09-01-2002, 11:19 PM #1
- Join Date
- Aug 2002
- Brooklyn, CT
Volunteer Property Tax Abatement Taxable???
(This is actually a posting by Dal90...hey Nate, did ya know the firehouse computer has your cookies??? )
BTW, my town doesn't do the tax abatement at this time. We do have a "LOSAP" which essentially is a pension plan and that is approved by the IRS so no current tax liability is incurred (we will be taxed however when we receive the pension payments).
From today's New London (CT) Day (www.theday.com)
Property-tax breaks for local volunteer firefighters explored in wake of IRS ruling
By Claire Bessette - More Articles
Published on 08/31/2002
Local volunteer fire chiefs are researching whether a ruling by the federal Internal Revenue Service in Massachusetts will scuttle new incentive programs in Connecticut that offer the most active volunteer firefighters property-tax breaks for their service.
In the January memorandum, IRS attorney Heather C. Maloy ruled that a Massachusetts program that awarded property-tax breaks to senior citizens who volunteered for community service qualified as “working off” a portion of their tax payments. The residents thus would have to declare the amount of the tax break on their federal income tax forms, and the Massachusetts towns participating in the program would have to pay Social Security taxes on the amount as well.
The ruling surfaced recently in discussions among fire chiefs associations in Connecticut and in trade journals. Several local chiefs said they hadn't heard of the Massachusetts decision until a few days ago, and the New London County Chiefs Association is researching whether it can be applied to local tax abatement ordinances in place in this region for the past two years.
U.S. Rep. John Larson, D-1st District, said if the ruling is extended to apply to volunteer firefighters, he would submit federal legislation next month to make the property-tax abatements exempt from federal taxes.
Fire departments, faced with a shrinking force of volunteers, have been using the tax breaks to entice residents to join and be active members.
In Norwich, dozens of volunteer firefighters in the five volunteer departments qualify for a tax break. According to the city's ordinance enacted in 2000, qualifying firefighters must respond to at least 20 percent of the department's emergency calls and attend at least 20 percent of the training drills or attend equivalent training programs elsewhere to qualify for the property-tax break of up to $1,000.
Edward Martin, chief of the Laurel Hill Volunteer Fire Dept., said he was unaware of the potential tax problem, and neither the city nor his tax accountant has mentioned the potential tax conflict. If the $400 abatement he receives for his vehicle is considered income, the city would have to issue a proof of income form for the money.
When the city enacted the ordinance, membership in the Laurel Hill department had dwindled to the point where the department asked for coverage assistance from the city's paid fire department for daytime calls. Martin said the abatement program helped keep current members active more than it attracted new members. Laurel Hill now has 18 members on the list submitted to the city tax collector. A dozen of those members qualify for at least a partial tax break.
Martin said most volunteers aren't looking for monetary incentives, but the tax breaks help compensate them for the long hours away from their families. For some, the extra $1,000 could put them in a higher tax bracket, negating any incentive.
Frank Blanchard, chief of the Yantic Volunteer Fire Department, said 23 of the 32 volunteers in his department received at least a partial tax break.
Blanchard said the new program brought in about five new members. He said the abatements, in addition to the small pension the city offers to volunteers, help attract new members and keep current members.
Blanchard read about the Massachusetts ruling in a trade publication recently and said it was discussed recently at a New London County Chiefs Associations meeting.
“We're really not receiving a check for $1,000,” Blanchard said.
In the Stonington Borough Fire Department, five firefighters have taken advantage of a plan that offers volunteers who live in the borough and own motor vehicles or homes up to $500 off their borough tax bill. Those taking advantage of the offer have to be certified by the fire chief as being active members.
In the borough, where the tax rate is just 4.5 mills, the rebate can erase a volunteer's annual tax bill. The program has been in effect for two years.
Warden Andrew Maynard said he opposes any attempts to tax the rebates and plans to raise the issue at the next meeting of the Southeastern Connecticut Council of Governments with hopes of getting support from other mayors and first selectmen.
“It's hard enough to get people to serve in emergency services. The least the federal government can do is not take back what we are offering on the local level,” he said
Maynard added that the federal and state governments should consider offering similar tax breaks for volunteer emergency workers.
Bozrah First Selectman Keith Robbins said the town passed an ordinance two years ago that offers volunteers varying levels of property tax breaks depending on their volunteer time. A firefighter who reaches the minimum time commitment and has done all the required training receives a $500 abatement; someone who has gone through advanced firefighter training receives $750, and a firefighter who also has completed emergency medical technician training receives up to $1,000 in a property tax abatement. About 20 firefighters received at least partial abatements last year, Robbins said.
“I don't know how the IRS can consider that as a tax,” Robbins said, “because (it's not a check).”
For the past two years, Waterford Tax Collector Betsy Ritter has been reducing volunteer emergency workers' property taxes by as much as $1,000 a year. Town Attorney Nick Kepple has advised her not to require volunteers to claim the money as income.
Kepple interprets a letter from the IRS that he obtained two years ago as failing to clarify such issues, except to indicate that the money volunteers get need not be considered compensation for town employees. That makes it a gift under $10,000, well below the threshold for being taxed, he said.
“Our interpretation is, volunteers are giving a gift of their time,” he said.
Old Lyme has a tax abatement program for its volunteer fire and ambulance personnel who live in town as well. The $1,000 abatement is given to members who have served and been active for two years. Firefighters and ambulance workers must earn a certain amount of points by responding to calls.
East Lyme is considering such a program for its two volunteer fire departments, Flanders and Niantic. Ron Pringle, chief at Niantic, said that recruitment and retention would become more difficult if the incentive becomes taxable.
Day Staff Writers Joe Wojtas, Patricia Daddona, Karin Crompton, Matthew Malone and Charles Potter contributed to this report.
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