On May 22, 2015, President Obama signed into law H.R. 606, the "Don't Tax Our Fallen Public Safety Heroes Act" (Act). The Act amends Section 104(a) of the Internal Revenue Code (Code) to provide that certain compensation paid to public safety officers and their dependents due to death or disability in the line of duty is not subject to federal income tax. Specifically, the following amounts are excluded from gross income:
- Death benefits paid by the Bureau of Justice Assistance (a component of the U.S. Department of Justice) (BJA) to survivors of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty;
- Disability benefits paid by the BJA to a public safety officer who has become permanently and totally disabled as the direct and proximate result of a personal injury sustained in the line of duty; and
- Benefits paid under a program established under the laws of any state that provides compensation for surviving dependents of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty. However, this tax exclusion does not apply to benefits that would have been payable if the public safety officer's death occurred other than as the direct and proximate result of a personal injury sustained in the line of duty.
- The Act does not define “public safety officer.” However, this term is defined under Code Section 101(h), discussed below, and includes an individual serving a public agency in an official capacity, with or without compensation, as a law enforcement officer; as a firefighter; as a chaplain; as a member of a rescue squad or ambulance crew; or as an employee of a state or local emergency management or civil defense agency performing official duties in connection with Federal Emergency Management Agency related to major disasters or emergencies or duties that are hazardous.
These tax exclusions for public safety officers and their dependents are in addition to the following potential tax exclusions:·
- Code Section 101(h): Excludes from gross income a survivor annuity paid under a governmental qualified plan to the surviving spouse, former spouse or child of a public safety officer killed in the line of duty to the extent such annuity is attributable to the officer's service as a public safety officer.
- Code Section 101(a)(1): Excludes from gross income amounts received under workmen’s compensation acts (or statutes in the nature of workmen’s compensation acts) as compensation for personal injuries or sickness. Thus, this exclusion applies to compensation (lump sum or annuity) payable as a result of an injury or death incurred in the course of employment (i.e., duty-related). Treasury regulations provide that this tax exclusion does not apply to the extent that the amounts are determined by reference to the employee’s age, length of service, or prior contributions.