[Congressional Record Volume 148, Number 129 (Friday, October 4, 2002)]
[Senate]
[Pages S9978-S9979]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX RELIEF FOR MEMBERS OF THE ARMED FORCES
Mr. GRAHAM. Mr. President, I would like to thank Senators Baucus and
Grassley for introducing the Armed Forces Tax Fairness Act, and for
including a very important provision within it. I, along with Senators
Lincoln and McCain, am proud to cosponsor a specific provision that
provides tax relief for members of the military and foreign service
officers serving on assignment abroad. This provision provides tax
relief on the profit generated by the sale of a primary residence--
allowing those who serve our country the ability to exclude their time
living abroad from the calculation of total years living in their
primary residence.
This provision does not create a new tax benefit, it merely modifies
current law. The Taxpayer Relief Act of 1997 gave 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 live
in the residence for two of the five years preceding the sale and be at
least 55 years old. This policy provided no tax 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 filers are not taxed on their first $500,000 of
profit. To qualify for this tax relief, the taxpayer must meet two
requirements: No. 1, they must own the home for at least two of the
five years preceding the sale; and No. 2, they must live in the home as
their primary residence for at least two of the last five years.
Unfortunately, this second requirement unintentionally and unfairly
prohibits men and women in the armed services and foreign service from
qualifying for this beneficial tax relief when their service mandates
that they live abroad for longer periods of time.
The bill being considered today remedies the inequality in the
Taxpayer Relief Act of 1997. While military and foreign service
professionals working abroad would still be required to own and live in
their home for at least 2 years, the Internal Revenue Code would be
amended to suspend the five-year determination period--when members of
the military and foreign service are away from home.
The 1997 home sale provision was bad fiscal policy because as it
unintentionally discouraged government personnel from owning their own
homes. We all know that home ownership has numerous benefits. It
provides Americans with a valuable sense of community. It adds
stability to our Nation's neighborhoods, and generates valuable
property taxes for our Nation's communities. Home ownership should be
commended and encouraged, and members of the military and foreign
service should not be penalized with higher taxes simply because they
are on extended assignment abroad. Enacting this remedy will grant
equal and fair tax relief to those U.S. citizens who serve our country
away from home.
Ms. LANDRIEU. Mr. President, I want to commend the chairman and
ranking member of the Finance Committee for bringing the Armed Forces
Tax Fairness Act of 2002 to the floor and winning Senate passage of
this important legislation. This bill contains some valuable tax
benefits for the men and women who defend out country, fighting the war
against terrorism.
I am very pleased that this bill contains provisions based on a bill
I introduced, S. 2807, to clarify that dependent care benefits paid to
our armed forces are excluded from their gross incomes. S. 2807 fixes
what I believe was an oversight in the Tax Reform Act of 1986. That Act
consolidated the laws regarding the tax treatment of certain military
benefits. The conference report to the 1986 Act contained a long list
of benefits to be excluded from the gross incomes of military
personnel. According to the report, this list was to be exhaustive. The
problem was that dependent and child care benefits were not included on
the list.
The Treasury Secretary does have the authority to expand the list of
benefits in the 1986 Act, but so far no Treasury Secretary has chosen
to expand the list. As a matter of practice, we do not tax these
benefits, but the Department of Defense is concerned that this may
change without greater clarification. The Defense Department came to us
to clarify the tax treatment of dependent and child care benefits once
and for all. I was proud to help them. I thank Senator Baucus, the
chairman of the Finance Committee and the ranking member, Senator
Grassley, for including my legislation in this package.
Throughout our history, in times of war and in times of peace we have
worked to make sure that our armed forces have everything they need and
we have spared no expense in this regard. The Armed Forces Tax Fairness
Act of 2002 is another symbol of this support. I hope the House of
Representatives will pass this bill as well and move it on to the
President's desk for passage into law before we adjourn this session of
Congress. The men and women of our armed forces and their families
deserve this legislation.
Mrs. CARNAHAN. Mr. President, last night the Senate acted to
demonstrate our support and gratitude for those brave men and women who
are fighting to protect our freedom and our Nation's interests abroad.
I am proud to be an original cosponsor of the Armed Forces Tax Fairness
Act. These common sense tax cuts rectify injustices in our tax code
that punish those who serve in our military.
Even in times of peace, extraordinary demands are placed on our
troops. They are separated from their families. They endure physically
grueling training. And most important, they commit to put their own
lives at risk for the sake of this country. Since last year's attacks,
we have become even more dependent on the dedication of our armed
forces.
This reality makes it all the more important that we ensure our tax
laws are fair to those who serve in our military. In August, I
introduced the Honoring Our Heroes Act. Under my bill, families of
soldiers who lose their lives while serving their country do not have
to pay income taxes on the death benefit payment the federal government
provides. Under current law the government provides $6,000 to families
of servicemen and women who die. However, families are required to pay
income tax on half of that benefit. My legislation enables a family to
use the entire death benefit to cover funeral or other expenses they
face after losing their loved one.
The bill passed by the Senate last night includes my bill, and other
improvements to our tax code. Reservists and members of the National
Guard will be pleased to know that this bill enables them to deduct
their service-related travel expenses even if they do not itemize their
tax deductions. This bill also ensures that service members will not be
penalized when they sell their houses after a period of service away
from home. In addition, this legislation provides automatic filing
extensions to military personnel who are assigned to contingency
operations and would naturally have trouble meeting the regular IRS
deadlines.
These and other tax cuts for our service members are paid for by
closing a horrible loophole in our tax code. Currently wealthy
individuals can escape paying taxes by renouncing their U.S.
citizenship. This is unconscionable. Citizens who have benefited from
the freedom and opportunity provided by
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this country should not be allowed to avoid paying income tax by
renouncing their citizenship. I believe we owe it to those fighting for
our country's freedom to close this loophole.
I am pleased to work with my colleagues on both sides of the aisle to
make our tax code more fair. The United States is extremely grateful
for the hard work and dedication of our armed forces. And the bill we
passed last night will ensure that our tax code reflects this
gratitude.
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