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[Senate Report 114-26]
[From the U.S. Government Publishing Office]

                                                        Calendar No. 49
114th Congress     }                                   {         Report
                                 SENATE
 2d Session        }                                   {         114-26

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             DON'T TAX OUR FALLEN PUBLIC SAFETY HEROES ACT

                                _______
                                

                 April 14, 2015.--Ordered to be printed

                                _______
                                

               Mr. Hatch, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 916]

    The Committee on Finance, having considered an original 
bill, S. 916, to amend the Internal Revenue Code of 1986 to 
exclude certain compensation received by public safety officers 
and their dependents from gross income, having considered the 
same, reports favorably thereon without amendment and 
recommends that the bill do pass.

                                CONTENTS

                                                                   Page
 I. LEGISLATIVE BACKGROUND............................................1
II. EXPLANATION OF THE BILL...........................................2
        A. Exclusion of Certain Compensation Received by Public 
            Safety Officers and Their Dependents (sec. 2 of the 
            bill and sec. 104(a) of the Code)....................     2
III.BUDGET EFFECTS OF THE BILL........................................3

IV. VOTES OF THE COMMITTEE............................................4
 V. REGULATORY IMPACT AND OTHER MATTERS...............................4
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED.............6

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, having considered S. 916, the 
``Don't Tax Our Fallen Public Safety Heroes Act,'' to amend the 
Internal Revenue Code of 1986 to exclude certain compensation 
received by public safety officers and their dependents from 
gross income, reports favorably thereon without amendment and 
recommends that the bill do pass.

Background and need for legislative action

    Background.--Based on a proposal recommended by Senator 
Toomey, the Committee on Finance marked up original legislation 
(a bill to amend the Internal Revenue Code of 1986 to exclude 
certain compensation received by public safety officers and 
their dependents from gross income) on February 11, 2015, and, 
with a majority present, ordered the bill favorably reported. 
Related bills include--
     In the 114th Congress, S. 322 (Senators Ayotte, 
Shaheen, Blunt, Capito, Cardin, Coons, and Toomey) and S. 279 
(Senator Ayotte); and
     In the 113th Congress, S. 2912 (Senators Ayotte, 
Shaheen, and McConnell, and passed by the Senate on September 
18, 2014); S. 2377 (Senators Ayotte, Shaheen, and McConnell); 
and S. 2355 (Senators Ayotte and Shaheen).
    Need for legislative action.--Under longstanding tax law, 
benefits paid as compensation for an employee's injury or death 
on the job are excluded from income. This exclusion applies in 
the case of payments made with respect to a public safety 
officer who is killed or becomes disabled in the line of duty. 
However, because the tax rules do not address every specific 
Federal or State program under which such payments are made, 
uncertainty exists as to the tax treatment of payments under a 
Federal program of the Bureau of Justice Assistance and similar 
State programs. The bill removes this uncertainty.

                      II. EXPLANATION OF THE BILL

A. Exclusion of Certain Compensation Received by Public Safety Officers 
 and Their Dependents (sec. 2 of the bill and sec. 104(a) of the Code)

