[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 878 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 878

 To amend the Internal Revenue Code of 1986 to provide a special rule 
     for members of the uniformed services and Foreign Service in 
    determining the exclusion of gain from the sale of a principal 
   residence and to restore the tax exempt status of death gratuity 
 payments to members of the uniformed services, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 25, 2003

Mr. Thomas (for himself, Mr. Houghton, Mr. Camp, Mr. Lewis of Kentucky, 
 Mr. Hayworth, Mr. Sam Johnson of Texas, Mr. Herger, Mr. Ramstad, Mr. 
  Cantor, Mr. English, and Mr. Crane) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide a special rule 
     for members of the uniformed services and Foreign Service in 
    determining the exclusion of gain from the sale of a principal 
   residence and to restore the tax exempt status of death gratuity 
 payments to members of the uniformed services, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Armed Forces Tax Fairness Act of 
2003''.

SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND FOREIGN 
              SERVICE IN DETERMINING EXCLUSION OF GAIN FROM SALE OF 
              PRINCIPAL RESIDENCE.

    (a) In General.--Subsection (d) of section 121 of the Internal 
Revenue Code of 1986 (relating to exclusion of gain from sale of 
principal residence) is amended by adding at the end the following new 
paragraph:
            ``(10) Members of uniformed services and foreign service.--
                    ``(A) In general.--At the election of an individual 
                with respect to a property, the running of the 5-year 
                period referred to in subsection (a) with respect to 
                such property shall be suspended during any period that 
                such individual or such individual's spouse is serving 
                on qualified official extended duty as a member of the 
                uniformed services or of the Foreign Service.
                    ``(B) Maximum period of suspension.--Such 5-year 
                period shall not be extended more than 5 years by 
                reason of subparagraph (A).
                    ``(C) Qualified official extended duty.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        official extended duty' means any extended duty 
                        while serving at a duty station which is at 
                        least 150 miles from such property or while 
                        residing under Government orders in Government 
                        quarters.
                            ``(ii) Uniformed services.--The term 
                        `uniformed services' has the meaning given such 
                        term by section 101(a)(5) of title 10, United 
                        States Code, as in effect on the date of the 
                        enactment of this paragraph.
                            ``(iii) Foreign service.--The term `member 
                        of the Foreign Service' has the meaning given 
                        the term `member of the Service' by paragraph 
                        (1), (2), (3), (4), or (5) of section 103 of 
                        the Foreign Service Act of 1980, as in effect 
                        on the date of the enactment of this paragraph.
                            ``(iv) Extended duty.--The term `extended 
                        duty' means any period of active duty pursuant 
                        to a call or order to such duty for a period in 
                        excess of 180 days or for an indefinite period.
                    ``(D) Special rules relating to election.--
                            ``(i) Election limited to 1 property at a 
                        time.--An election under subparagraph (A) with 
                        respect to any property may not be made if such 
                        an election is in effect with respect to any 
                        other property.
                            ``(ii) Revocation of election.--An election 
                        under subparagraph (A) may be revoked at any 
                        time.''.
    (b) Effective Date; Special Rule.--
            (1) Effective date.--The amendment made by this section 
        shall take effect as if included in the amendments made by 
        section 312 of the Taxpayer Relief Act of 1997.
            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendment made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by 
        the operation of any law or rule of law (including res 
        judicata), such refund or credit may nevertheless be made or 
        allowed if claim therefor is filed before the close of such 
        period.

SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS INCOME OF DEATH 
              GRATUITY PAYMENT.

    (a) In General.--Subsection (b)(3) of section 134 of the Internal 
Revenue Code of 1986 (relating to certain military benefits) is amended 
by adding at the end the following new subparagraph:
                    ``(C) Exception for death gratuity adjustments made 
                by law.--Subparagraph (A) shall not apply to any 
                adjustment to the amount of death gratuity payable 
                under chapter 75 of title 10, United States Code, which 
                is pursuant to a provision of law enacted before 
                December 31, 1991.''.
    (b) Conforming Amendment.--Subparagraph (A) of section 134(b)(3) of 
such Code is amended by striking ``subparagraph (B)'' and inserting 
``subparagraphs (B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to deaths occurring after September 10, 2001.

