[Congressional Record Volume 142, Number 45 (Thursday, March 28, 1996)]
[Extensions of Remarks]
[Pages E486-E487]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 ELIMINATE DOUBLE TAXATION OF LUMP SUM SEPARATION BENEFITS FOR VETERANS

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                      HON. G.V. (SONNY) MONTGOMERY

                             of mississippi

                    in the house of representatives

                        Thursday, March 28, 1996

  Mr. MONTGOMERY. Mr. Speaker, I am introducing legislation today, H.R. 
3183, which would eliminate double taxation of lump sum separation 
benefits for a veteran who is subsequently determined to be entitled to 
compensation for a service-connected disability.
  This bill would not only do equity, it would correct a legislative 
oversight.
  Prior to 1981, the Department of Veterans Affairs was required to 
recoup only 75 percent of the total amount of the military separation 
payment by withholding disability compensation. This provision was 
intended to account for the inequity of recouping taxable separation 
pay with nontaxable compensation.

[[Page E487]]

  The enactment of 10 U.S.C. 1174(h) eliminated the percentage 
recoupment and established total recoupment of separation pay. The 
effect is to require the veteran who has paid income tax on the total 
separation pay to, in effect, pay that tax again, out of his disability 
compensation.
  H.R. 3183 would correct this inequity by limiting future recoupment 
of separation pay to no more that 75 percent of the benefit received.
  I urge my colleagues to join me in cosponsoring this legislation.

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