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HB 1787

Health and Human Resources, Secretary of; review of informed consent for surgeries, report.

2025 Regular Session Introduced by Bobby Orrock

Arkansas HB 1787 would have exempted certain retirement and survivor benefits for qualified law enforcement officers and firefighters from state income tax, starting in 2026.

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Bill Summary · HB 1787

HB 1787 — Summary

Note: The materials provided include multiple, conflicting uses of the bill number “HB 1787” from different jurisdictions and subjects. This summary focuses on the primary legislative text and fiscal analysis in the supplied documents, which describe an Arkansas measure that would amend state income tax law to exempt certain retirement benefits for law enforcement officers and firefighters. Where relevant, I note other inconsistencies in the record.

Purpose

To exempt from Arkansas state income tax certain retirement and survivor benefits received by qualifying law enforcement officers and firefighters, effective for tax years beginning on or after January 1, 2026.

Key provisions

  • Adds a targeted exemption to Ark. Code § 26-51-307(e):
    • Retirement benefits received by retired firefighters (certified municipal or volunteer firefighters and firefighters with the Arkansas National Guard).
    • Retirement benefits received by retired law enforcement officers, defined to include municipal police officers, county sheriffs/deputies, members of the Arkansas State Police, Arkansas Highway Police (Arkansas Department of Transportation), officers of state or local detention facilities, and certain state agency employees engaged in law enforcement duties.
    • Survivor benefits funded by such retirement pay are also exempt.
  • Interaction with existing exemptions:
    • A taxpayer who claims an exemption under this new subsection (e) generally cannot claim the general retirement exemption under subsection (a).
    • If the exemption under subsection (e) is less than $6,000, the taxpayer may claim additional exemption under subsection (a) up to the $6,000 threshold (i.e., the combined exempt amount can reach $6,000).
  • Effective date: tax years beginning on or after January 1, 2026.

Fiscal impact

  • FY2026: estimated General Revenue reduction of $2.5 million.
  • FY2027 and subsequent years: estimated General Revenue reduction of $5.0 million annually.
  • Basis: DFA analysis of Arkansas Local Police and Fire Retirement System (LOPFI) pension withholding data indicating ~10,000 retirees receive ~$213 million in benefits and withheld ~$5 million annually.

Who is affected

  • Directly: retired firefighters and retired law enforcement officers who meet the bill’s definitions (and their survivors receiving benefits).
  • Indirectly: state General Revenue (reduced receipts), tax administrators (need to update forms, instructions, and computer systems), and other retirees who may be affected by the interplay with the $6,000 general exemption.
  • Note: taxpayers with qualifying law enforcement/firefighter retirement amounts over $6,000 could forgo the general $6,000 exemption for other retirement income.

Implementation and administrative notes

  • Department of Finance & Administration must update computer programs, tax forms, instructions, and provide education to staff and the tax community.
  • DFA indicated adequate time for implementation.

Legal considerations

  • DFA legal analysis flagged a potential constitutional challenge under the doctrine of intergovernmental tax immunity (4 U.S.C. § 111) because the exemption applies to state/local/public retirees but not to federal law enforcement/firefighters — potentially discriminatory based on source of payments.
  • Arkansas Supreme Court precedent (Pledger v. Bosnick, 306 Ark. 45 (1991)) is cited as relevant where differential treatment of federal retirees was found unconstitutional.

Procedural status

  • According to the provided legislative actions, HB 1787 was filed Jan. 8, 2025, referred to Revenue & Taxation (House), and ultimately “Died in House Committee at Sine Die adjournment” (did not become law in this form).
  • The documents also contain records from another jurisdiction (Illinois) using the same bill number for an unrelated education measure (School Safety Drill Act amendment), which became Public Act 104-0198; that is a separate bill and should not be conflated with the Arkansas tax exemption proposal.

Bottom line

HB 1787 would have created a state income tax exemption for certain retirement and survivor benefits paid to Arkansas law enforcement officers and firefighters, with an expected recurring revenue cost of about $5 million annually beginning FY2027. The bill did not advance out of committee and raised potential legal concerns regarding discrimination against federal retirees.

Compiled from official sources — confirm details with the bill’s official record.

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