                              PRESENT LAW

    Amounts received under a workmen's compensation act as 
compensation for personal injuries or sickness are excluded 
from gross income.\1\ This exclusion applies to amounts 
received by an employee under a workmen's compensation act, or 
under a statute in the nature of a workmen's compensation act 
that provides compensation to employees for personal injuries 
or sickness incurred in the course of employment, as well as to 
compensation paid under a workmen's compensation act to the 
survivor or survivors of a deceased employee.\2\
---------------------------------------------------------------------------
    \1\Sec. 104(a)(1). All statutory references are to the Internal 
Revenue Code of 1986 (``Code'') unless otherwise indicated.
    \2\Treas. Reg. sec. 1.104-1(b).
---------------------------------------------------------------------------
    Under the Omnibus Crime Control and Safe Streets Act of 
1968, if the Bureau of Justice Assistance (``BJA''), an agency 
of the U.S. Department of Justice, determines that a public 
safety officer has died as the direct and proximate result of a 
personal injury sustained in the line of duty, the BJA will pay 
a monetary benefit to surviving family members or other 
beneficiary (``public safety officer survivor's benefit'').\3\ 
In addition, if the BJA determines that a public safety officer 
has become permanently and totally disabled as the direct and 
proximate result of a personal injury sustained in the line of 
duty, the BJA will pay a monetary benefit to the public safety 
officer (``public safety officer disability benefit'').\4\
---------------------------------------------------------------------------
    \3\42 U.S.C. sec. 3796(a).
    \4\42 U.S.C. sec. 3796(b).
---------------------------------------------------------------------------
    With respect to payments made by the Law Enforcement 
Assistance Administration (a previous agency of the U.S. 
Department of Justice) under the Public Safety Officers' 
Benefits Act of 1976 to a surviving dependent of a public 
safety officer who died as the direct and proximate result of a 
personal injury sustained in the line of duty, the Internal 
Revenue Service has ruled that the payments are made under a 
statute in the nature of a workmen's compensation act and are 
thus excluded from gross income.\5\
---------------------------------------------------------------------------
    \5\Rev. Rul. 77-235, 1977-2 C.B. 45.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee wishes to make it clear that benefits paid 
solely as a result of a public safety officer's death or 
disability in the line of duty are excluded from income.

                        EXPLANATION OF PROVISION

    The provision amends the Code to provide a specific 
exclusion from gross income for amounts paid (1) by the BJA as 
a public safety officer survivor's benefit or public safety 
officer disability benefit, or (2) under a State program that 
provides monetary compensation for surviving dependents of a 
public safety officer who has died as the direct and proximate 
result of a personal injury sustained in the line of duty, 
except that the exclusion does not apply to any amounts that 
would have been payable if the death of the public safety 
officer had occurred other than as the direct and proximate 
result of a personal injury sustained in the line of duty.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment of the 
provision.

                    III. BUDGET EFFECTS OF THE BILL

                         A. Committee Estimates

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 308(a)(1) of the 
Congressional Budget and Impoundment Control Act of 1974, as 
amended (the ``Budget Act''), the following statement is made 
concerning the estimated budget effects of the revenue 
provisions of the ``Don't Tax Our Fallen Public Safety Heroes 
Act'' as reported.
    The bill is estimated to have no effect on Federal budget 
receipts for fiscal years 2015-2025.

                B. Budget Authority and Tax Expenditures

Budget authority

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that no provisions of the bill as reported 
involve new or increased budget authority.

Tax expenditures

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that the revenue provisions of the bill do not 
involve increased or reduced tax expenditures (see statement of 
effect on budget receipts in part A, above).

            C. Consultation With Congressional Budget Office

    In accordance with section 402 of the Budget Act, the 
Committee advises that the Congressional Budget Office has not 
submitted a statement on the bill. The letter from the 
Congressional Budget Office will be provided separately.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, the ``Don't Tax Our Fallen Public Safety 
Heroes Act'' was ordered favorably reported by voice vote on 
February 11, 2015.

                 V. REGULATORY IMPACT AND OTHER MATTERS

                          A. Regulatory Impact

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    The bill clarifies that certain benefits paid solely as a 
result of the death or disability of a public safety officer in 
the line of duty are excluded from income. The provisions of 
the bill are not expected to impose additional administrative 
requirements or regulatory burdens on individuals or 
businesses.
    The provisions of the bill do not impact personal privacy.

                     B. Unfunded Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the tax provisions of the 
reported bill do not contain Federal private sector mandates or 
Federal intergovernmental mandates on State, local, or tribal 
governments within the meaning of Public Law 104-4, the 
Unfunded Mandates Reform Act of 1995.

                       C. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. The staff of the Joint Committee on Taxation has 
determined that there are no provisions that are of widespread 
applicability to individuals or small businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

                                  [all]
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