U.S. SENATE – During National Police Week, U.S. Senators Steve Daines and Jon Tester 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.
The legislation was inspired by the story of the now retired Billings police officer, Ladd Paulson. In 2002, Mr. Paulson was hit by an impaired driver while he was conducting a routine traffic stop on his motorcycle. He survived the near-death experience, but was left with severe injuries. After the accident, the Internal Revenue Service (IRS) audited Mr. Paulson for five years in a row after he did not file taxes on treatment for his injuries. To this day, Mr. Paulson still receives letters from the IRS.
“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. These heroes deserve better and this bill will make that possible.”
“Montana’s first responders put their lives on the line to protect our communities, and unfortunately some have the scars to prove it,” Tester said. “Folks who were injured in the line of duty and receive disability should get every dollar of that, regardless of their age. They’ve fought for us and now I’ll fight to make sure the IRS doesn’t nickel and dime the folks who bravely served our communities.”
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. 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.
Statements of Support:
“On behalf of critically injured law enforcement officers and first-responders across the country, we would like to thank Senator Daines, Senator Coons and Senator Casey for sponsoring the Putting First-Responders First Act. This is important legislation on behalf of those who are permanently disabled serving local communities across the country.” – Heidi Paulson, Wife of Ladd Paulson, an injured retired policeman from the Billings Police Department; author of Dependence Day; member of Wounded Officers Initiative
“The Montana Sheriffs and Peace Officers Association supports ‘Putting Our First Responders First Act of 2018’ and thanks Senator Daines for his long-standing support of law enforcement. This bill goes a long way in helping the families of officers that have been hurt in the line of duty.” – Erin McGowan, Montana Sheriffs and Peace Officers Association
“On behalf of more than 3,000 elected sheriffs nationwide, NSA is proud to support the Putting our First Responders First Act. Men and women in law enforcement demonstrate their dedication and strength to this country by putting their lives on the line every day on behalf of their communities. The Putting our First Responders First Act is an appropriate way to honor and respect the individuals who protect and secure not only our communities, but our entire country.” – Jonathan Thompson, Executive Director of the National Sheriffs’ Association
“On behalf of the Montana Retired Police Officers Association, we are very happy to hear that Sen. Daines has introduced a bill to assist police officers critically injured in the line of duty. We are thrilled that those officers that need assistance due to severe injury will now have the opportunity to receive help. We want to thank Sen. Daines for his support.” – Jerry Williams, President of the MT. Retired Police Officers Association
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