Volunteer R&R Tax Exemption Bill Reduces Risk of IRS Audits, Fines

July 28, 2015

The Volunteer Responder Incentive Protection Act (VRIPA) exempts all property tax benefits and up to $600 per year of any other type of benefit that a volunteer emergency responder receives as a reward for their service from being subject to federal income taxes, including payroll taxes. The Senate version of the bill, S. 616, was introduced on February 27 by Senators Charles Schumer (D-NY) and Susan Collins (R-ME). The House version, H.R. 2752, was introduced on June 12 by Representatives John Larson (D-CT) and David Reichert (R-WA).

The obvious impact from passage of VRIPA would be that individual volunteers would pay less (and in many cases no) tax on service-related benefits. That means more money in the pockets of volunteers, which enhances the incentive value of recruitment and retention benefits. Most volunteers view benefits as reimbursement for personal expenses that they incur in the course of their service – responding to emergencies in their personal vehicles, replacing clothing and boots that are damaged during responses, and training – and resent having to pay any amount to the federal government. VRIPA would let volunteers keep their money.

A less recognized but equally significant benefit of VRIPA would be for agencies that provide benefits. Under current law, agencies are required to report the benefits that they provide to their volunteers to the IRS. Many volunteer departments are unaware of this and do not report anything. Others report income to the IRS using a 1099 form as one would report a payment to a contractor. Still others report income using a W-2 form as one would report a wage or a salary to an employee.

Agencies that do not report or improperly report benefits are at risk of being audited and even fined by the IRS. Within the past year the National Volunteer Fire Council (NVFC) has been contacted by fire departments in two different states that were each fined more than $100,000 for failure to properly report volunteer benefits. Passage of VRIPA would mean that agencies that offer minor benefit amounts would no longer be required to report anything to the IRS and therefore would not have to worry about IRS audits or fines.

VRIPA is one of several pieces of federal legislation boosting volunteer recruitment and retention that the NVFC is working to get passed. According to the National Fire Protection Association the value of services donated by volunteer firefighters alone is worth approximately $140 billion annually. Unfortunately, fire and EMS agencies are finding it increasingly difficult to recruit and retain the next generation of volunteers. Heightened training and certification requirements have made volunteer  emergency response an extraordinarily time-consuming activity, even as a variety of shifting societal factors have left fewer young people with less free time available in communities traditionally served by volunteers.

The NVFC invites you to use our Engage Action Center to contact your U.S. Representative and Senators to ask them to co-sponsor VRIPA and other federal R&R bills.