[Congressional Record Volume 148, Number 130 (Monday, October 7, 2002)]
[House]
[Pages H7164-H7167]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ARMED FORCES TAX FAIRNESS ACT OF 2002
Mr. WELLER. Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 5557) to amend the Internal Revenue Code of 1986 to provide
a special rule for members of the uniformed services and Foreign
Service 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, and for other
purposes.
The Clerk read as follows:
H.R. 5557
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 AND
FOREIGN SERVICE 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:
``(10) Members of uniformed services and foreign service.--
``(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 or of the
Foreign Service.
``(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 150 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) Foreign service.--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 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; Special Rule.--
(1) Effective date.--The amendment made by this section
shall take effect as if included in the amendments made by
section 312 of the Taxpayer Relief Act of 1997.
(2) Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendment made by this
section is prevented at any time before the close of the 1-
year period beginning on the date of the enactment of this
Act by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period.
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.
SEC. 4. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF
DEFENSE HOMEOWNERS ASSISTANCE PROGRAM.
(a) In General.--Section 132(a) of the Internal Revenue
Code of 1986 (relating to the exclusion from gross income of
certain fringe benefits) is amended by striking ``or'' at the
end of paragraph (6), by striking the period at the end of
paragraph (7) and inserting ``, or'' and by adding at the end
the following new paragraph:
``(8) qualified military base realignment and closure
fringe.''.
(b) Qualified Military Base Realignment and Closure
Fringe.--Section 132 of such Code is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Qualified Military Base Realignment and Closure
Fringe.--For purposes of this section, the term `qualified
military base realignment and closure fringe' means 1 or more
payments under the authority of section 1013 of the
Demonstration Cities and Metropolitan Development Act of 1966
(42 U.S.C. 3374) to offset the adverse effects on housing
values as a result of a military base realignment or
closure.''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made after the date of the enactment
of this Act.
SEC. 5. EXPANSION OF COMBAT ZONE FILING RULES TO CONTINGENCY
OPERATIONS.
(a) In General.--Section 7508(a) of the Internal Revenue
Code of 1986 (relating to time for performing certain acts
postponed by reason of service in combat zone) is amended--
(1) by inserting ``or when deployed outside the United
States away from the individual's permanent duty station
while participating in an operation designated by the
Secretary of Defense as a contingency operation (as defined
in section 101(a)(13) of title 10, United States Code) or
which became such a contingency operation by operation of
law'' after ``section 112'',
(2) by inserting in the first sentence ``or at any time
during the period of such contingency operation'' after ``for
purposes of such section'',
(3) by inserting ``or operation'' after ``such an area'',
and
(4) by inserting ``or operation'' after ``such area''.
(b) Conforming Amendments.--
(1) Section 7508(d) of such Code is amended by inserting
``or contingency operation'' after ``area''.
(2) The heading for section 7508 of such Code is amended by
inserting ``OR CONTINGENCY OPERATION'' after ``COMBAT ZONE''.
[[Page H7165]]
(3) The item relating to section 7508 of such Code in the
table of sections for chapter 77 is amended by inserting ``or
contingency operation'' after ``combat zone''.
(c) Effective Date.--The amendments made by this section
shall apply to any period for performing an act which has not
expired before the date of the enactment of this Act.
SEC. 6. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR EXEMPTION
FROM TAX FOR CERTAIN VETERANS' ORGANIZATIONS.
(a) In General.--Subparagraph (B) of section 501(c)(19) of
the Internal Revenue Code of 1986 (relating to list of exempt
organizations) is amended by striking ``or widowers'' and
inserting ``, widowers, or ancestors or lineal descendants''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 7. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT
CARE ASSISTANCE PROGRAMS.
(a) In General.--Section 134(b) of the Internal Revenue
Code of 1986 (defining qualified military benefit) is amended
by adding at the end the following new paragraph:
``(4) Clarification of certain benefits.--For purposes of
paragraph (1), such term includes any dependent care
assistance program (as in effect on the date of the enactment
of this paragraph) for any individual described in paragraph
(1)(A).''.
(b) Conforming Amendments.--
(1) Section 134(b)(3)(A) of such Code (as amended by
section 3) is further amended by inserting ``and paragraph
(4)'' after ``subparagraphs (B) and (C)''.
(2) Section 3121(a)(18) of such Code is amended by striking
``or 129'' and inserting ``, 129, or 134(b)(4)''.
(3) Section 3306(b)(13) of such Code is amended by striking
``or 129'' and inserting ``, 129, or 134(b)(4)''.
