[Congressional Record Volume 148, Number 91 (Tuesday, July 9, 2002)]
[House]
[Pages H4365-H4369]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ARMED FORCES TAX FAIRNESS ACT OF 2002
Mr. HOUGHTON. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 5063) to amend the Internal Revenue Code of 1986 to provide
a special rule for members of the uniformed services in determining the
exclusion of gain from the sale of a principal residence and to restore
the tax exempt status of death gratuity payments to members of the
uniformed services.
The Clerk read as follows:
H.R. 5063
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 ``Armed Forces Tax Fairness
Act of 2002''.
SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES 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 paragraph:
``(9) Members of uniformed services.--
``(A) In general.--At the election of an individual with
respect to a property, the running of the 5-year period
described in subsection (a) with respect to such property
shall be suspended during any period that such individual or
such individual's spouse is serving on qualified official
extended duty as a member of the uniformed services.
[[Page H4366]]
``(B) Maximum period of suspension.--The 5-year period
described in subsection (a) shall not be extended more than 5
years by reason of subparagraph (A).
``(C) Qualified official extended duty.--For purposes of
this paragraph--
``(i) In general.--The term `qualified official extended
duty' means any extended duty while serving at a duty station
which is at least 250 miles from such property or while
residing under Government orders 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) 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 180 days or for an indefinite
period.
``(D) Special rules relating to election.--
``(i) Election limited to 1 property at a time.--An
election under subparagraph (A) with respect to any property
may not be made if such an election is in effect with respect
to any other property.
``(ii) Revocation of election.--An election under
subparagraph (A) may be revoked at any time.''.
(b) Effective Date.--The amendment made by this section
shall apply to elections made after the date of the enactment
of this Act for suspended periods under section 121(d)(9) of
the Internal Revenue Code of 1986 (as added by this section)
beginning after such date.
SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS INCOME OF
DEATH GRATUITY PAYMENT.
(a) In General.--Subsection (b)(3) of section 134 of the
Internal Revenue Code of 1986 (relating to certain military
benefits) is amended by adding at the end the following new
subparagraph:
``(C) Exception for death gratuity adjustments made by
law.--Subparagraph (A) shall not apply to any adjustment to
the amount of death gratuity payable under chapter 75 of
title 10, United States Code, which is pursuant to a
provision of law enacted before December 31, 1991.''.
(b) Conforming Amendment.--Subparagraph (A) of section
134(b)(3) of such Code is amended by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to deaths occurring after September
10, 2001.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
York (Mr. Houghton) and the gentleman from New York (Mr. McNulty) each
will control 20 minutes.
The Chair recognizes the gentleman from New York (Mr. Houghton).
Mr. HOUGHTON. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this is an important bill. It has two features to it.
First, it increases the tax-free death benefit payment provided to
members of the Armed Services who are on active duty. The present
exempt amount is $3,000. The bill increases that to $6,000. In 1991,
during Desert Storm, this death benefit paid to the survivors was
increased from $3,000 to $6,000, but the tax amount was not changed, so
that the extra $3,000 has been subject to tax since that time. What
this does, the bill will correct that oversight.
The second feature, Mr. Speaker, is the bill will allow members of
the uniformed services who are transferred to take advantage of the
present-law capital gains tax relief on the sale of their home, the way
all the rest of us can do. An individual is not subject to the first
$250,000, or, for a couple, $500,000 on a joint return on the sale of a
home if it has been lived in as a principal residence for 2 out of the
last 5 years.
Uniformed members are transferred around this country and overseas at
someone else's choosing. This happens so many times that it is
impossible for them to meet the 5-year rule. What this bill would do is
suspend the running of the 5-year rule for a total of 5 years during
the time they are assigned away from home.
Furthermore, Mr. Speaker, although the provisions in this bill apply
only to the military and uniformed service members, there are other
citizens who work abroad for the government or foreign service
officers, as well as employees of businesses, who have the same problem
with the 5-year rule. At some point, not now, but at some point we need
to consider their needs so that the rule is uniform.
Mr. Speaker, I reserve the balance of my time.
Mr. McNULTY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, during this time of heightened military engagement, the
benefits provided under this bill should go to our men and women in
uniform without delay. The high price they are willing to pay is often
overlooked during peacetime, but war quickly reminds us of their
willingness to place their lives on the line for all that we hold dear.
The families of these men and women deserve any help we can provide in
making their lives a bit easier.
