[Congressional Record Volume 145, Number 78 (Thursday, May 27, 1999)]
[Extensions of Remarks]
[Page E1123]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   RECTIFYING IRS RULING FOR VETERANS

                                 ______
                                 

                         HON. ELLEN O. TAUSCHER

                             of california

                    in the house of representatives

                         Thursday, May 27, 1999

  Mrs. TAUSCHER. Mr. Speaker, I am pleased to join with my colleague 
from California, Mr. Brian Bilbray, to introduce a bill to rectify an 
unjust Internal Revenue Service (IRS) ruling which adversely affected 
our nation's veterans.
  In a 1962 IRS ruling, an allowance was made for the deduction of 
flight training expenses from a veteran's income tax even if veterans' 
benefits were received to pay the training costs. Subsequently, many 
veterans used their G.I. benefits to go to flight school and correctly 
deducted these expenses on their income tax forms. In 1980, the IRS 
revised its 1962 ruling by terminating this tax deduction in Revenue 
Ruling 80-173. However, the IRS decided to apply this new ruling 
retroactively, which meant the veterans who had utilized this deduction 
would now have to pay back their tax refund to the IRS. This decision 
was detrimental to the taxpayers who took the deduction as instructed, 
and therefore simply unfair.
  Naturally, these taxpayers took their case to court. In April 1985, 
the 11th Circuit Court of Appeals, in Baker v. United States, 
considered this issue and sided with the taxpayer. The IRS did not 
appeal the decision to the U.S. Supreme Court. Consequently, the 
veterans who fought the battle in the 11th Circuit Court of Appeals 
received refunds of the tax they had been required to pay. At the same 
time, however, veterans who suffered from the retroactive IRS ruling 
but who fell outside the purview of that court decision were not given 
refunds. Similarly situated veterans were therefore being treated 
differently by the IRS due to geographic location.
  This bipartisan legislation will permit those veterans who settled 
with the IRS on less favorable terms or were precluded from having the 
IRS consider their claims because of the time limits in the law, a one-
time opportunity to file for a refund. This way the remaining veterans 
and the IRS would have a second chance to come to a much more equitable 
settlement.
  Nationwide, this legislation will affect the approximately 200 
remaining veterans who have still not received an equitable settlement 
from the IRS--roughly \1/3\ of these veterans reside in the State of 
California.
  Basically this legislation boils down to restoring a sense of 
fairness. We need to do what is right and put an end to this 
inequitable situation once and for all. These veterans stood up for 
America--it's time we stand up for them.

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