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Bill inspired by former Billings police officer set to pass U.S. Congress

First Responders First Act will guarantee full pensions for disabled officers
Ladd Paulson
Posted at 5:40 PM, Dec 21, 2022

BILLINGS — Somewhere around the middle of the 4,000-plus-page, $1.7 trillion spending bill expected to pass the U.S. Congress this week, you’ll also find the Putting First Responders First Act. At its core, it will allow those injured in the line of duty to keep their full pensions for life.

It sounds simple, but it’s been a very personal, 20-year fight for one Billings couple.

"A Ford pickup coming down Laurel Road at over 55mph basically T-Boned me," former Billings Police Officer Ladd Paulson said.

Paulson doesn’t remember the night that changed his life in 2002 - a traumatic brain injury won’t let him. But he remembers the aftermath.

"I was in a wheelchair for 11 months," he said. "My medical list is three feet tall."

Ladd Paulson hospital
Former Billings police officer Ladd Paulson lays in the hospital after he was severely injured during a traffic stop when he was struck by a pickup truck while on his department motorcycle in 2002.

He tried to go back to work, but his injuries didn’t make it safe. Ladd officially retired on Dec. 10, 2004 - and then he and wife Heidi’s real problems started.

"We got a tax audit that said I owed $11,000 in tax on a $20,000 retirement," he said. "That scared us to death."

The good news was, he didn’t owe that money, thanks to a revenue ruling that makes all disabled first responder pensions exempt from federal taxes. But the Paulsons' problems didn’t stop there.

"Since then, we’ve been audited at least a dozen times," Paulson said.

"It always raises the blood pressure when you get those letters," Heidi added.

Heidi Paulson
Heidi Paulson flips through Dependence Day, a book she wrote in 2010 detailing husband Ladd Paulson's career-ending accident while on patrol for the Billings Police Department.

Luckily, the Paulsons found an accountant that first year that knew the obscure rule, which is not written into the IRS tax code.

"A lot of officers don’t know their disability pensions are not subject to federal withholding," Heidi said. "We talked to a number of officers that chose to pay the tax rather than file and take the exemption because they were more worried about the audit than the tax bill."

"IRS are the scariest three letters in a lot of Americans of lives," Ladd said.

That’s why nearly 20 years ago, Heidi started working on getting the language changed into law. U.S. Sen. Steve Daines. R-Mont., introduced the bill in Congress in 2016, but it never made it out of committee until this year, even with bipartisan support. But now it looks like the long wait is finally over.

"Our brave first responders should never have to endure burdensome taxes and audits on injury-related pay," Daines said in a statement from the U.S. Capitol Wednesday.

"It was really their idea on how to fix this," U.S. Sen. Jon Tester, D-Mont., said. "We took their idea and got it put into the code. That’s the way a democracy is supposed to work, right?”

"Two people can go in there and get things done," Ladd said. "It may take 20 years, but you can get a law changed. You can get a law made."

Ladd and Heidi Paulson at U.S. Capitol
Ladd and Heidi Paulson meet with U.S. Senator Steve Daines (R. - Mont.) to talk about the First Responders First Act, which would guarantee disabled officers their full pensions for life.

If passed, the language will not only become IRS law, but the bill will also eliminate the provision that puts a cap on the exemption until retirement age. It will last a person’s entire life now, a life the Paulsons have used well.

"Something that took so much from Ladd, took a lot from our family," Heidi said, "we were able to use that for something that would help a lot of people."