Issue 6. Are retirement benefits received from the Federal Employees Retirement System (FERS) that are attributable to service as a federal law enforcement officer fully subtractable under subsection (11)?

Answer: Yes, benefits received exclusively for service as a federal law enforcement officer will generally qualify for the unlimited public retirement income deduction authorized under subsection 30(11). Before PA 4, federal retirement benefits were deductible under 30(1)(f)(i) but were subject to the limitations and restrictions in subsection 30(9).

Though the language of subsection 30(11) limits that benefit to certain retired state and local law enforcement and public safety employees, the intergovernmental tax immunity doctrine applies and allows federal law enforcement and public safety employees with retirement income to qualify for the unlimited deduction of public retirement income.

The intergovernmental tax immunity doctrine is codified in a federal statute, 4 USC §111, in which the United States Congress consented to state taxation of federal employees as long as the tax did not discriminate against federal employees on the basis of the source of the employees’ compensation. The United States Supreme Court has interpreted the doctrine to bar unequal tax treatment of similarly situated federal and state employees. See Davis v Mich Dep’t of Treasury , 489 US 803, 813 (1989), and Dawson v Steager, W Va State Tax Comm’r , 139 S Ct 698 (2019).

There are no substantive differences between law enforcement retirees described in subsection (11) and those federal retirees who worked in substantially similar federal jobs. Therefore, under the intergovernmental tax immunity doctrine, federal retirees receiving retirement income from work earned in jobs similar to state and local public police or fire department employees, state troopers or police sergeants, or corrections officers working in facilities managing adult prisoners, will qualify for the subsection (11) retirement income deduction.