Incentives Watch: Fighting Fire With Tax Credits

Although most people probably think of economic development or job creation when they think of tax credits, that is not always the case. States also address civic problems through the use of tax credits. A perfect example of states addressing important community needs is credits for volunteer firefighters and emergency responders.

In 2015, 70 percent of all firefighters in the U.S. were volunteers, according to an April 2017 National Fire Protection Association fact sheet. During that timeframe, 19,762 of the approximately 29,727 fire departments in the country were entirely volunteer departments, according to the fact sheet.

These statistics illustrate that a large portion of the nation’s firefighters work on a volunteer basis. However, recruitment and retention of volunteer firefighters is increasingly becoming a major problem. 

For example, Williamson County in Tennessee has only succeeded in recruiting 25 percent of their goal of 1,000 volunteer firefighters, as reported by the Tennessean. North Carolina and Wisconsin also illustrate the ongoing firefighter recruitment issue facing states, as both states are also working to address volunteer shortages.

Similar recruitment problems led Pennsylvania to enact a law which allows municipalities to establish tax credits for volunteer firefighters in 2016, according to the Public Opinion. The legislation permits municipalities to offer volunteer firefighters a credit against their earned income tax and property taxes. 

Currently six states offer tax credits to volunteer firefighters and/or emergency responders—Delaware, Iowa, Nebraska, New York, Oklahoma, and the aforementioned Pennsylvania.

These income tax credits, normally ranging from $100 to $400 per year, provide some economic incentive for individuals to volunteer as firefighters in addition to working their normal day jobs. 

However, even for states with volunteer firefighter credits, an end to volunteer shortages may not be on the horizon. In New York, a state which offers a credit for volunteer firefighters, at least one county feels that a larger tax credit should be offered to help deal with the shortage. For this reason the Board of Supervisors of Madison County voted to back a new push for the state to increase the volunteer firefighter credit from $200 per year to $500 per year, according to the Rome Sentinel.  

For now at least, it remains to be seen if tax credits, like those offered in New York and Pennsylvania, will be enough for states to change the tide of volunteer firefighter recruiting.

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are tax credits a useful way to address civic needs like increasing the number of volunteer firefighters?

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