(4) Section 3401(a)(18) of such Code is amended by striking
``or 129'' and inserting ``, 129, or 134(b)(4)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
(d) No Inference.--No inference may be drawn from the
amendments made by this section with respect to the tax
treatment of any amounts under the program described in
section 134(b)(4) of the Internal Revenue Code of 1986 (as
added by this section) for any taxable year beginning before
January 1, 2002.
SEC. 8. PROTECTION OF SOCIAL SECURITY.
The amounts transferred to any trust fund under title II of
the Social Security Act shall be determined as if this Act
had not been enacted.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Illinois (Mr. Weller) and the gentleman from California (Mr. Becerra)
each will control 20 minutes.
The Chair recognizes the gentleman from Illinois (Mr. Weller).
Mr. WELLER. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, on July 9, 2002, the House of Representatives passed
H.R. 5063, the Armed Forces Tax Fairness Act of 2002, by a unanimous
bipartisan vote of 413 to 0. That legislation contained two important
provisions that would restore equity to the Tax Code for Members of the
Armed Forces.
The Senate expanded the bill by adding other provisions and passed
H.R. 5063 by unanimous consent on October 3. The bill before us today,
H.R. 5557, combines the House- and Senate-passed bills to provide
several important tax benefits to members of our Nation's military.
First, H.R. 5557 fixes an inequity in the law relating to the capital
gains exclusion on home sales. Under the present law, the first
$250,000 of gain from the sale of a home is not subject to capital
gains tax if the individual lived in the home for 2 of the past 5
years. The exclusion is $500,000 for married couples.
Members of the military and Foreign Service often cannot meet this
residency requirement if they are transferred on extended duty. As a
result, military personnel, through no fault of their own, cannot take
advantage of the tax relief when they sell their homes.
The Armed Forces Tax Fairness Act of 2002 fixes this inequity by
suspending the 5-year ownership test when a member of the military or
Foreign Service is transferred on extended duty more than 150 miles
from home.
The second provision of the bill provides tax-free treatment for
gratuity death payments paid to survivors of military personnel. Under
present law, survivors of the members of the Armed Forces receive a
$6,000 death gratuity payment, but only half of this payment is tax-
free.
{time} 2200
H.R. 5063 updates the tax codes by providing tax-free treatment for
the entire and full $6,000 amount.
Third, it provides that payments made under the Homeowners'
Assistance Program are tax free. These payments are made to compensate
members of the Armed Forces if they suffer a decline in home value
because of a military base closure or realignment.
Fourth, the bill clarifies that dependent care benefits provided
under a military dependent care assistance program are excludable from
income. As a result, the value of employer-provided dependent care is
not taxed.
Fifth, the definition of a qualified veterans organization is
expanded so that more organizations qualify under the law. And,
finally, the bill extends several tax filing extensions to individuals
serving in a contingency operation. These benefits are already provided
to individuals serving in a combat zone.
Madam Speaker, these provisions are noncontroversial and they are
fair. I hope the House will join me in supporting this legislation
today; and I hope that the other body, the Senate, will quickly take up
the bill and send it to the President's desk for his signature before
we adjourn in this Congress.
Madam Speaker, I reserve the balance of my time.
Mr. BECERRA. Madam Speaker, I yield myself such time as I might
consume.
Madam Speaker, the House passed H.R. 5063, the Armed Forces Tax
Fairness Act of 2002 back on July 9, 2002, by a vote of 413 to zero.
Last Thursday, October 3, the Senate approved H.R. 5063 with an
amendment by unanimous consent and returned the same bill to the House.
The bill before us is nearly identical to the Senate-passed version of
H.R. 5063 with two key differences, as my friends and colleague from
Illinois (Mr. Weller) has mentioned.
Even with these differences, even with some differences in the bill
that the Senate passed which I will explore in just a few moments in
more detail in my remarks, I feel it is again important for us to
support our military and pass H.R. 5557. During these times when we
depend on our men and women in uniform to perform the highest levels of
service, and we place them in harm's way, and I need not remind people
today that we have troops remaining in Afghanistan, we have National
Guard troops who are patrolling our borders, and in the days ahead we
will be debating the merits of the President's call for the use of
force against Iraq. But given all of that, these benefits that we are
trying to provide under this legislation should go to our men and women
in uniform without delay.
The talk of war quickly reminds us of the willingness of our military
men and women to place their lives at risk for each of us and for our
country. The families deserve all the support and help we can provide.
First, this bill provides much-needed relief for favorable tax
treatment to death benefits that are paid on behalf of military
personnel who die in the line of duty. While the deaths gratuity
received by spouses is $6,000, only half of that amount, $3,000, is
currently excluded for income for tax purposes. The other $3,000 in
deaths benefits incongruously gets taxed.
