U.S. SENATE – During National Police Week, U.S. Senators Steve Daines (R-MT), Chris Coons (D-DE) and Bob Casey (D-PA) introduced the bipartisan Putting First-Responders First Act. This legislation would clarify the current tax code to ensure injured first-responders do not have to pay taxes on injury-related compensation. In addition, this bill prevents injury-related compensation from becoming taxable when injured first-responders reach retirement age since their injuries and associated costs remain.
“Our first responders leave home each day not knowing if they will return,” said Daines. “These brave men and women put their life on the line for our safety. It is our duty to make sure they are not unfairly taxed or inappropriately audited by the IRS for the sacrifices they’ve made on our behalf.”
“First responders are dedicated men and women who put themselves at risk on a daily basis in order to protect and serve their communities,” said Coons. “If these men and women are injured while performing their life-saving work, the last thing we should do is tax the benefits that their families receive. That’s why I’m proud to work with Senators Daines and Casey to eliminate a surprise, unfair tax on first responders who are injured in the line of duty.”
“We must do all we can to support our law enforcement officers, firefighters and first responders, this bipartisan legislation works to do just that,” said Casey. “Updating the tax code to prevent the IRS from erroneously taxing the disability-related pension payments of our first responders is a commonsense measure to uphold our promise to the brave men and women who protect and serve our communities each day.”
Since 1985, service-connected disability compensation has been tax-exempt pursuant to Revenue Ruling 85-105. Depending on a first-responder’s years of service and state worker’s compensation regulation, the percentage of total compensation that is service-connected disability compensation can vary.
Oftentimes, IRS auditors are not aware of Revenue Ruling 85-105 and request injured first-responders to pay taxes on the injury-related compensation. Many first-responders themselves, many in the midst of significant life adjustments, are unaware of the Revenue Ruling and unnecessarily pay sizeable tax bills. Codifying the principle of Revenue Ruling 85-105 would clarify that injury-related compensation is, in fact, tax-exempt.
What’s more, injury-related compensation becomes taxable once the first-responder reaches retirement age of 65, although his or her injuries remain and the individual’s retirement compensation level has been limited due to prematurely leaving the workforce.
The Putting First-Responders First Act provides clarification to both IRS employees and first-responders and keep injury-related compensation tax-exempt after retirement age. The Wounded Officer Initiative, National Sheriffs’ Association and Women in Federal Law Enforcement Foundation support the bill.
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