[Congressional Record Volume 149, Number 50 (Thursday, March 27, 2003)]
[Senate]
[Pages S4475-S4483]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            ARMED FORCES TAX FAIRNESS ACT OF 2003--Continued

  Mr. DeWINE. Mr. President, I rise today to share my strong support 
for this much needed and much deserved military tax package. I commend 
Chairman Grassley and my many colleagues who have worked so hard on 
this bill for such a long time. As we all know, this tax package is 
long overdue.
  As my colleagues know, the Armed Forces Tax Fairness Act of 2003 
would provide critical tax relief to our service men and women. 
Specifically, this bill would remedy several tax problems that unfairly 
penalize the men and women serving in our military and Foreign Service. 
Certainly now, more than ever, we must correct these inequities. It is 
the right thing to do.
  Mr. President, there are many service men and women from my home 
state of Ohio serving in our military today. My wife, Fran, and I pray 
for all of them and their families--we pray that they will be safe, 
wherever they are and in whatever capacity they are working. Many of 
these courageous men and women are in Iraq right now. Four of them from 
Ohio have been injured or are listed as missing. Both Army CPT Gregory 
Holden from Huron, OH, and Marine Corps Sgt. Jose Torres from Lorain, 
OH, have been injured in the war. And Army PVT Brandon Sloan from 
Bedford Heights, OH, and Marine Corps MSgt Robert Dowdy from Cleveland 
are listed as missing. I would like their families to know that we are 
praying for them. We pray for their recovery and their safe return 
home.
  Mr. President, as we debate the merits of this bill, I would like to 
take a moment to discuss a specific provision that I have worked on for 
more than two years--and that is a provision that would allow our 
National Guard and Reserve members to take deductions for travel 
expenses incurred getting to and from duty assignments. This initiative 
stems from legislation I first introduced two years ago, and then again 
this past January.
  Specifically, the provision would provide a tax deduction for 
overnight travel costs incurred more than 100 miles from the taxpayer's 
home. These expenses include meals, transportation, and lodging up to 
the amount allowable under Department of Defense per diem allowances.
  Mr. President, this provision is a positive step in the right 
direction, as approximately 225,000 Reservists and Guardsmen incur 
significant out-of-pocket expense--expenses that often match or even 
exceed their military take-home pay.
  The restoration of the tax deductibility of these expenses would help 
alleviate the personal and financial costs of these individuals' 
patriotic efforts. And, quite frankly, our servicemen and women should 
not be put in the position of subsidizing their own training.
  I thank Chairman Grassley, Senator Baucus, and the Finance Committee 
for working with my office to include my provision. I also would like 
to thank Senator McCAIN and my 61 colleagues who co-sponsored this 
legislation with me last year. The incredible number of bipartisan co-
sponsors demonstrates the widespread support our legislation carries, 
as well as the tremendous support we all share for our troops.
  Mr. President, we owe these brave Americans our thanks and our deep 
and abiding gratitude for their service and dedication to our country 
and all that it represents. Whether in the streets of Baghdad, the 
deserts of Kuwait, or the caves of Afghanistan, we must never forget 
those men and women, who serve to uphold the ideals of our great 
Nation.
  They have sacrificed so much not only to protect our freedom, 
liberty, and way of life here at home, but also to promote those ideals 
abroad.
  Mr. President, this entire military tax package is an important sign 
of support for those called to serve, as well as their families. I urge 
my colleagues to support it.
  I thank the Chair and yield the Floor.
  Mr. BAUCUS. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. Mr. President, thousands of men and women from Montana 
are currently stationed overseas, be it in Iraq, Afghanistan, South 
Korea, Southeast Asia or in other supporting missions throughout the 
United States and the rest of the world.
  These brave and dedicated soldiers have chosen to join the Armed 
Forces and protect our country, which is one of the highest forms of 
service there is. They are putting their lives on the line to protect 
the freedom and security of the United States. I take my hat off to 
them.
  To date, Montana has sent almost 700 Reserve forces into Active Duty. 
Malmstrom Air Force Base has 105 airmen deployed overseas, including 50 
members of the 819th Red Horse Squadron. Earlier this month 114 members 
of the Red Horse Squadron came home after being deployed in southwest 
Asia for five and a half months. The airmen are supporting six 
different operations around the world in southwest Asia, supporting no-
fly zones in Iraq or in Afghanistan.
  About 390 Army Reservists from Montana have been deployed. From Great 
Falls, the 889th Quartermaster Company unit--with 119 members--recently 
received mobilization orders along with 100 members of the 4225th U.S. 
Army Hospital.
  From Missoula, 58 soldiers from the 279th Engineer Battalion and 16 
soldiers from the 823rd Transportation Detachment have been activated. 
And out of Billings, 161 members of the 592nd Ordnance Company recently 
received their orders. Most of these army Reservists will take part in 
Operation Enduring Freedom.
  Montana's Air National Guard has also contributed significant human 
resources. 210 members of the 120th Fighter Wind have been activated 
flying in the no-fly zone over Iraq.
  Montana's Army National Guard has contributed about 125 Army Guard 
members, many of which are at other bases throughout the United States 
taking part in Homeland Security measures.
  Thirty-five members of the 443rd Petroleum, Oil and Lubricants Supply 
Company have been mobilized to assist

