Length of Service Award Tax Deferral H.R. 1893 & S. 1232

(PASSED & SIGNED INTO LAW!)

Sponsored by Rep. Houghton and Sen. D'Amato

Objective: A bill to amend the Internal Revenue Code of 1986 to exclude length of service awards to volunteers performing fire fighting of prevention services, emergency medical services, or ambulance services from the limitations applicable to certain deferred compensation plans.

Overview: Approximately 150,000 volunteer firefighters in about 37 states receive nominal awards under Length of Service Award Programs (LOSAPs) from their government or tax exempt fire districts. The average annual amount of an award is about $250. Volunteers earn awards under a LOSAP while they are performing volunteer services, on the basis of their years of service. However, the awards are not actually paid to volunteers in cash until after they have retired as volunteers.

Similar award programs exist for volunteers performing other emergency medical service, such as rescue personnel and ambulance drivers. Provisions of the current tax law may require volunteers to include their awards in gross income for income tax purposes when the awards are earned, long before the volunteers retire and are actually paid the awards.

H.R. 1893 would provide that awards under LOSAPs and similar programs for volunteers would be includable in gross income only when the awards are actually paid to volunteers, which would be after they retire from performing volunteer services. Similarly, H.R. 1893 would exempt awards under LOSAPs from FICA and Medicare taxation.

Status: Passed by Congress as a provision in the Minimum Wage Bill! This legislation was signed into law on August 20, 1996 and will take affect on September 1, 1996.

Legislative Text Search for Bills H.R.1893 & S.1232 (Search by Bill Number)