[Congressional Record Volume 147, Number 165 (Monday, December 3, 2001)]
[Senate]
[Pages S12312-S12313]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. GRAHAM (for himself and Mrs. Lincoln):
S. 1755. A bill to amend the Internal Revenue Code of 1986 to provide
a special rule for members of the uniformed services and Foreign
Service, and other employees, in determining the exclusion of gain from
the sale of a principal residence; to the Committee on Finance.
Mr. GRAHAM. Mr. President, I along with Senator Lincoln am proud to
sponsor this bill to allow members of the military service, Foreign
Service, and employees serving on assignment abroad to qualify for the
same tax relief on the profit generated when they sell their main
residence as other Americans. This bill does not create a new tax
benefit, it merely modifies current law to exclude the time living
abroad when calculating the number of years the homeowner has lived in
their primary residence. This bill will treat members of the military,
foreign service officers and civilians living abroad fairly, by
treating them like all other Americans.
The Taxpayer Relief Act of 1997 gives taxpayers who sell their
principal residence a much-needed tax break. Prior to the 1997 act,
taxpayers received a one-time exclusion on the profit they made when
they sold their principal residence, but the taxpayer had to be at
least 55 years old and live in the residence for two of the five years
preceding the sale. This provision primarily benefited older Americans,
while not providing any relief to younger taxpayers and their families.
The 1997 act corrected this flaw. Now, a taxpayer who sells his or
her principal residence is not taxed on the first $250,000 of profit
from the sale. Joint files are not taxed on the first $500,000 of
profit they make from selling their principal residence. The taxpayer
must meet two requirements to qualify for this tax relief: One, they
must own the home for at least two of the five years preceding the
sale; and two, they must live in the home as their main home for at
least two of the last five years.
Unfortunately, the second part of this eligibility text
unintentionally and unfairly prohibits men and women in the Armed
Forces, Foreign Service, and U.S. employees working abroad from
qualifying for this beneficial tax relief. This was not the intent of
the 1997 Taxpayer Relief Act of 1997.
This bill remedies the inequality in the 1997 law. The bill amends
the Internal Revenue Code so that military members, Foreign Service
members, and U.S. employees working abroad are not penalized by
suspending the five-year determination period. The member is still
required to own and live in the home for at least two years. This
change was previously passed by Congress as part of the 1999 Taxpayer
Relief and Refund Act, which was vetoed by President Clinton for
unrelated reasons.
The 1997 home sale provision unintentionally discourages home
ownership for U.S. members serving abroad which is bad fiscal policy.
Home ownership has numerous benefits for communities and individual
homeowners. Owning a home provides Americans with a sense of community
and adds stability to our nation's neighborhoods. Home ownership also
generated valuable property taxes for our nation's communities.
We cannot afford to discourage U.S. citizens from working and living
abroad by penalizing them with higher taxes merely because they are
doing
[[Page S12313]]
their job. Enacting this remedy will grant equal and fair tax relief to
those U.S. citizens working abroad.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 1755
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND
FOREIGN SERVICE, AND OTHER EMPLOYEES, 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 paragraphs:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with respect
to an individual during any time 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) Qualified official extended duty.--For purposes of
this paragraph--
``(i) In general.--The term `qualified official extended
duty' means any period of extended duty as a member of the
uniformed services or a member of the Foreign Service during
which the member serves at a duty station which is at least
50 miles from such property or is under Government orders to
reside 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 of the united states.--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 90 days or for an indefinite
period.
``(10) Other employees.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with respect
to an individual during any time that such individual or such
individual's spouse is serving as an employee for a period in
excess of 90 days in an assignment by such employee's
employer outside the United States.
``(B) Limitations and special rules.--
``(i) Maximum period of suspension.--The suspension under
subparagraph (A) with respect to a principal residence shall
not exceed (in the aggregate) 5 years.
``(ii) Members of uniformed services and foreign service.--
Subparagraph (A) shall not apply to an individual to whom
paragraph (9) applies.
``(iii) Self-employed individual not considered an
employee.--For purposes of this paragraph, the term
`employee' does not include an individual who is an employee
within the meaning of section 401(c)(1) (relating to self-
employed individuals).''.
(b) Effective Date.--The amendment made by this section
shall apply to sales and exchanges after the date of the
enactment of this Act.
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