SEC. 4. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF DEFENSE 
              HOMEOWNERS ASSISTANCE PROGRAM.

    (a) In General.--Section 132(a) of the Internal Revenue Code of 
1986 (relating to the exclusion from gross income of certain fringe 
benefits) is amended by striking ``or'' at the end of paragraph (6), by 
striking the period at the end of paragraph (7) and inserting ``, or'' 
and by adding at the end the following new paragraph:
            ``(8) qualified military base realignment and closure 
        fringe.''.
    (b) Qualified Military Base Realignment and Closure Fringe.--
Section 132 of such Code is amended by redesignating subsection (n) as 
subsection (o) and by inserting after subsection (m) the following new 
subsection:
    ``(n) Qualified Military Base Realignment and Closure Fringe.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified military base realignment and closure fringe' means 
        1 or more payments under the authority of section 1013 of the 
        Demonstration Cities and Metropolitan Development Act of 1966 
        (42 U.S.C. 3374) (as in effect on the date of the enactment of 
        this subsection).
            ``(2) Limitation.--With respect to any property, such term 
        shall not include any payment referred to in paragraph (1) to 
        the extent that the sum of all such payments related to such 
        property exceeds the amount described in subsection (c)(1) of 
        such section (as in effect on such date).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after the date of the enactment of this Act.

SEC. 5. EXPANSION OF COMBAT ZONE FILING RULES TO CONTINGENCY 
              OPERATIONS.

    (a) In General.--Section 7508(a) of the Internal Revenue Code of 
1986 (relating to time for performing certain acts postponed by reason 
of service in combat zone) is amended--
            (1) by inserting ``or when deployed outside the United 
        States away from the individual's permanent duty station while 
        participating in an operation designated by the Secretary of 
        Defense as a contingency operation (as defined in section 
        101(a)(13) of title 10, United States Code) or which became 
        such a contingency operation by operation of law'' after 
        ``section 112'',
            (2) by inserting in the first sentence ``or at any time 
        during the period of such contingency operation'' after ``for 
        purposes of such section'',
            (3) by inserting ``or operation'' after ``such an area'', 
        and
            (4) by inserting ``or operation'' after ``such area''.
    (b) Conforming Amendments.--
            (1) Section 7508(d) of such Code is amended by inserting 
        ``or contingency operation'' after ``area''.
            (2) The heading for section 7508 of such Code is amended by 
        inserting ``or contingency operation'' after ``combat zone''.
            (3) The item relating to section 7508 of such Code in the 
        table of sections for chapter 77 is amended by inserting ``or 
        contingency operation'' after ``combat zone''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any period for performing an act which has not expired before 
the date of the enactment of this Act.

SEC. 6. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR EXEMPTION FROM TAX 
              FOR CERTAIN VETERANS' ORGANIZATIONS.

    (a) In General.--Subparagraph (B) of section 501(c)(19) of the 
Internal Revenue Code of 1986 (relating to list of exempt 
organizations) is amended by striking ``or widowers'' and inserting ``, 
widowers, ancestors, or lineal descendants''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 7. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT CARE 
              ASSISTANCE PROGRAMS.

