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Tax Reform: Not a Nickel-and-Dime Issue

Jul 14, 2016, 10:36 AM
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Summary : Since January, the Ways and Means Committee in the House of Representatives and the Finance Committee in the Senate have ...
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Date : Apr 10, 2013, 06:56 AM

Since January, the Ways and Means Committee in the House of Representatives and the Finance Committee in the Senate have been working to assemble a package of tax reforms. The IAFC has been actively highlighting several important fire service-related tax issues to include in this comprehensive tax-reform legislation. However, the fire service needs you to contact your representative and senators to let them know how important these tax issues are to your department.

The first tax issue Congress needs to address is passing the Volunteer Responder Incentive Protection Reauthorization, S.501 (VRIPRA). Since the Volunteer Responder Incentive Protection Act expired in 2010, the IRS has considered incentives given to volunteer firefighters and EMTs as taxable income. Everything from job shirts to local tax waivers, and even recognition dinners, can be considered taxable income.

VRIPRA will protect the first $600 of incentives that a volunteer receives in a year from being considered taxable income by the IRS. Senators Chuck Schumer (D-N.Y.) and Susan Collins (R-Maine) have introduced VRIPRA in the Senate; however, there isn’t yet a version of VRIPRA in the House. The IAFC is working with members of the House to encourage reintroduction of VRIPRA in the House.

The second issue before Congress is the Fire Sprinkler Incentive Act. One of the most effective lifesaving tools at a fire is a working fire-sprinkler system. Recent data from the NFPA shows sprinkler systems can reduce fire death rates by 86%. Since 2003, nearly 30,000 people have been killed in fires in the United States; sprinkler systems can easily bring this number down.

While the effectiveness of fire-sprinkler systems is widely known, the cost of retrofitting an existing building with a sprinkler system is often prohibitively high. But as we saw at the Station Nightclub fire in 2003 and Brazil's KISS nightclub fire earlier this year, older, high-occupancy buildings need sprinkler systems most.

The Fire Sprinkler Incentive Act will allow owners of small- and medium-rise buildings to classify a fire-sprinkler system as a Section 179 deduction and deduct the system’s cost from their income taxes. Owners of high-rise buildings, however, will see help through a different tax mechanism; the Fire Sprinkler Incentive Act will accelerate the depreciation schedule of a sprinkler system from 29 years to 15. The IAFC is working with members of both the House and the Senate to encourage introduction of the Fire Sprinkler Incentive Act.

The third issue is the Volunteer Firefighter Fairness Act. Historically, fire departments classified their volunteers as independent contractors for the purposes of taxation and issued them a Form 1099 to declare the incentives they receive. However, starting in the early 2000s, various IRS offices around the United States began requiring fire departments to classify their volunteers as employees and issue them a Form W-2 to declare the incentives they receive.

Issuing a volunteer a Form W-2 creates an important distinction that could lead to volunteers qualifying for a pension and other employee benefits, depending on state laws. Additionally, the process of issuing a Form W-2 necessitates a very thorough and burdensome process that may be well beyond the capacity of small volunteer fire departments.

The Volunteer Firefighter Fairness Act would allow fire departments to choose whether to classify their volunteers as an employee or an independent contractor, depending upon an individual volunteer's level of service, fire department resources and applicable state laws. The IAFC is pushing for the reintroduction of the Volunteer Firefighter Fairness Act in the current Congress.

As a leader in the fire service, it’s imperative that you’re actively involved in shaping the future of the fire service through these important issues. The best way to get involved is to use the resources listed on the IAFC's Government Relations webpage and contact your members of Congress to ensure your voice is heard.

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