[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 3243 Introduced in Senate (IS)]

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118th CONGRESS
  1st Session
                                S. 3243

  To amend the Internal Revenue Code of 1986 to exclude all military 
        retirement and related benefits from Federal income tax.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 7, 2023

 Mr. Ricketts introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to exclude all military 
        retirement and related benefits from Federal income tax.

    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 ``Tax Cuts for Veterans Act of 2023''.

SEC. 2. EXCLUSION OF ALL MILITARY RETIREMENT AND RELATED BENEFITS.

    (a) In General.--Section 122 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 122. CERTAIN UNIFORMED SERVICES RETIREMENT PAY AND RELATED 
              BENEFITS.

    ``(a) General Rule.--In the case of a member or former member of 
the armed forces of the United States, gross income does not include--
            ``(1) any retired or retainer pay paid under title 10 or 
        14, United States Code, or
            ``(2) any amounts not described in section 104(a)(4) 
        received as monthly compensation, pension, pay, annuity, or 
        allowance paid under title 10, 14, 37, or 38, United States 
        Code, in connection with a disability or combat-related injury 
        or disability or death of a member of the armed forces.
    ``(b) Certain Reduced Uniformed Services Retirement Pay.--
            ``(1) In general.--In the case of a member or former member 
        of the uniformed services of the United States other than a 
        member or former member of the armed forces, gross income does 
        not include the amount of any reduction in retired or retainer 
        pay pursuant to the provisions of chapter 73 of title 10, 
        United States Code.
            ``(2) Special rule.--
                    ``(A) Amount excluded from gross income.--In the 
                case of any individual referred to in paragraph (1), 
                all amounts received as retired or retainer pay shall 
                be excluded from gross income until there has been so 
                excluded an amount equal to the consideration for the 
                contract. The preceding sentence shall apply only to 
                the extent that the amounts received would, but for 
                such sentence, be includible in gross income.
                    ``(B) Consideration for the contract.--For purposes 
                of subparagraph (A) and section 72(n), the term 
                `consideration for the contract' means, in respect of 
                any individual, the sum of--
                            ``(i) the total amount of the reductions 
                        before January 1, 1966, in the individual's 
                        retired or retainer pay by reason of an 
                        election under chapter 73 of title 10 of the 
                        United States Code, and
                            ``(ii) any amounts deposited at any time by 
                        the individual pursuant to section 1438 or 
                        1452(d) of such title 10.
    ``(c) Definitions.--For purposes of this section, the terms `armed 
forces' and `uniformed services' have the respective meanings given 
such terms by section 101 of title 10, United States Code.''.
    (b) Conforming Amendments.--
            (1) Conforming repeal.--
                    (A) In general.--Section 1403 of title 10, United 
                States Code, is repealed.
                    (B) Clerical amendment.--The table of sections at 
                the beginning of chapter 71 of such title is amended by 
                striking the item relating to section 1403.
            (2) Annuities.--Subsection (n) of section 72 of the 
        Internal Revenue Code of 1986 is amended by striking 
        ``Subsection (b)'' and inserting ``In the case of any member or 
        former member of the uniformed services of the United States 
        other than a member or former member of the armed forces, 
        subsection (b)''.
    (c) Clerical Amendment.--The item relating to section 122 in the 
table of sections for part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended to read as follows:

``Sec. 122. Certain uniformed services retirement pay and related 
                            benefits.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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