Under this bill, the full $6,000 that the surviving spouse of that
man or woman who served our country who receive death benefits would be
excluded from income for tax purposes.
Secondly, the bill would ensure that military families do not lose
the current law principle residence tax gains exclusion because of
extended military assignments away from home. Under current law, any
American who is a taxpayer receives exclusion from taxes of up to
$250,000 as an individual or if you are married and you file jointly,
up to $500,000 of any gain that is realized on the sale of your
principal residence. So if Jane Smith were to purchase a home today for
$100,000 and in something more than 2 years have the good fortune to
sell it for $350,000, Jane Smith under our current tax law would not
have to pay any taxes on the $250,000 profit on the sale of her
principal residence.
Many of our military personnel cannot receive this same military tax
benefit because they are stationed away from home for an extended tour
of duty. By being away from their home
[[Page H7166]]
they fail to meet one of the criteria for qualifying for this tax
exclusion. One of the requirements of our tax law is that the taxpayer
must have lived, owned or used his residence as the principal residence
for at least 2 of the previous 5 years prior to the sale or exchange of
the property.
H.R. 5557 addresses this inequity and extends appropriate
consideration in tax treatment to our men and women in uniform.
Madam Speaker, as I have said, this bill includes several positive
changes from the original House-passed bill that were added by the
Senate. Unfortunately, two important Senate-passed provisions are not
included in this bill that I would like to mention because they also
affect the livelihood of our men and women in uniform.
First, the Senate had included an above the line deduction for
overnight travel expenses of National Guard and Reserve members in
their version of the bill. This provision would have benefited men and
women who do not itemize in their tax filing, whether it is a 1040, a
1040EZ form; but for those men and women in uniform in the National
Guard who do not take the time or do not have enough deductions to fill
out and itemize those deductions, those individuals would not be able
to benefit as a result of this legislation because the provision which
had been included by the Senate to allow for an above the line
deduction for these overnight travel expenses of National Guards and
Reserve members has been excluded from this final version of the bill.
Many of these men and women who would have benefited happen to be
modest-income soldiers often with family and they would have benefited
most from the extra money in their pocket. The Senate by the way passed
this provision by unanimous consent; and unfortunately, as I said, it
was not included in this version of the House bill.
The second provision I would like to mention would have been the
provision that would have paid for the cost of this legislation. We
know from the Congressional Budget Office that we are projected to have
somewhere on the order of a $300 billion deficit, not just for this
year, but for several years to come. If you look at what we are doing
these days to Social Security and Medicare and how we are beginning to
use these monies from the trust fund because of the fact that we now
are in deficit, it makes you wonder why we would want to put forward
bills that were not paid for. Because every time we do that we take the
chance of having to take out money from Social Security and from the
Medicare trust funds. And that is not fair for those who are retired or
preparing to retire.
We should be responsible and pay for these bills that we have before
us, especially this one because I believe every Member of this House
would agree that we should do this for our men and women in uniform. A
significant provision to pay for the cost of this legislation, which
was included by the Senate but dropped by this House, would have really
been something that I think most Americans would have agreed with
almost immediately. And that would have been a provision that would
have taken what we have in current law that says that an individual who
relinquishes his or her U.S. citizenship or terminates his or her U.S.
residency for the purpose of avoiding U.S. income tax estate or gift
taxes right now is allowed to do that. But under the Senate provision
we would have said to anyone who wished to become an expatriate for the
purposes of avoiding taxes that he or she would not be able to escape
his or her responsibilities.
While we have men and women today, whether in Afghanistan or on our
borders trying to protect us who are willing to put their lives in
harm's way, we should not have individuals who are trying to relinquish
their U.S. citizenship simply to avoid paying U.S. taxes to help us pay
for the costs of providing our men and women the best equipment, the
best training that they need in order to protect us.
The provision that the Senate had included would have raised over
$650 million over the next 10 years from these expatriates who are
trying to evade U.S. taxation by giving up, relinquishing their U.S.
citizenship. That would have been more than two times the amount of
money necessary to pay for the cost of providing these benefits to our
men and women in uniform, which we would all agree are good to provide.
At the very time that we are asking our military to be prepared to
defend America, it seems wholly inconsistent to allow those people who
should help us pay for the cost of supporting our men and women to
escape any taxation and to go abroad by relinquishing their U.S.
citizenship and avoid that tax.
Madam Speaker, it is important that we again look at this legislation
and pass it as quickly as possible. The Armed Forces Tax Fairness Act
is something that we must do now. We will send this bill to the Senate
and we hope we get a quick signature from the President.
