[Congressional Record Volume 148, Number 147 (Thursday, November 14, 2002)]
[Senate]
[Pages S11159-S11160]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 ARMED FORCES TAX FAIRNESS ACT OF 2002

  Mr. REID. Madam President, I ask unanimous consent that the Senate 
proceed to the consideration of H.R. 5557, which is now at the desk.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A 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.

  There being no objection, the Senate proceeded to consider the bill.


            TAX STATUS OF SERVICE PERSONNEL ON DIEGO GARCIA

  Mr. BAUCUS. The distinguished Senator from Louisiana, Ms. Landrieu 
has raised an issue with respect to the legislation before us. That 
legislation, H.R. 5557, deals with tax benefits for military service 
personnel. Senator Landrieu would like clarification from the 
Administration on the status of service men and women on the Island of 
Diego Garcia. These service personnel have participated in military 
operations as part of Operation Enduring Freedom and will participate 
in future military operations from that location. There is a question 
whether these members of the armed forces are entitled to be treated in 
the same manner as if such services were in a combat zone.
  Mr. GRASSLEY. Let me respond to the distinguished chairman on this 
point. At the request of the Senator from Louisiana, our staffs made 
inquiries of the administration on this question this evening. In 
discussion with Treasury officials, our staffs have been assured that 
the Treasury Department will look into this matter and work

[[Page S11160]]

with the Senator from Louisiana to address the questions raised by the 
Senator. We look forward to an expeditious response from the 
Administration.
  Mr. BAUCUS. I thank my good friend from Iowa.
  Mr. HARKIN. Madam President, I am pleased that we are passing the 
Armed Services Tax Fairness Act that will make a number of useful tax 
changes benefitting our military personnel including the National Guard 
and Reserve. It includes a provision that I introduced that broadens 
the allowable membership of veterans organizations so ancestors and 
descendants can be members. This will allow veterans organizations, 
particularly at the local chapter level to preserve as tax exempt a 
variety of their activities which otherwise would be subject to tax as 
the number of veterans who are members decline.
  Unfortunately, because of opposition from the House, this measure 
does not include a provision passed by the Senate on an earlier version 
of the Armed Services Tax Fairness Act that I feel very strongly about. 
I introduced it earlier this year. It was companion to a measure 
introduced by Congressman Rangel.
  My bill blocks the ability of the very rich to reduce their taxes by 
renouncing their U.S. citizenship. The Joint Tax Committee has 
estimated that it will raise $656 million from a very few people who I 
call Benedict Arnolds. These are people who turn their back on their 
country which provided so well for them so they can avoid paying their 
fair share of U.S. taxes.
  Under current law, there are special rules that apply to these former 
citizens that appear to recover funds lost to the Treasury. But, they 
are full of holes. Under the current regime, for 10 years after a U.S. 
citizen renounces his or her citizenship with a principal purpose of 
avoiding U.S. taxes, the person is taxed at the rates that would have 
applied had he or she remained a citizen. Actually the tax is nominally 
on a broader base of income and on more types of transactions. In 
addition, if the expatriate dies within 10 years of the expatriation, 
more types of assets are included in his or her estate. But, the 
reality is that taxes are very often not paid.
  The reality is that once a person has expatriated and removed U.S. 
assets from U.S. jurisdiction, it is extremely difficult to enforce the 
current rules, particularly for an entire decade after the citizenship 
is renounced. The measure I introduced simply provides that the very 
act of renouncing ones citizenship triggers the recognition of tax. So, 
rather than collecting tax every time an asset is sold over the next 
decade, my bill treats all of the assets of an expatriate as having 
been sold the day prior to when the person renounces their citizenship. 
The taxes are due up front rather than over time. In regard to estate 
taxes, rather than attempting to collect the tax from the estate of an 
expatriate not in U.S. jurisdiction, my measure taxes the inheritance 
of an heir remaining in the U.S. in such a way as to remove any tax 
benefit from the renouncement of citizenship.
  Madam President, $656 million in revenue from these very few former 
citizens is a lot of revenue that must be made up by loyal Americans or 
in higher debt that Americans will face. I intend to reintroduce my 
measure at the beginning of the next Congress and will be working hard 
for its passage at the earliest possible point.
  Mr. REID. I ask unanimous consent that the Baucus amendment at the 
desk be agreed to, the bill be read three times and passed, the motion 
to reconsider be laid on the table, and any statements be printed in 
the Record, with no intervening action or debate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 4961) was agreed to.
  (The amendment is printed in today's Record under ``Text of the 
Amendments.'')
  The bill (H.R. 5557), as amended, was read the third time and passed.

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