    (a) In General.--Section 134(b) of the Internal Revenue Code of 
1986 (defining qualified military benefit) is amended by adding at the 
end the following new paragraph:
            ``(4) Clarification of certain benefits.--For purposes of 
        paragraph (1), such term includes any dependent care assistance 
        program (as in effect on the date of the enactment of this 
        paragraph) for any individual described in paragraph (1)(A).''.
    (b) Conforming Amendments.--
            (1) Section 134(b)(3)(A) of such Code (as amended by 
        section 3) is further amended by inserting ``and paragraph 
        (4)'' after ``subparagraphs (B) and (C)''.
            (2) Section 3121(a)(18) of such Code is amended by striking 
        ``or 129'' and inserting ``, 129, or 134(b)(4)''.
            (3) Section 3306(b)(13) of such Code is amended by striking 
        ``or 129'' and inserting ``, 129, or 134(b)(4)''.
            (4) Section 3401(a)(18) of such Code is amended by striking 
        ``or 129'' and inserting ``, 129, or 134(b)(4)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 8. CLARIFICATION RELATING TO EXCEPTION FROM ADDITIONAL TAX ON 
              CERTAIN DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS, 
              ETC., ON ACCOUNT OF ATTENDANCE AT MILITARY ACADEMY.

    (a) In General.--Subparagraph (B) of section 530(d)(4) of the 
Internal Revenue Code of 1986 (relating to exceptions from additional 
tax for distributions not used for educational purposes) is amended by 
striking ``or'' at the end of clause (iii), by redesignating clause 
(iv)  as clause (v), and by inserting after clause (iii) the following 
new clause:
                            ``(iv) made on account of the attendance of 
                        the account holder at the United States 
                        Military Academy, the United States Naval 
                        Academy, the United States Air Force Academy, 
                        the United States Coast Guard Academy, or the 
                        United States Merchant Marine Academy, to the 
                        extent that the amount of the payment or 
                        distribution does not exceed the costs of 
                        advanced education (as defined by section 
                        2005(e)(3) of title 10, United States Code, as 
                        in effect on the date of the enactment of this 
                        section) attributable to such attendance, or''.
    (b) Effective Date.--The amendment made by this section shall take 
effect for taxable years beginning after December 31, 2002.

SEC. 9. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST ORGANIZATIONS.