I join my colleague from Illinois (Mr. Weller), and I believe every
Member who would have an opportunity to speak on this legislation would
say that it is time that we do this. I join some of my colleagues in
also expressing some dismay that we are not paying for this
legislation. As much as we need it, we should be responsible and pay
for it. But what we should do is pass it now. For those reasons, Madam
Speaker, I too stand in support of this legislation and urge my
colleagues to also vote for it.
Madam Speaker, I yield back the balance of my time.
Mr. WELLER. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, this is important legislation. Our Nation is making
very tough decisions and this Congress is making very tough decisions,
and we have military men and women who are currently in combat in
Afghanistan.
This is important legislation that protects their personal interest
while we ask them to go overseas and put their lives at risk for our
freedom as well as in our efforts to win the war on terrorism. And as
we all know, the war on terrorism will neither begin or end in
Afghanistan, nor will it end in a few short months, but it is expected
to last years.
This legislation deserves bipartisan support. And in quick reaction
to my friend and colleague's comment, I would note that there are no
funds at all, none, no funds taken from Social Security or Medicare to
provide for this legislation to help our military men and women. And we
are not touching Social Security or Medicare. But I do want to ask for
strong bipartisan support for this legislation. It is important for our
military men and women that we stand in strong bipartisan support of
what they do when we ask them to take the risks that they do.
As I noted earlier, this legislation has six provisions that benefit
working men and women who serve in the military and I ask for an
``aye'' vote.
Mr. BUYER. Mr. Speaker, the Medical Device User Fee and Modernization
Act addresses three crucial interests of the medical device community
and the patients and providers it serves.
First, it has been recognized for some time that the Food and Drug
Administration is not reviewing medical device applications in a timely
fashion. For this to happen, FDA needs adequate resources to have
personnel who have the necessary expertise to conduct reviews. This
bill would address this matter by imposing user fees on the medical
device community for the first time, to provide FDA additional funding
for hiring and maintaining a highly skilled workforce and to implement
infrastructure improvements. The FDA will also pledge to enhance its
performance in reviewing and evaluating device applications.
Second, the device community would like to see more utilization of
expert third parties in quality assurance of facilities and
manufacturing processes and review of applications. This measure will
provide flexibility in regard to inspection while retaining FDA's
authority in device manufacturing.
Finally, the bill addresses concerns over the labeling and reuse of
medical devices.
On the whole I think this is a balanced bill. The agreement on these
provisions was reached after much hard work and it is my view that all
parties negotiated in good faith to achieve the best agreement.
I am very appreciative of the adoption of several suggestions I have
made to ensure that children are well served by this bill. I am pleased
that the bill excludes from user fees those devices, both PMAs and
510(k)s, that are intended solely for a pediatric population. Hopefully
this will provide some incentive for manufacturers to address needs in
the pediatric population that cannot be met by devices used in adults.
I must also express my concerns over the user fee provisions. While I
will support the
[[Page H7167]]
bill, I am troubled by the level at which the bill defines a ``small''
company. The bill recognizes that there are differences in large and
small companies and their ability to pay user fees. The ``two-tiered''
approach to take in the application of user fees is the correct
approach to take. However, the bill defines a ``small'' manufacturer as
one with revenues of $10 million annually or less. This will capture
only around 8 percent of medical device companies. In my opinion, this
is too low and not adequate to meet the needs of small manufacturers. A
more appropriate level for a ``small'' manufacturer would be around $25
to $30 million in annual revenue, companies that have 50-70 employees.
The resources that must be invested in research and the testing
necessary before a company even goes to FDA with an application is
significant. There are individual innovators who have started companies
based upon their own hard work and research. . . . modern day Thomas
Edisons. While I would not say that they work out of their garages, it
is true that many ideas and advances in technology have come from hard
working individuals, who take the risk of starting their own medical
device company. I do not want to have the federal government enact
legislation that will stifle this innovation or make it impossible for
the small companies to become big companies.
This past summer, I met with the representatives of many small
medical device manufacturers based in Indiana. All these companies
wanted is a chance to develop their products and to compete. They are
very willing to play by the rules of safety and effectiveness that we
impose on all manufacturers as good public policy. But because of their
more limited resources, they do not want to be disadvantaged from the
big companies. I agree with their concerns and, therefore, I am
troubled by the level set in this bill.
Nonetheless, I intend to support the bill and I urge its adoption.
Mr. WELLER. Madam Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Ms. Hart). The question is on the motion
offered by the gentleman from Illinois (Mr. Weller) that the House
suspend the rules and pass the bill, H.R. 5557.
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. WELLER. Madam 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.
____________________