SB 573
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
First Reader
Senate Bill 573 (The President)(By Request - Administration)
Budget and Taxation
Income Tax Subtraction Modification – Correctional Officers, Law Enforcement
Officers, and Fire, Rescue, and Emergency Services Personnel (Hometown
Heroes Act)
This Administration bill expands the State income tax subtraction modification for retired
law enforcement; correctional officers; and fire, rescue, or emergency services personnel
by (1) increasing the maximum value of the subtraction modification and (2) extending
eligibility to retirees who are between age 50 and 54. The bill takes effect July 1, 2021,
and applies to tax year 2021 and beyond.
Fiscal Summary
State Effect: General fund revenues decrease by $6.8 million in FY 2022 due to additional
retirement income being exempted. The Governor’s proposed FY 2022 operating budget
assumes that general fund revenues will decrease by $6.8 million due to the expansion of
the subtraction modification. Future year estimates reflect projected growth in retirement
income and the phase-in specified by the bill. Expenditures are not affected.
($ in millions) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
GF Revenue ($6.8) ($15.8) ($16.1) ($16.4) ($16.8)
Expenditure 0 0 0 0 0
Net Effect ($6.8) ($15.8) ($16.1) ($16.4) ($16.8)
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: Local revenues decrease by $4.4 million in FY 2022 and by $11.0 million
in FY 2026. Local expenditures are not affected.
Small Business Effect: The Administration has determined that this bill has minimal or
no impact on small business (attached). The Department of Legislative Services concurs
with this assessment.
 Analysis
Bill Summary: Under current law, the maximum value of the subtraction modification is
reduced by the amount of Social Security benefits received. After this adjustment, the
maximum value is further limited to $15,000. The bill alters this limitation to the greater
of $15,000, or 50%, of the eligible income in tax year 2021 and eliminates the limitation
beginning with tax year 2022.
Current Law:
State Pension Exclusion – All Eligible Individuals
Maryland law provides a pension exclusion (in the form of a subtraction modification) for
individuals who are at least 65 years old or who are totally disabled. Under this subtraction
modification, up to a specified maximum amount of taxable pension income ($33,100 for
2020) may be exempt from tax. The maximum exclusion allowed is indexed to the maximum
annual benefit payable under the Social Security Act and is reduced by the amount of any
Social Security payments received (Social Security offset). Military retirees who are at least
age 65 or are totally disabled can qualify and claim the State pension exclusion for retirement
income that is not excluded under the military retirement income subtraction.
Social Security benefits and benefits received under the federal Railroad Retirement Act are
totally exempt from the Maryland income tax, even though they may be partly taxable for
federal income tax purposes. In addition to the special treatment of Social Security and other
retirement income, other income tax relief is provided to senior citizens regardless of the
source of their income. In addition to the regular personal exemption available to all
taxpayers, an additional exemption amount of $1,000 may be claimed by an elderly or blind
individual.
Law Enforcement Officers; Correctional Officers; and Fire, Rescue, or Emergency
Services Personnel
Retired law enforcement officers; correctional officers; and fire, rescue, or emergency
services personnel who are age 65 or older or are totally disabled qualify and claim the
State pension exclusion in the same manner as other eligible retirees as described above.
Chapters 153 and 154 of 2017 established a pension exclusion for retired law enforcement
officers or fire, rescue, or emergency services personnel. Retirement income qualifies for
this exclusion if the individual is between the ages of 55 and 64 and the retirement income
is attributable to employment as a law enforcement officer or as a fire, rescue, or emergency
services personnel of the United States, the State, or a local jurisdiction. Emergency
services personnel includes emergency medical technicians and paramedics.
SB 573/ Page 2
Chapters 573 and 581 of 2018 extended eligibility to correctional officers. An eligible
retiree includes an individual who was employed in (1) a State correctional facility; (2) a
local correctional facility; (3) a juvenile facility; and (4) a facility of the United States that
is equivalent to a State or local correctional facility or juvenile facility in the State. The
maximum exclusion in the tax year is limited to $15,000.
State Revenues: Additional retirement income can be exempted beginning in tax
year 2021. It is assumed that individuals do not adjust withholdings and estimated
payments. As a result, general fund revenues decrease by $6.8 million in fiscal 2022.
Exhibit 1 shows the estimated impact of the bill on State and local revenues.
Exhibit 1
State and Local Revenue Impacts
Fiscal 2022-2026
($ in Millions)
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
State ($6.8) ($15.8) ($16.1) ($16.4) ($16.8)
Local (4.4) (10.3) (10.5) (10.8) (11.0)
Total ($11.2) ($26.2) ($26.7) ($27.2) ($27.7)
The estimated impact of exempting additional public safety retirement income is based on
the number of retirees who claimed the subtraction modifications in tax year 2019, adjusted
for the provisions of the bill.
Local Revenues: Local income tax revenues decrease as a result of subtraction
modifications claimed against the personal income tax. Local revenues decrease by
$4.4 million in fiscal 2022 and by $11.0 million in fiscal 2026, as shown in Exhibit 1.
Additional Information
Prior Introductions: Similar bills, SB 269 of 2020 and SB 171 of 2019, received a hearing
in the Senate Budget and Taxation Committee, but no further action was taken. The cross
files, HB 350 of 2020 and HB 154 of 2019, received a hearing in the House Ways and
Means Committee, but no further action was taken.
SB 573/ Page 3
Designated Cross File:HB 735 (The Speaker)(By Request - Administration) - Ways and
Means.
Information Source(s): Comptroller’s Office; Department of Legislative Services
Fiscal Note History: First Reader - February 8, 2021
rh/hlb
Analysis by: Robert J. Rehrmann Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 573/ Page 4
 ANALYSIS OF ECONOMIC IMPACT ON SMALL BUSINESSES
TITLE OF BILL: Income Tax Subtraction Modification – Correctional Officers, Law
Enforcement Officers, and Fire, Rescue, and Emergency Services
Personnel (Hometown Heroes Act)
BILL NUMBER: SB 573
PREPARED BY: Governor’s Legislative Office
PART A. ECONOMIC IMPACT RATING
This agency estimates that the proposed bill:
__X_ WILL HAVE MINIMAL OR NO ECONOMIC IMPACT ON MARYLAND SMALL
BUSINESSES
OR
WILL HAVE A MEANINGFUL ECONOMIC IMPACT ON MARYLAND SMALL
BUSINESSES
PART B. ECONOMIC IMPACT ANALYSIS
SB 573/ Page 5


Statutes affected:
Text - First - Income Tax Subtraction Modification – Correctional Officers, Law Enforcement Officers, and Fire, Rescue, and Emergency Services Personnel (Hometown Heroes Act): 10-209 Tax General, 10-207 Tax General, 2-020 Tax General, 2-021 Tax General