[Congressional Record Volume 149, Number 20 (Tuesday, February 4, 2003)]
[Senate]
[Pages S1885-S1886]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 284. A bill to amend the Internal Revenue Code of 1986 to provide 
a special rule for members of the uniformed services and the Foreign 
Service in determining the exclusion of gain from the sale of a 
principal residence; to the Committee on Finance.
  Mr. McCAIN. Mr. President, I am proud to sponsor the Military Home 
Owners Equity Act of 2003, S. 284. This is important legislation which 
I have been privileged to introduce in the Senate during previous 
Congresses. This legislation would allow members of the Uniformed 
Services, who are away on extended active duty, to qualify for the same 
tax relief on the profit generated when they sell their main residence 
as other Americans. I am pleased to announce that Secretary of State 
Colin Powell fully supports this legislation and this legislation 
enjoys overwhelming support by the senior uniformed leadership, the 
Joint Chiefs of Staff, as well as the Office of Management and Budget 
Director Mitch Daniels, the 31-member associations of the Military 
Coalition, the American Foreign Service Association, and the American 
Bar Association.
  The average American participates in our Nation's growth through home 
ownership. Appreciation in the value of a home allows everyday 
Americans to participate in our country's prosperity. Fortunately, the 
Taxpayer Relief Act of 1997 recognized this and provided this break to 
lessen the amount of tax most Americans will pay on the profit they 
make when they sell their homes. Unfortunately, the 1997 home sale 
provision unintentionally discourages home ownership among members of 
the Uniformed and Foreign Services.
  This bill will not create a new tax benefit; it merely modifies 
current law to include the time members of the Uniformed Services are 
away from home on active duty when calculating the number of years the 
homeowners has lived in their primary residence. In short, this bill is 
narrowly tailored to remedy a specific dilemma.
  The Taxpayer Relief Act of 1997 delivered sweeping tax relief to 
millions of Americans through a wide variety of important tax changes 
that affect individuals, families, investors and businesses. It was 
also one of the most complex tax laws enacted in recent history.
  As with any complex legislation, there are winners and losers. But in 
this instance, there are unintended losers: members of the Uniformed 
and Foreign Services.
  The 1997 act 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 2 of the 5 years preceding the sale. This provision 
primarily benefitted elderly taxpayers, while not providing any relief 
to younger taxpayers and their families.
  Fortunately, the 1997 act addressed this issue. Under this law, 
taxpayers who sell their principal residence on or after May 7, 1997, 
are not taxed on the first $250,000 of profit from the sale, joint 
filers are not taxed on the first $500,000 of profit they make from 
selling their principal residence. The taxpayers must meet two 
requirements to qualify for this tax relief. The taxpayer must one, own 
the home for at least 2 of the 5 years preceding the sale, and two, 
live in the home as their main home for at least 2 years of the last 5 
years.

[[Page S1886]]

  I applaud the bipartisan cooperation that resulted in this much-
needed form of tax relief. The home sales provision sounds great, and 
it is. Unfortunately,the second part of this eligibility test 
unintentionally and unfairly prohibits many of the women and men who 
serve this country overseas from qualifying for this beneficial tax 
relief.
  Constant travel across the United States and abroad is inherent in 
the Uniformed and Foreign Services. Nonetheless, some members of these 
Services choose to purchase a home in a certain locale, even though 
they will not live there much of the time. Under the new law, if they 
do not have a spouse who resides in the house during their absence, 
they will not qualify for the full benefit of the new home sales 
provision, because no one ``lives'' in the home for the required period 
of time. The law is prejudiced against families that serve our Nation 
abroad. They would not qualify for the home sales exclusion because 
neither spouse ``live'' in the house for enough time to qualify for the 
exclusion.
  This bill simply remedies an inequality in the 1997 law. The bill 
amends the Internal Revenue Code so that members of the Uniformed and 
Foreign Services will be considered to be using their house as their 
main residence for any period that they are assigned overseas in the 
execution of their duties. In short, they will be deemed to be using 
their house as their main home, even if they are stationed in Bosnia, 
the Persian Gulf, in the ``no man's land,'' commonly called the DMZ 
between North and South Korea, or anywhere else they are assigned.
  In the wake of September 11, our Armed Forces are now deployed to an 
unprecedented number of locations. They are away from their primary 
homes, protecting and furthering the freedoms we Americans hold so 
dear. We cannot afford to discourage military service by penalizing 
military personnel with higher taxes merely because they are doing 
their job. Military service entails sacrifice, such as long periods of 
time away from friends and family and the constant threat of 
mobilization into hostile territory. We must not use the tax code to 
heap additional burdens upon our women and men in uniform.
  In my view, the way to decrease the likelihood of further 
inequalities in the tax code, intentional or otherwise, is to adopt a 
fairer, flatter tax system that is far less complicated than our 
current system. But, in the meantime, we must insure the Tax Code is as 
fair and equitable as possible.
  The Taxpayers' Relief Act of 1997 was designed to provide sweeping 
tax relief to all Americans, including those who serve this country 
abroad. Yes, it is true that there are winners and losers in any tax 
code, but, this inequity was unintended. Enacting this narrowly 
tailored remedy to grant equal tax relief to the members of our 
Uniformed and Foreign Services restores fairness and consistency to our 
increasingly complex Tax Code.
  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. 284

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL 
                   RESIDENCE BY A MEMBER OF THE UNIFORMED SERVICES 
                   OR THE FOREIGN SERVICE.

       (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 redesignating 
     paragraph (9) as paragraph (10) and by inserting after 
     paragraph (8) the following new paragraph:
       ``(9) 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 subsections (a) and (c)(1)(B) and paragraph (7) 
     of this subsection 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 of the United States.
       ``(B) Maximum period of suspension.--The 5-year period 
     described in subsection (a) shall not be extended more than 
     10 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 50 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 of the united states.--The term 
     `member of the Foreign Service of the United States' 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.
       ``(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 amendments 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 amendments 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.
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