This bill responds, as my colleague from New York pointed out, to two
areas of need. It provides much-needed relief to members of our
military through favorable tax treatment of death benefits paid on
behalf of military personnel who die in the line of duty. In addition,
the bill eases the burden currently experienced by certain military
personnel with respect to the exclusion of gain on the sale of their
principal residence.
We all agree that the current death benefit of $3,000 is inadequate.
This position was adopted earlier when the benefit was increased from
$3,000 to $6,000 through the appropriations process. We must now ensure
that our military men and women receive the full benefits as intended.
Thus, under the bill the full amount of the death penalty payable,
which is $6,000, would be excluded from income.
The second provision of the bill would ensure that certain military
personnel are not denied the benefits of excluding an amount of the
gain realized upon the sale of a principal residence simply because of
extended military assignments away from home. Current law provides an
individual taxpayer an exclusion from tax of up to $250,000, or
$500,000 if married and filing a joint return, of gains realized on the
sale or exchange of a principal residence. To qualify, the taxpayer
must have owned and used the residence as a principal residence for at
least 2 of the 5 years prior to the sale or exchange.
Many of our military personnel do not receive this benefit because
they are stationed away from home for an extended tour of duty. Thus,
they fail to meet the so-called 2 of the 5 preceding years rule. This
bill would ensure that this benefit is not lost because of an extended
tour of duty. Under the bill, military personnel would be permitted to
exclude any time spent on an extended tour of duty for purposes of
meeting the 2 of 5 preceding years rule.
This provides the benefits which were intended when the law was
enacted. I do not believe anyone in this body would argue that the
Congress intended to deny this benefit to the men and women who
faithfully serve in our Armed Forces. This provision brings about the
fair and intended results.
I join the gentleman from New York (Mr. Houghton) in strongly
supporting this bill, H.R. 5063, and I urge all of my colleagues to
support it as well.
Mr. Speaker, I reserve the balance of my time.
Mr. HOUGHTON. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Sam Johnson).
(Mr. SAM JOHNSON of Texas asked and was given permission to revise
and extend his remarks.)
Mr. SAM JOHNSON of Texas. Mr. Speaker, I thank the gentleman for
yielding me time.
Mr. Speaker, it is a great honor to be here today in support of
improving the quality of life for the men and women of our military and
their loved ones with this Armed Forces Tax Fairness Act.
Let me begin by saying how extremely proud I am of the men and women
who serve in our military, as well as their families. No matter where I
go, I have the absolute rapt attention from everyone when I talk about
members of our Armed Services and the great job they are doing today. I
hope that our troops know that all across the Nation, citizens are
proud of our troops and that Americans are grateful for the sacrifices
that they and their families make for the defense of our Nation.
The bill we debate here today will put some muscle behind our
statements of appreciation. While one could never, ever, put a price on
life, as a very small token of respect and condolences, the military
provides a death benefit for survivors called a death gratuity after
the loss of a loved one. This money can be used to fly family members
to a funeral or pay for memorial service expenses.
Unfortunately, in the last decade a large portion of that money has
gone back to the Federal Government. The death gratuity was increased
from
[[Page H4367]]
$3,000 to $6,000 during the Persian Gulf War, but our Tax Code failed
to keep up with the military changes. As a result, only half of that
$6,000 is tax-free today.
During times of war and times of peace, every military family prays
for the safety of their loved ones. A visit by a military chaplain
bearing bad news one day is only compounded by the horror of the tax
man soon after.
Taxing the loved ones' loss is one of the most inappropriate,
irresponsible and immoral forms of taxation. Today's action will change
that. This exclusion would be effective for those who died in the
Pentagon, have fought for freedom in Afghanistan, and any service
member killed while defending this country on September 11 or since
that tragic day.
Mr. Speaker, I remember when my wife talked about the chaplain coming
up to her front door just when I was missing in action. Those families
who have suffered, suffered through the death of a loved one killed in
action by terrorism, should not have to give one nickel more to Uncle
Sam.
The other important change being made concerns housing of military
families. The act would provide a reasonable accommodation to members
of the military so they, too, can benefit from the current $500,000
exclusion from capital gains on the sale of a home.
To get this exclusion, a family must live in a home for at least 2 of
the previous 5 years. This is generally reasonable, but for those
serving in the military, such a requirement is out of their control
when their orders ship them to any of the four corners of the earth.
I know firsthand about being transferred. As a 29-year veteran of the
Air Force, my wife Shirley and our three kids and I moved 17 times. It
is a reality of military life. It is fair for the Tax Code to hold them
harmless for the time when they are not living in their own homes
because of military orders.
