[DTrim99]

New Mexico and Oklahoma count pensions and annuities in the income tests for their low-income credits, whether or not the state taxes them. PolicyEngine-US counted only pension_income, which leaves out military retired pay. A military retiree's credit income was therefore understated, and some retirees kept credits they don't qualify for.

Changes

State	Income concept	Law	Credits it gates
New Mexico	Modified gross income (gov.states.nm.tax.income.modified_gross_income)	NMSA 1978 § 7-2-2(L): all income from whatever source, including "(9) annuities" and "(11) pensions". The 2025 PIT-RC instructions list "an annuity, pension, retirement pay" (p. 10).	Low income comprehensive tax rebate, property tax rebate, child day care credit
Oklahoma	Gross household income (gov.states.ok.tax.income.credits.gross_income_sources)	OAC 710:50-15-96(c): "the gross income of every type", including "pensions, annuities", and "It is not relevant whether or not the income is taxable". Form 538-S Part 3 asks for "taxable and nontaxable gross income", line 6 "Other pensions, annuities, and Individual Retirement Accounts".	Sales tax relief credit (538-S), property tax credit (538-H)

Both lists now include military_retirement_income, which adds the retiree's pay (military_retirement_pay) and military Survivor Benefit Plan annuities (military_retirement_pay_survivors). Both lists sit under tax/, so the military retirement readers guard (#10317) allows either input. The total is used because a survivor annuity is an annuity under both rules.

These are income tests only. New Mexico still exempts up to $30,000 of military retired pay from its income tax (NMSA 1978 § 7-2-5.13), and Oklahoma exempts all of it (68 O.S. § 2358(E)(17)).

Effect

The state-law check of the Veterans Day post (PolicyEngine/policyengine-app-v2#1523) found this gap. In 2025, a retired couple, both 67, with $45,000 of military retired pay and $30,000 of Social Security has $30,000 of New Mexico modified gross income and Oklahoma gross household income on main. With the pay counted, it's $75,000:

• in New Mexico the couple loses the low income comprehensive tax rebate ($149 with six exemptions), as it is over the table's $36,000 limit;
• in Oklahoma it loses the sales tax relief credit ($80), as it is over the $50,000 limit for filers 65 and older.

The same couple with a civilian pension already got these results.

Tests

• nm_modified_gross_income.yaml: wages $20,000, military retired pay $30,000 and a $6,000 survivor annuity give $56,000.
• ok_gross_income.yaml: wages $10,000, military retired pay $15,000 and a $2,000 survivor annuity give $27,000.
• nm_low_income_comprehensive_tax_rebate.yaml and ok_stc.yaml: the 2025 couple above has $75,000 of modified gross income and gross income, six NM rebate exemptions, and no NM rebate or OK sales tax relief credit (149 and 80 without the pay).

Locally, the NM modified gross income, NM rebate and NM child day care files, and the OK gross income, sales tax credit and property tax credit files, all pass at 93109b6. The two credit cases were added after review and are checked in CI.

Not included

The Kansas disabled veteran exemption fix the same check recommended is in Ziming's #10768.

axiom: TheAxiomFoundation/rulespec-us#2146 queued (New Mexico § 7-2-2(L)(9), (11)); TheAxiomFoundation/rulespec-us#2147 queued (Oklahoma OAC 710:50-15-96(c))

🤖 Generated with Claude Code

https://claude.ai/code/session_01LqCGPgxDukji8Bhs57c5rH

[hua7450]

Thanks, David. The policy change is right: New Mexico's modified gross income (NMAC 3.3.1.10 and the 2025 PIT-RC instructions) and Oklahoma's gross household income (OAC 710:50-15-96(c), line 6 of Forms 538-S and 538-H) both count pensions and annuities whether or not they're taxed, which includes military retired pay and survivor annuities. military_retirement_income doesn't overlap any other listed source, and the change reaches every credit that reads these incomes (the NM low income comprehensive tax rebate, property tax rebate and child day care credit; the OK sales tax relief and property tax credits). Approving, with two reference fixes to make before merge.

Before merge

1. New Mexico reference, page and duplicate. In modified_gross_income.yaml, the new entry cites NM_PIT_RC_INST.PDF#page=10, but "an annuity, pension, retirement pay" is on physical page 2 (the "If you received any of the following" table); page 10 is the medical care and child income tax credits. The same PDF is also already listed at #page=4 (line 11). Please replace the two PIT-RC entries with one:

       - title: "2025 PIT-RC instructions, modified gross income (an annuity, pension, retirement pay; line 5 pensions and annuities; line 11 estate or trust) #page 2,4"
         href: https://taxsim.nber.org/historical_state_tax_forms/NM/2025/NM_PIT_RC_INST.PDF#page=2

2. Oklahoma reference for line 6. The new comment in gross_income_sources.yaml cites Form 538-S line 6, but the metadata entry points to 511-Pkt.pdf#page=51 ("lines 9 to 14"). Line 6 and the "taxable and nontaxable gross income" heading are on physical page 50. Something like:

       - title: "2025 Form 511 packet, Form 538-S, Part 3 (taxable and nontaxable gross income, lines 1 to 14; line 6 other pensions and annuities) #page 50-51"
         href: https://oklahoma.gov/content/dam/ok/en/tax/documents/forms/individuals/current/511-Pkt.pdf#page=50

Optional

• Neither new case checks a credit, so the $152 NM rebate and $80 OK sales tax relief losses in the PR body aren't pinned. One case with ok_stc or nm_low_income_comprehensive_tax_rebate as an output, for a military retiree near the limit, would lock that in.

[DTrim99]

@hua7450 Thanks. I pushed all three in d26d228:

1. New Mexico reference: the two PIT-RC entries are now one, using your title, with the href at #page=2. Page 2 has "an annuity, pension, retirement pay", page 4 has lines 5 and 11, and page 10 is the medical care and child income tax credits, as you said.
2. Oklahoma reference: Form 538-S Part 3 now points at page 50 (line 6 and the "taxable and nontaxable gross income" heading), with the title covering pages 50-51.
3. Credit cases: I added a 2025 couple, both 67, with $45,000 of military retired pay and $30,000 of Social Security to nm_low_income_comprehensive_tax_rebate.yaml and ok_stc.yaml. Each case asserts $75,000 of income and a credit of 0. New Mexico also asserts six rebate exemptions. Without the pay, the NM rebate would be $149 and the OK credit $80.

The body's New Mexico figure is now the 2025 amount, $149, instead of $152.