Section 40-18-19.2
Exemption of certain death benefit payments for peace officer or fireman killed in line of duty.
(a) Effective for the 2006 state income tax year and each year thereafter, any death benefit payments listed in subsection (e) that are paid to the designated beneficiary of a peace officer or fireman killed in the line of duty, as determined by the awarding authority, shall be exempt from any state income tax.
(b) For purposes of this section, the terms peace officer and fireman are defined in the same manner as provided in Section 36-30-1. For purposes of this section, the term awarding authority shall mean an entity or body authorized by law to award any of the death benefit payments listed in subsection (e).
(c) Any determinations made by an awarding authority pursuant to this section shall apply only to death benefit payments made by that awarding authority.
(d)(1) For purposes of this section, the phrase line of duty shall mean arising out of and in the course of that person's assigned duty, including all normal and special assignments as ordered by his or her superiors or assignments undertaken while acting as a peace officer under rules, directions, or regulations promulgated by the appropriate employing authority, within or outside of normal duty hours.
(2) With respect to firemen, the phrase line of duty shall also include any death occurring while performing assigned duties, or while traveling to or returning from a fire alarm, rescue operation, or any other emergency operation.
(3) With respect to peace officers, the phrase line of duty shall include, but is not limited to, any of the following:
a. While the peace officer was present on or about the premises where his or her duties were being performed or where his or her duties require the officer's presence as a part of his or her duties at the time of the accident and during the hours of service as a peace officer.
b. While engaged in any training which is mandated to maintain his or her general or specialized assignment as a peace officer.
c. While the peace officer was in conflict, pursuit, or observation of a person or persons suspected or under suspicion of breaking the law, or has broken the law, or is in the process of breaking the law.
d. While the peace officer was defending persons or property.
e. While engaged in performing a law enforcement duty at the direction of his or her supervisor.
(e) This section applies to any death benefit payments received by the designated beneficiary of a peace officer or fireman killed in the line of duty that are paid from the State Treasury pursuant to Section 36-30-2, paid from the Alabama Peace Officers' Annuity and Benefit Fund pursuant to Section 36-21-72, or paid from any governmental plan that is exempt from federal income taxation pursuant to 26 U.S.C.A. §101(h), as amended.
(f) This section shall not apply with respect to the death of any peace officer or fireman if it is determined by the awarding authority that any of the following occurred or will occur:
(1) The death was caused by the intentional misconduct of the officer or fireman or by the officer's or fireman's intention to bring about his or her death.
(2) The officer or fireman was voluntarily intoxicated at the time of death.
(3) The officer or fireman was performing his or her duties in a grossly negligent manner at the time of death.
(4) The payment is to an individual whose actions were a substantial contributing factor to the death of the officer or fireman.
(Act 2006-424, §2.)