{time} 1300
Do not worry. Service members will not be able to become real estate
moguls by buying property all over the country and getting this
benefit. It is only relevant for one property per family.
Today's action is one more way Congress can say ``thank you'' to our
brave military men and women, as well as their families. I hope the
Senate follows suit for the families and for freedom, and sends this
bill to the President soon.
Mr. HOUGHTON. Mr. Speaker, I thank the gentleman from Texas very much
for those wonderful and eloquent words.
Mr. Speaker, I yield 2 minutes to the gentleman from North Carolina
(Mr. Jones).
Mr. JONES of North Carolina. Mr. Speaker, I want to first thank the
gentleman from California (Mr. Thomas) and the gentleman from New York
(Mr. Rangel) and the gentleman from New York (Mr. Houghton) and the
gentleman from New York (Mr. McNulty) for bringing this legislation
forward.
I think, after the celebration of our freedom last Thursday, that it
is just and appropriate that we should bring this legislation forward.
I actually got involved with H.R. 3973 2 or 3 months ago when I learned
that the tax was on the death gratuity of our military; and I worked
both sides of the political aisle. We had over 110 sponsors for that
legislation, because all of us were surprised that there was still that
tax on the death gratuity. So I want to compliment the chairman and the
ranking member for bringing this legislation forward.
I am pleased to say, as the gentleman from Texas (Mr. Johnson), who
was a former POW, said, that we have so many wonderful men and women in
uniform who serve this Nation and are willing to be called to give
their life for America at any time; and to eliminate this death tax,
death gratuity tax, on the family after they have lost a loved one is
absolutely the right thing to do. It should be, as it is to my
colleagues, unacceptable that this death gratuity tax is in the law
now, but we are going to eliminate that with the passage of this
legislation.
In addition, I would like to thank the gentleman from New York (Mr.
Houghton), the chairman of the subcommittee, and others, because I have
also shared their concern about the fact that our military was left out
of the Taxpayers Relief Act of 1997, when we allowed for the first sale
of a home that the capital gains tax would not apply. So I am pleased,
after 5 years, I say to my colleagues, that they are bringing this
forward and bringing this relief to the men and women in uniform.
The last point on that is that I did talk to Chairman Archer at the
time, back in 1998, and he said that it was a mistake, that the
military should have been included; so I am delighted with the efforts
of my colleagues that we are moving this forward.
Mr. Speaker, in closing, I would just like to say that I give my
strong support and appreciation to the leadership for bringing this act
to the floor of the House.
Mr. HOUGHTON. Mr. Speaker, I yield 3 minutes to the gentleman from
Mississippi (Mr. Pickering).
Mr. PICKERING. Mr. Speaker, to the gentleman from New York (Mr.
McNulty), I rise in proud support and sponsorship of the Armed Forces
Tax Relief Act of 2002.
As we return from the 4th of July recess, I can think of nothing more
appropriate or better to do than to correct the injustice and the wrong
code in our tax system that we would take a tax at the very worst time
in an armed service member's family's life when they have lost someone
in the line of duty, in combat. We, as a government, have said that we
will give that family a death benefit. We should not be taxing them on
that; we should be helping them.
Mr. Speaker, I agree with the gentleman from Texas. This is simply
wrong and immoral. We must do something. This act will correct that
injustice, and we will say to the family, we are proud of your family
member's service to our country. We want to help you in this most
difficult time, and we will not increase your burden, but we will stand
with you and try to comfort, not tax you.
The other thing that is most important in an armed service member's
family's life is when they move or sell their home and the quality of
life that is so critical to be able to sell a home and buy a home and
improve that home, and to create the comfort and the quality for their
children. We should not be taxing them in a way that makes that very
important and essential component of their quality of life more
difficult. So I am very proud to see that we are adjusting the Tax
Code.
In my home State of Mississippi, we have two military bases in
Meridian and Columbus, Mississippi. Our Air Guard and our other Guard
and Reserve forces are being deployed on an even more frequent basis,
and we should not count that time of their serving our country, being
deployed in foreign countries, fighting a war on terrorism or
conducting humanitarian missions or whatever their mission may be, and
then penalizing them as they try to sell their home and create a better
place and a better home for their family.
So this is an act that is long overdue. It is something that is done
in tribute on this, the week after the 4th of July, as our men and
women are fighting a war on terrorism. I can think of nothing more
appropriate or right to do as we today pass, later this afternoon, the
Armed Services Tax Fairness Act of 2002.
