[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.
                                 ______