Is there any rollover that is not a rollover under any State’s tax law?

A State might have an income tax law that does not follow the US Internal Revenue Code.

Is anyone aware of a State’s tax law that would treat as not an income-free rollover a transaction or an amount treated as rolled over for Federal income tax purposes?

Today, I’m writing my updates of two chapters—Beneficiary Designations and Domestic Relations Orders—in Governmental Plans Answer Book. In that book and others, when I write a fictional example about State law I use the State of Anxiety, the State of Confusion, the State of Disarray, and the State of Goodness. (The examples often point out something mainstream “ERISA” practitioners might miss.)

Because Pennsylvania’s personal income tax law is not based on the US Internal Revenue Code, I checked it first. A distribution reported with a rollover code on the Form 1099-R is treated, at least in processing, as not counting in compensation income.

Does any State (that has an income tax) have law about rollovers that differs from Federal income tax law?

I am not aware of any state that would treat a federal-tax-free rollover as state-taxable.

A nuance to consider is a rollover distribution from non-Roth sources to a Roth source or Roth IRA could have a taxable amount reported in Box 2a on a 1099R with a rollover code.  I expect that if there is an amount reported as taxable, many if not all states would also consider it taxable.  I think - but haven't confirmed - that if this occurs in Pennsylvania and the individual is not over 59 1/2, PA will tax it.

Paul I, you raise a nice point on which Pennsylvania law might be unclear.

But if Pennsylvania law counts in compensation income any portion of the Federal income that results from a non-Roth to Roth rollover within an employer-sponsored plan, the distributee gets cost recovery up to the sum of her previously Pennsylvania-taxed contributions.

Further, there might be an interpretation that nothing of the Federal income that results from a non-Roth to Roth rollover within an employer-sponsored plan counts in Pennsylvania compensation income if the whole of that rollover is allocable to previously Pennsylvania-taxed contributions.

Pennsylvania’s Revenue department has unofficially communicated an explanation:

“If a distribution from an IRA was received before age 59½ and retiring, and [the distributee] rolled the entire distribution (100 percent) into a Roth IRA directly or within 60 days, the [rolled-over] distribution is not taxable income for Pennsylvania purposes. If the entire distribution was not rolled into another IRA, Pennsylvania-taxable income must be reported to the extent the distribution exceeds your contributions.”

https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Gross-Compensation.aspx

Such an interpretation might be logically consistent with recognizing that such a conversion-to-Roth rollover, even if it results in income for Federal income tax purposes, is not for Pennsylvania personal income tax purposes an early distribution that pays or delivers compensation income to the continuing participant.

And Pennsylvania should treat a conversion-to-Roth rollover within an employer-sponsored plan no less favorably than Pennsylvania treats a conversion-to-Roth rollover within an individual’s IRAs.

https://revenue-pa.custhelp.com/app/answers/detail/a_id/1470/kw/rollover%20AND%20Roth

22 hours ago, Peter Gulia said:

If the entire distribution was not rolled into another IRA, Pennsylvania-taxable income must be reported to the extent the distribution exceeds your contributions.”

I used to live in PA and have posited* that a lump sum shouldn't be taxable in PA, except for the amounts in excess of the contributions made becaue they were previously taxed.  I seriously doubt many people know this and/or have the records to establish the "cost basis".  

* Most colleagues disagreed, but I think I am right on this.

For Pennsylvania’s personal income tax, a retirement plan’s distribution—if not treated as an excludable old-age retirement benefit—counts in compensation income only after the distributee recovers her previously taxed contributions.

61 Pa. Code § 101.6(c)(8)(iii) https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/061/chapter101/s101.6.html&d=reduce

You forgot the State of Denial, not to be confused with the one in the Egypt, the State of De Nile.