Mr. HOUGHTON. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. Gekas).
Mr. GEKAS. Mr. Speaker, I thank the gentleman for yielding me this
time.
When I served in the United States Army, I remember very well, I can
trace my steps during that time very vividly, I was transferred four
times. That is not unusual for any member of the Armed Forces, no
matter which branch it might be.
During that time, I did not have any property problems. I owned no
property, so some of these provisions which we attack here today would
not have applied to me. But some of the people with whom I served would
have faced tax consequences if we were in a position not to do
something, as we are doing here today.
The point is that transfers being a way of life, it is possible that
the capital gains tax relief that is granted to people otherwise would
not be granted
[[Page H4368]]
to a member of the armed services because of the rapid transferability
of every single member of the United States Army, Navy, Marines, the
entire gamut of the Armed Forces.
What we do here today is to grant members of the Armed Forces the
stability in their tax structure that they otherwise would not be able
to garner. So when we do this, we honor the members of the Armed Forces
and we pay heed to their special tax consequences if we did not have
the vision to foresee some of the problems that they might face. This
bill foresees it and remedies it.
Mr. HOUGHTON. Mr. Speaker, I yield 2 minutes to the gentleman from
Virginia (Mr. Forbes).
Mr. FORBES. Mr. Speaker, I thank the gentleman from New York for
yielding me this time.
I am very proud to rise in support of this important legislation. On
September 11, our Nation suffered a great tragedy. The enemies of
freedom made a deliberate attack upon our people and our soil and our
way of life. But those enemies were mistaken if they believed that such
an attack could turn us away from the principles of liberty and freedom
that we hold so dear.
Despite the strains of the war on terror, America's military is still
the strongest in the world. However, the true power behind America's
military might is not the high-tech tanks and planes and guns that we
have; it is the fighting American soldier, sailor, airman and Marine
that operates those weapons.
People are the true power behind America's military might. People fly
planes and drive tanks and ride on horseback through the mountains of
Afghanistan. People sail into harm's way and launch from the decks of
aircraft carriers. People guard over the very freedom that makes this
country the best in the world. There is no warfighting without
warfighters, and if we do not protect our people, we will lose them.
Only two things in life they say are certain: death and taxes. But
how in the world can we possibly continue to justify penalizing our
service members who risk their lives to protect this government by then
turning around and taxing them on the benefits their families receive
because they gave their lives for us? It makes absolutely no sense for
our government to bestow a gratuity upon the American service member
only so that we can take it away after he has given the ultimate
sacrifice.
Please join me in supporting this important legislation to remove
death gratuity payments from members of the armed services.
Mr. McNULTY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I work very hard these days on trying to keep my
priorities straight, and part of that is remembering that had it not
been for all of the men and women who wear the uniform of the United
States military through the years, I would not have the privilege as an
American citizen of going around bragging, as I often do, about how we
live in the freest and most open democracy on the face of the Earth.
Freedom is not free. We have paid a tremendous price for it. I try
not to let a day go by without remembering with deep gratitude all of
those who, like my own brother, Bill, made the supreme sacrifice, and
all of those who, like many members of this Chamber, served in our
Armed Forces, came back home, continued to render outstanding service
and raise beautiful families to carry on their fine traditions.
Like many Members, I attended a number of events over the July 4th
weekend. One of them was on Sunday, July 7th, with survivors of the
Battle of Saipan. They recalled with great sorrow how 80 percent of the
people that they served with at the time did not come home alive.
But they survived. This was a very special group, Mr. Speaker,
because they had never received the medals that they had earned 58
years before. Thankfully, one of the things that we could do, as
Members of Congress, is to try to rectify that.
On that day, I had the honor of pinning on their lapels literally
dozens of those medals, including Bronze Stars and Purple Hearts, which
they earned 58 years prior to the day, but had never received. People
like Nick Grinaldo and Joe Mariano, Adam Weasack, Ralph Colangione,
Frank Pusatere, and Sammy DiNova; and people like the gentleman from
Texas (Mr. Johnson), who just left this Chamber, who served our
country, was a prisoner of war, who endured torture on our behalf.
These are the reasons why, when I get up in the morning, my
priorities, Mr. Speaker, are to thank God for my life and veterans for
my way of life.
