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Committee passes narrow tax-fix for line-of-duty disability benefits for police and firefighters
Summary
Senate Bill 316 would create a statutory line-of-duty disability benefit for municipal police and firefighters to preserve federally tax-free treatment for a limited period; the committee passed the bill in executive action after proponents described no fiscal impact to retirement trusts.
The Senate Business and Labor Committee voted to pass Senate Bill 316, a narrowly drawn change to Montana pension statutes that creates a line-of-duty disability benefit for members of the municipal police and firefighters' retirement systems so those payments can be reported as tax-free under an existing federal private letter ruling.
Sponsor Daniel Zolnikov said the change is procedural and limited in duration because forthcoming federal law (SECURE Act provisions) will address the issue within a year or two. "This is just to make this a tax free versus federally taxable pension for those injured in the line of duty," he said, and proponents including the Public Employees Retirement Administration and the Montana Police Protective Association told the committee the change would mirror existing disability formulas and have no fiscal impact on trust funds.
Multiple proponents described personal cases of officers injured in the line of duty and said the measure provides temporary tax relief to affected members and families while federal guidance is pending. The committee moved the bill into executive action and approved it on a voice vote, recording a proxy for one absent member. The bill will now advance to the Senate floor.
Next steps: SB 316 will be placed on the Senate calendar for floor consideration; administrative guidance will follow from the retirement administration for reporting to IRS and affected members.
