WILLIAM DONALD SCHAEFER, Governor Ch. 554

JANUARY 1, 1974 BEARS TO THE NUMBER OF CALENDAR YEARS OF ACTIVE
PARTICIPATION BY THE EMPLOYEE IN THE PLAN.

SECTION 2. AND BE IT FURTHER ENACTED, That the Laws of
Maryland read as follows:

Article - Tax - General

10-205.

[(d) (1) In this subsection, "Internal Revenue Code" means
the Internal Revenue Code of 1954, as amended through 1985.

(2) The addition under subsection (a) of this section
includes from a lump sum distribution claimed as a deduction
under § 402(e)(3) of the Internal Revenue Code and reduced by the
minimum distribution allowance under § 402(e)(1)(D) of the
Internal Revenue Code:

(i) the ordinary income portion as defined
under § 402(e)(4)(E) of the Internal Revenue Code; and

(ii) 40% of the capital gains portion, as
defined in § 402(a)(2) of the Internal Revenue Code, to the
extent that the portion is treated as ordinary income.]

(D) THE ADDITION UNDER SUBSECTION (A) OF THIS SECTION
INCLUDES, TO THE EXTENT NOT INCLUDED IN FEDERAL ADJUSTED GROSS

INCOME, 40% OF THE CAPITAL GAINS PORTION OF A LUMP SUM

DISTRIBUTION AS DEFINED IN § 402(A)(2) OF THE INTERNAL REVENUE
CODE EFFECTIVE AS OF DECEMBER 31, 1986, AND THE BALANCE OF THE
LUMP SUM DISTRIBUTION AS DEFINED UNDER THE INTERNAL REVENUE CODE

REDUCED BY THE MINIMUM DISTRIBUTION ALLOWANCE UNDER §

402(E)(1)(C) OF THE INTERNAL REVENUE CODE.

(D) (1) IN THIS SUBSECTION, "LUMP-SUM DISTRIBUTION",
"MINIMUM DISTRIBUTION ALLOWANCE", AND "TOTAL TAXABLE AMOUNT" HAVE
THE MEANINGS STATED IN § 402(E) OF THE INTERNAL REVENUE CODE.

(2)  THE ADDITION UNDER SUBSECTION (A) OF THIS SECTION
INCLUDES THE AMOUNT BY WHICH THE TOTAL TAXABLE AMOUNT OF A
LUMP-SUM DISTRIBUTION EXCEEDS THE SUM OF:

(I)  60% OF THE CAPITAL GAINS PORTION OF THE
TOTAL TAXABLE AMOUNT; AND

(II)  THE MINIMUM DISTRIBUTION ALLOWANCE.

(3)  FOR PURPOSES OF THIS SUBSECTION, THE CAPITAL
GAINS PORTION OF THE TOTAL TAXABLE AMOUNT IS DETERMINED BY
MULTIPLYING THE TOTAL TAXABLE AMOUNT BY A FRACTION:

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