Beyond winning the two great World Wars of this century, think of
what their service and their vigilance has meant just in the past
decade or so: the democratization of all of Eastern Europe. And I can
remember, as those Communist countries were falling in 1989, Erich
Honecker, then the leader of Germany, standing up before the world and
making the pronouncement, ``This is where it stops. It shall not happen
here,'' meaning the democracy movement. Three weeks later he was no
longer the leader of East Germany, replaced by Egon Krenz, who decided
to adopt what he called the interpretation as, ``the moderate hard
line,'' meaning he was going to try to preserve the Communist system
and just appease the democratic movement. And he was quickly
dispatched, and we know the rest of the story.
What a great thrill it was for me in the following spring, in the
spring of 1990, to travel and visit our troops in Germany. They flew me
into Berlin and they took me to the Berlin Wall, as the people were out
there with their hammers and chisels, tearing down the wall piece by
piece. Our soldiers made that happen. I got a hammer and chisel, and I
went out there and I banged away at the wall myself, and I brought back
some of those pieces of wall and gave them to veterans and thanked them
for what they had done for the people of that region and for every
citizen of the Free World.
And the year after that, the breakup of the Soviet Union into 15
individual democratic republics, who would have predicted that even a
short time prior?
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I thank this body for sending me over to one of those republics when
they were having their independence referendum in Armenia. I went over
with three of my other colleagues and watched in awe as 99.5 percent of
the people over the age of 18 in that country went out and voted, a
privilege none of them had experienced before in their lives. I watched
them stand in line for hours for the privilege of the right to vote.
Then it was a beautiful scene, because when they finished voting,
they did not go home. They had little banquets in every little polling
place to celebrate their independence. What a great thrill it was for
me as a Representative of the United States Congress to be there with
them the next day in the streets of Yeravan, their capital, as they
danced and sang and shouted (Armenian phrase), long live free and
independent Armenia, and then pointed to the United States of America
as their example of what they wanted to be as a democracy.
At that moment, I was never more proud to be an American. But I
remembered why I had that feeling: the men and women who put on the
uniform of the United States military through the years and put their
lives on the line for me, for my family, and every citizen of this
country.
This bill today, Mr. Speaker, is peanuts; it is small-time stuff; it
is a couple of minor tax breaks. But we should enact it and build on it
and remember why we have the great privileges we have in this country:
the men and women of our Armed Forces.
Mr. Speaker, I urge my colleagues to support this legislation, and I
yield back the balance of my time.
Mr. HOUGHTON. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to thank the gentleman from New York (Mr.
McNulty) for those wonderful words. Many strong words have been uttered
by many strong people here, and I will not try to add to those.
Suffice it to say, Mr. Speaker, that this is a fair bill, it is the
right bill, it is the right bill at the right time; and I would like
to, as with the gentleman from New York (Mr. McNulty), urge Members to
support H.R. 5063.
Mr. GILMAN. Mr. Speaker, I rise today in strong support of H.R. 5063,
the Armed Services Tax Fairness Act.
[[Page H4369]]
Everyday the men and women of the Armed Services risk their lives to
defend our country. After September 11th the burden upon the men and
women in uniform has grown exponentially. As it is, many in the Armed
Forces claim that their pay is low. The least that we could do would be
to give those who serve our country some type of financial relief.
Back in 1991, the gratuity death payment was increased from $3,000 to
$6,000, however the Tax Code was not adjusted to reflect the change. As
a result only the first $3,000 is truly tax-free. House Resolution 5063
would change this so that all of the gratuity death payment money would
be exempt from taxes.
Furthermore, this bill would protect armed services personnel who are
transferred to take advantage of capital gains tax relief on any home
sales. Currently, the law states that a person is not subject to
capital gains tax on the first $250,000 when selling a home and
$500,000 for a married couple. However, only people who live in their
home for at least 2 out of the past 5 years can take advantage of
exemption. Armed service men and women often are not able to satisfy
the 5-year rule and therefore are not able to take advantage of this
tax relief. House Resolution 5063 would address this by providing that
even when men and women of the Armed Forces are transferred, it will
put them in the same position as if they had been living at home while
serving elsewhere.
Accordingly, I urge all of our colleagues to support H.R. 5063, the
Armed Services Tax Fairness Act. This is simply the right and fair
thing to do for all those in uniform who risk their lives everyday for
our Nation.
Mr. HOUGHTON. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Petri). The question is on the motion
offered by the gentleman from New York (Mr. Houghton) that the House
suspend the rules and pass the bill, H.R. 5063.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. HOUGHTON. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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