: 500 
+    mt_taxable_social_security: 850
+
+# Joint filers run the schedule once with the full joint base amounts
+# ($32,000/$12,000), so the same income is only partially taxed ($500).
+- name: Test case 1b, joint single-column computation uses the full joint base amounts.
+  period: 2021
+  input:
+    social_security: 1_000
+    irs_gross_income: 50_000
+    taxable_social_security: 200
+    tax_exempt_interest_income: 100
+    mt_applicable_ald_deductions: 5_000
+    student_loan_interest_ald: 300
+    mt_subtractions: 2_000
+    filing_status: JOINT
+    state_code: MT
+  output:
+    mt_taxable_social_security_joint: 500
 
 - name: Test case 2, filing single. 
   period: 2021

policyengine_us/variables/gov/states/mt/tax/income/base/mt_agi_joint.py

@@ -31,7 +31,7 @@ def formula(tax_unit, period, parameters):
         if p.applies:
             # 2023 and before: apply lines 21-24 adjustment for social security
             taxable_ss = add(tax_unit, period, ["taxable_social_security"])
-            mt_taxable_ss = add(tax_unit, period, ["mt_taxable_social_security"])
+            mt_taxable_ss = tax_unit("mt_taxable_social_security_joint", period)
             adjusted_mt_ss_difference = mt_taxable_ss - taxable_ss
             tax_unit_mt_agi = max_(reduced_agi + adjusted_mt_ss_difference, 0)
         else:

policyengine_us/variables/gov/states/mt/tax/income/base/mt_taxable_social_security.py

@@ -47,13 +47,31 @@ def formula(person, period, parameters):
         )
         # line 10: get amount based on filing status
         filing_status = person.tax_unit("filing_status", period)
-        threshold_amount = p.lower[filing_status]
+        statuses = filing_status.possible_values
+        # Montana's Taxable Social Security Benefits Schedule computes married
+        # taxpayers in separate columns, applying half the joint base amounts
+        # to each spouse's column (Form 2, page 6, lines 10 and 12: married
+        # filing separately enters $16,000/$6,000 in columns A and B). Map
+        # joint filers to the married-filing-separately thresholds so the base
+        # amounts are applied once per couple rather than in full per spouse.
+        uses_separate_threshold = filing_status == statuses.JOINT
+        lower_amount = where(
+            uses_separate_threshold,
+            p.lower["SEPARATE"],
+            p.lower[filing_status],
+        )
+        upper_amount = where(
+            uses_separate_threshold,
+            p.upper["SEPARATE"],
+            p.upper[filing_status],
+        )
+        threshold_amount = lower_amount
         # line 11: line 9 - line 10 (income_reduced_by_subtractions - threshold_amount)
         income_reduced_by_subtractions_and_threshold = max_(
             0, income_reduced_by_subtractions - threshold_amount
         )
         # line 12: get amount based on filing status
-        amount_lower = p.upper[filing_status] - p.lower[filing_status]
+        amount_lower = upper_amount - lower_amount
         # lien 13: line 11 - line 12
         minimum_tax_threshold = max_(
             0, income_reduced_by_subtractions_and_threshold - amount_lower

policyengine_us/variables/gov/states/mt/tax/income/base/mt_taxable_social_security_joint.py

@@ -0,0 +1,78 @@
+from policyengine_us.model_api import *
+
+
+class mt_taxable_social_security_joint(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Montana taxable social security benefits for joint filers"
+    defined_for = StateCode.MT
+    definition_period = YEAR
+    reference = (
+        "https://mtrevenue.gov/wp-content/uploads/mdocs/form%202%202021.pdf#page=6"
+    )
+
+    def formula(tax_unit, period, parameters):
+        p = parameters(period).gov.states.mt.tax.income.social_security.amount
+        p_irs = parameters(period).gov.irs.social_security.taxability.rate
+        # Joint filers run the Taxable Social Security Benefits Schedule once
+        # in a single column, combining both spouses' lines 1-9 and applying
+        # the joint base amounts once (Form 2, page 6).
+        # line 1 total net SS amount
+        social_security = add(tax_unit, period, ["social_security"])
+        # line 2 SS multiplied by the base rate
+        social_security_benefits_fraction = social_security * p_irs.base.benefit_cap
+        # line 3: irs_gross_income - taxable_social_security
+        gross_income = add(tax_unit, period, ["irs_gross_income"])
+        taxable_ss = add(tax_unit, period, ["taxable_social_security"])
+        reduced_gross_income = max_(gross_income - taxable_ss, 0)
+        # line 5: tax exempt interest income
+        tax_exempt_interest_income = add(
+            tax_unit, period, ["tax_exempt_interest_income"]
+        )
+        # line 6: Sum of line 2, 3, 4, 5
+        income_increased_by_ss_and_interest = (
+            social_security_benefits_fraction
+            + reduced_gross_income
+            + tax_exempt_interest_income
+        )
+        # line 7: Remove the student loans from the above the line deductions
+        ald_less_student_loan = add(
+            tax_unit, period, ["mt_applicable_ald_deductions"]
+        ) - add(tax_unit, period, ["student_loan_interest_ald"])
+        # line 8: Montana subtractions + ald
+        subtractions = add(tax_unit, period, ["mt_subtractions"])
+        increased_subtractions = subtractions + ald_less_student_loan
+        # line 9: line 6 - line 8, if line 8 >= line 6, return 0
+        income_reduced_by_subtractions = max_(
+            0, income_increased_by_ss_and_interest - increased_subtractions
+        )
+        # line 10: joint base amount applied once
+        filing_status = tax_unit("filing_status", period)
+        threshold_amount = p.lower[filing_status]
+        # line 11: line 9 - line 10
+        income_reduced_by_subtractions_and_threshold = max_(
+            0, income_reduced_by_subtractions - threshold_amount
+        )
+        # line 12: joint span applied once
+        amount_lower = p.upper[filing_status] - p.lower[filing_status]
+        # line 13: line 11 - line 12
+        minimum_tax_threshold = max_(
+            0, income_reduced_by_subtractions_and_threshold - amount_lower
+        )
+        # line 14 & 15
+        capped_reduced_income = min_(
+            income_reduced_by_subtractions_and_threshold, amount_lower
+        )
+        minimum_tax_threshold_fraction = capped_reduced_income * p_irs.base.excess
+        # line 16
+        smaller_fraction = min_(
+            minimum_tax_threshold_fraction, social_security_benefits_fraction
+        )
+        # line 17 & 18: line_13 * 0.85 + line_16
+        adjusted_tax_amount = (
+            minimum_tax_threshold * p_irs.additional.benefit_cap + smaller_fraction
+        )
+        # line 19: line_1 * 0.85
+        adjusted_taxable_amount = social_security * p_irs.additional.excess
+        # line 20
+        return min_(adjusted_taxable_amount, adjusted_tax_amount)