Volunteer firefighter LOSAPs in New York are governed by the General Municipal Law (GML). Article 11-A of the ​GML contain the relevant sections (214 through 219-a) that authorize volunteer firefighter LOSAPs. Most attention is paid to the sections that provide the detail on establishing a plan, the point system, and the benefits that can be provided - those are clearly important parts of the law. What is often overlooked is the very first section - section 214. This section is entitled "Purpose" and the text is as follows: 

There are three takeaways from this section of statue:

• Section eighteen (18) of Article one (1) of the constitution basically states that the legislature can enact laws to provide for the protection of safety of the lives, health and safety of employees and to also provide compensation for injuries or upon the death of an employee. It appears to only deal with compensation for injuries or death of employees, which is curious as the LOSAP provides direct payments to volunteers, not just in the event of death or injury (disability). Regardless, referencing this section of the constitution seems to establish the authority under which the legislature created Article 11-A.
  
  
• The relationship between the sponsoring municipality and the volunteer firefighter is that of an employer and employee. This ended up being an important arguing point for the Equal Employment Opportunity Commission (EEOC) lawsuits for age discrimination.
    
• The final sentence in 214(1) references section seven (7) of article five (5) of the constitution. Here is the relevant text of that section of the constitution:
  
  (a) After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired.
  
  In other words, the statute is clearly stating that the benefits provided by a LOSAP are not constitutionally guaranteed like the retirement system is. The implication is that LOSAP benefits could be diminished or impaired, or perhaps even eliminated or abolished completely. The term "abolish" is used in section 216 of the GML. 

This last bullet point is an important one in understanding the nature of LOSAP, and helps to inform and clarify some of the remaining parts of the statute. These will be explored in future posts.

It has just recently come to our attention that the National Volunteer Fire Council (NVFC) sought clarification from the Internal Revenue Service (IRS) about the application of the Volunteer Responder Incentive Protection Act (VRIPA) to LOSAP. Here is a link to the article on the NVFC website, which summarizes the response, as well as a link to the actual response from the IRS:​

On December 21, 2020, Congress made VRIPA a permanent part of the Internal Revenue Code. The language of this Act is found in Section 139B of the Code. In summary, it allows a volunteer to exclude from gross taxable income any "qualified payments" received from a State or political subdivision for services rendered as a member of a volunteer emergency response organization. The amount of the qualified payments that can be excluded from gross taxable income for any taxable year cannot exceed $50 multiplied by the number of months during such taxable year that the taxpayer performed the services. For example, if an individual served as a volunteer firefighter for all 12 months of calendar year 2021, that individual could exclude from gross taxable income up to $600 (12 x $50) of any qualified payments received during 2021.

The important detail for the purposes of this post is that the service must be performed, and the payment must be received, during the same calendar year.

In response to the question about the applicability of VRIPA to LOSAP, the IRS letter states: 

Payments under a length of service award plan for a taxable year are generally provided for qualified services performed prior to the taxable year.

Although the IRS response did not include a definite statement that payments from a LOSAP do not qualify for exclusion from gross income under VRIPA, it clarified that generally speaking payments from a LOSAP are received in a tax year after the year in which the service is rendered. Here in New York State, LOSAP is administered on a calendar year. As such, this statement made by the IRS is always true - when a volunteer firefighter performs service and earns 50 points during a calendar year, that volunteer receives the cash benefit(s) for that service in a future tax year (sometimes many tax years into the future). In other states it could be possible (though we would think still an unusual circumstance) and the IRS response leaves that possibility open.

Therefore, payments from a New York State LOSAP cannot be excluded from federal gross income under VRIPA.

This blog post is not intended to provide specific tax advice, and nothing contained herein constitutes investment, legal, tax or other advice.  Individuals reading this post are urged to consult their own tax, legal, and other advisors regarding their personal circumstances and the consequences of participation in any LOSAP.

Firefly Admin Inc. is guided by six core principles – serve, trust, value, teach, collaborate, and grow. You can read more about what these mean to us at www.fireflyadmin.com/core-principles/
 
This past week Firefly has grown with the addition of Connie Tyrrell to the Firefly team! Not only have we grown in number but in knowledge and expertise. Most importantly, Connie represents and practices all six of our core principles, making her a natural fit for our team. She joins our current group of Donna Armistead, Tony Fiorillo, Tony Hill, Lisa Leahey, and Craig Relyea, all of whom are integral parts of Firefly Admin Inc. and have demonstrated their expertise and commitment to these ideals.
 
Connie has significant experience with non-profit accounting, ranging from a large non-profit with a significant budget and multiple service areas, to smaller organizations where she’s donated her time and expertise. She holds an accounting certificate from Hudson Valley Community College.
 
At Firefly, we all do what it takes to get the overall job done, though we have specific concentrations. Connie will be taking over the Firefly bookkeeping, which means invoices will be emailed from Connie starting soon. She will also be assisting with reconciling the program trust funds and processing benefit payments. As she becomes more integrated in our process, she will become more and more involved in all aspects of LOSAP administration and the services we provide.
 
Welcome aboard, Connie!