Arkansas Finance Department Determines Income Tax Treatment of Disability Retirement Benefits for Firefighters, Police Officers

The Arkansas Department of Finance and Administration (DFA) Feb. 22 determined in a letter ruling the tax treatment of police officers’ and firefighters’ disability retirement benefits for individual income tax purposes. A state agency sought to renew a previous opinion on the taxability of the benefits. The DFA previously opined that the income tax exemption for disability retirement benefits also extended to compensation or benefits paid to the survivor or survivors of a deceased member. The DFA explained: 1) new designations under Arkansas law established disability severity levels of “catastrophic,” “hazardous,” and “ordinary;" 2) the amount of the disability annuity ...