[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5015 Enrolled Bill (ENR)]

        H.R.5015

                     One Hundred Fourteenth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

           Begun and held at the City of Washington on Monday,
           the fourth day of January, two thousand and sixteen


                                 An Act


 
 To restore amounts improperly withheld for tax purposes from severance 
  payments to individuals who retired or separated from service in the 
    Armed Forces for combat-related injuries, 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 ``Combat-Injured Veterans Tax Fairness 
Act of 2016''.
SEC. 2. FINDINGS.
    Congress makes the following findings:
        (1) Approximately 10,000 to 11,000 individuals are retired from 
    service in the Armed Forces for medical reasons each year.
        (2) Some of such individuals are separated from service in the 
    Armed Forces for combat-related injuries (as defined in section 
    104(b)(3) of the Internal Revenue Code of 1986).
        (3) Congress has recognized the tremendous personal sacrifice 
    of veterans with combat-related injuries by, among other things, 
    specifically excluding from taxable income severance pay received 
    for combat-related injuries.
        (4) Since 1991, the Secretary of Defense has improperly 
    withheld taxes from severance pay for wounded veterans, thus 
    denying them their due compensation and a significant benefit 
    intended by Congress.
        (5) Many veterans owed redress are beyond the statutory period 
    to file an amended tax return because they were not or are not 
    aware that taxes were improperly withheld.
SEC. 3. RESTORATION OF AMOUNTS IMPROPERLY WITHHELD FOR TAX PURPOSES 
FROM SEVERANCE PAYMENTS TO VETERANS WITH COMBAT-RELATED INJURIES.
    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Defense shall--
        (1) identify--
            (A) the severance payments--
                (i) that the Secretary paid after January 17, 1991;
                (ii) that the Secretary computed under section 1212 of 
            title 10, United States Code;
                (iii) that were not considered gross income pursuant to 
            section 104(a)(4) of the Internal Revenue Code of 1986; and
                (iv) from which the Secretary withheld amounts for tax 
            purposes; and
            (B) the individuals to whom such severance payments were 
        made; and
        (2) with respect to each person identified under paragraph 
    (1)(B), provide--
            (A) notice of--
                (i) the amount of severance payments in paragraph 
            (1)(A) which were improperly withheld for tax purposes; and
                (ii) such other information determined to be necessary 
            by the Secretary of the Treasury to carry out the purposes 
            of this section; and
            (B) instructions for filing amended tax returns to recover 
        the amounts improperly withheld for tax purposes.
    (b) Extension of Limitation on Time for Credit or Refund.--
        (1) Period for filing claim.--If a claim for credit or refund 
    under section 6511(a) of the Internal Revenue Code of 1986 relates 
    to a specified overpayment, the 3-year period of limitation 
    prescribed by such subsection shall not expire before the date 
    which is 1 year after the date the information return described in 
    subsection (a)(2) is provided. The allowable amount of credit or 
    refund of a specified overpayment shall be determined without 
    regard to the amount of tax paid within the period provided in 
    section 6511(b)(2).
        (2) Specified overpayment.--For purposes of paragraph (1), the 
    term ``specified overpayment'' means an overpayment attributable to 
    a severance payment described in subsection (a)(1).
SEC. 4. REQUIREMENT THAT SECRETARY OF DEFENSE ENSURE AMOUNTS ARE NOT 
WITHHELD FOR TAX PURPOSES FROM SEVERANCE PAYMENTS NOT CONSIDERED GROSS 
INCOME.
    The Secretary of Defense shall take such actions as may be 
necessary to ensure that amounts are not withheld for tax purposes from 
severance payments made by the Secretary to individuals when such 
payments are not considered gross income pursuant to section 104(a)(4) 
of the Internal Revenue Code of 1986.
SEC. 5. REPORT TO CONGRESS.
    (a) In General.--After completing the identification required by 
section 3(a) and not later than 1 year after the date of the enactment 
of this Act, the Secretary of Defense shall submit to the appropriate 
committees of Congress a report on the actions taken by the Secretary 
to carry out this Act.
    (b) Contents.--The report submitted under subsection (a) shall 
include the following:
        (1) The number of individuals identified under section 
    3(a)(1)(B).
        (2) Of all the severance payments described in section 
    3(a)(1)(A), the aggregate amount that the Secretary withheld for 
    tax purposes from such payments.
        (3) A description of the actions the Secretary plans to take to 
    carry out section 4.
    (c) Appropriate Committees of Congress Defined.--In this section, 
the term ``appropriate committees of Congress'' means--
        (1) the Committee on Armed Services, the Committee on Veterans' 
    Affairs, and the Committee on Finance of the Senate; and
        (2) the Committee on Armed Services, the Committee on Veterans' 
    Affairs, and the Committee on Ways and Means of the House of 
    Representatives.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.