    (a) In General.--Section 501 of the Internal Revenue Code of 1986 
(relating to exemption from tax on corporations, certain trusts, etc.) 
is amended by redesignating subsection (p) as subsection (q) and by 
inserting after subsection (o) the following new subsection:
    ``(p) Suspension of Tax-Exempt Status of Terrorist Organizations.--
            ``(1) In general.--The exemption from tax under subsection 
        (a) with respect to any organization described in paragraph 
        (2), and the eligibility of any organization described in 
        paragraph (2) to apply for recognition of exemption under 
        subsection (a), shall be suspended during the period described 
        in paragraph (3).
            ``(2) Terrorist organizations.--An organization is 
        described in this paragraph if such organization is designated 
        or otherwise individually identified--
                    ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of 
                the Immigration and Nationality Act as a terrorist 
                organization or foreign terrorist organization,
                    ``(B) in or pursuant to an Executive order which is 
                related to terrorism and issued under the authority of 
                the International Emergency Economic Powers Act or 
                section 5 of the United Nations Participation Act of 
                1945 for the purpose of imposing on such organization 
                an economic or other sanction, or
                    ``(C) in or pursuant to an Executive order issued 
                under the authority of any Federal law if--
                            ``(i) the organization is designated or 
                        otherwise individually identified in or 
                        pursuant to such Executive order as supporting 
                        or engaging in terrorist activity (as defined 
                        in section 212(a)(3)(B) of the Immigration and 
                        Nationality Act) or supporting terrorism (as 
                        defined in section 140(d)(2) of the Foreign 
                        Relations Authorization Act, Fiscal Years 1988 
                        and 1989); and
                            ``(ii) such Executive order refers to this 
                        subsection.
            ``(3) Period of suspension.--With respect to any 
        organization described in paragraph (2), the period of 
        suspension--
                    ``(A) begins on the later of--
                            ``(i) the date of the first publication of 
                        a designation or identification described in 
                        paragraph (2) with respect to such 
                        organization, or
                            ``(ii) the date of the enactment of this 
                        subsection, and
                    ``(B) ends on the first date that all designations 
                and identifications described in paragraph (2) with 
                respect to such organization are rescinded pursuant to 
                the law or Executive order under which such designation 
                or identification was made.
            ``(4) Denial of deduction.--No deduction shall be allowed 
        under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
        2106(a)(2), or 2522 for any contribution to an organization 
        described in paragraph (2) during the period described in 
        paragraph (3).
            ``(5) Denial of administrative or judicial challenge of 
        suspension or denial of deduction.--Notwithstanding section 
        7428 or any other provision of law, no organization or other 
        person may challenge a suspension under paragraph (1), a 
        designation or identification described in paragraph (2), the 
        period of suspension described in paragraph (3), or a denial of 
        a deduction under paragraph (4) in any administrative or 
        judicial proceeding relating to the Federal tax liability of 
        such organization or other person.
            ``(6) Erroneous designation.--
                    ``(A) In general.--If--
                            ``(i) the tax exemption of any organization 
                        described in paragraph (2) is suspended under 
                        paragraph (1),
                            ``(ii) each designation and identification 
                        described in paragraph (2) which has been made 
                        with respect to such organization is determined 
                        to be erroneous pursuant to the law or 
                        Executive order under which such designation or 
                        identification was made, and
                            ``(iii) the erroneous designations and 
                        identifications result in an overpayment of 
                        income tax for any taxable year by such 
                        organization,
                credit or refund (with interest) with respect to such 
                overpayment shall be made.
                    ``(B) Waiver of limitations.--If the credit or 
                refund of any overpayment of tax described in 
                subparagraph (A)(iii) is prevented at any time by the 
                operation of any law or rule of law (including res 
                judicata), such credit or refund may nevertheless be 
                allowed or made if the claim therefor is filed before 
                the close of the 1-year period beginning on the date of 
                the last determination described in subparagraph 
                (A)(ii).
            ``(7) Notice of suspensions.--If the tax exemption of any 
        organization is suspended under this subsection, the Internal 
        Revenue Service shall update the listings of tax-exempt 
        organizations and shall publish appropriate notice to taxpayers 
        of such suspension and of the fact that contributions to such 
        organization are not deductible during the period of such 
        suspension.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to designations made before, on, or after the date of the 
enactment of this Act.

SEC. 10. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT TRAVEL EXPENSES OF 
              NATIONAL GUARD AND RESERVE MEMBERS.

    (a) Deduction Allowed.--Section 162 of the Internal Revenue Code of 
1986 (relating to certain trade or business expenses) is amended by 
redesignating subsection (p) as subsection (q) and inserting after 
subsection (o) the following new subsection:
    ``(p) Treatment of Expenses of Members of Reserve Component of 
Armed Forces of the United States.--For purposes of subsection (a)(2), 
in the case of an individual who performs services as a member of a 
reserve component of the Armed Forces of the United States at any time 
during the taxable year, such individual shall be deemed to be away 
from home in the pursuit of a trade or business for any period during 
which such individual is away from home in connection with such 
services.''.
    (b) Deduction Allowed Whether or Not Taxpayer Elects To Itemize.--
Section 62(a)(2) of such Code (relating to certain trade and business 
deductions of employees) is amended by adding at the end the following 
new subparagraph:
                    ``(E) Certain expenses of members of reserve 
                components of the armed forces of the united states.--
                The deductions allowed by section 162 which consist of 
                expenses, not in excess of $500, paid or incurred by 
                the taxpayer in connection with the performance of 
                services by such taxpayer as a member of a reserve 
                component of the Armed Forces of the United States for 
                any period during which such individual is more than 
                100 miles away from home in connection with such 
                services.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2002.

SEC. 11. PROTECTION OF SOCIAL SECURITY.

    The amounts transferred to any trust fund under title II of the 
Social Security Act shall be determined as if this Act had not been 
enacted.
                                 <all>