[[Page S4476]]

with base security at the 120th Fighter Wing unit on Gore Hill outside 
of Great Falls, MT. Forty-five soldiers from the 495th Transportation 
Battalion are taking part in Operation Enduring Freedom. Eight ground-
air liaison teams are in Fort Sill, OK, and 2 UH60 Helicopter pilots 
are in Fort Benning, GA.
  Most certainly, I do not want to forget the thousands of Active Duty 
Army, Navy, Air Force and Marines from Montana stationed elsewhere 
throughout the Nation and overseas.
  These soldiers are sons and daughters, brothers and sisters, fathers 
and mothers. And like you and I, they have families to take care of and 
worry about. They have personal lives to attend to, bills to pay and 
tax forms to fill out. As they are stationed far away, they are worried 
about how their children are doing in school and how their husbands or 
wives are coping with the distance. It is not easy.
  Every day they are putting their lives back here on hold and instead 
putting their lives on the line to protect the rights we hold so dear.
  With all of the worries they are facing, I am urging for passage of 
the military tax bill so we can take one, or two, burden off of their 
minds.
  These men and women should not have to worry about whether or not 
their deployment changes their residency for tax purposes. They should 
not have to worry about whether or not they can afford their weekend 
training, nor should they ever have to worry about whether their death 
could result in an undue tax burden to their family.
  One of the best ways we can support our troops is by doing everything 
we can to ensure that they and their families are taken care of. As a 
tribute to our Armed Forces, I cannot think of a better way to support 
them than by passing the military tax bill and allowing them to focus 
on their mission rather than their finances.
  I encourage my colleagues to show their support for our troops today 
by voting in favor of the Armed Forces Tax Fairness Act.
  Ms. LANDRIEU. Mr. President, I know that my friends and colleagues, 
Senator Grassley from Iowa and Senator Baucus from Montana, share my 
concerns about the safety and welfare of our troops in the field and 
their families at home. With the deployment of the 389th Engineer 
Battalion and the 106th Aviation Unit from the Iowa Guard and 495th 
Transportation Company and 411th Support Detachment from the Montana 
Guard, no one can doubt that the people of the Hawkeye and Big Sky 
States are making very important contributions to our national defense.
  However, I wonder if my friends saw the article in the Washington 
Post on March 4, entitled ``Called-Up Reservists Take Big Hit in 
Wallet; Families Struggle on Military Salary.'' I ask unanimous consent 
that this article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                [From the Washington Post, Mar. 4, 2003]

   Called-Up Reservist Take Big Hit in Wallet; Families Struggle on 
                            Military Salary

       Spring should be the busy season for the Brinkers' Columbia 
     home improvement business. But instead of cashing in on the 
     jobs that will come up as the weather improves, Lynn Brinker 
     is calling customers to cancel thousands of dollars' worth of 
     work.
       It was less than five months ago that her husband, Sgt. 
     Mark Brinker, an Army reservist with the 400th Military 
     Police Battalion, returned from a year-long, post-Sept. 11 
     deployment to Fort Sam Houston in Texas. To get through that 
     tour, Lynn Brinker cashed in savings bonds meant for the 
     education of their three children, took out a bank loan and 
     borrowed $15,000 from a relative.
       Now, mark has been called up again, this time for the 
     impending war in Iraq, and she doesn't know what they're 
     going to do.
       ``There is just no way we can make ends meet with him gone 
     again,'' she said, ``It's just ridiculous. We're in our 
     forties, we've worked hard, and we didn't expect to have to 
     be starting all over again like this.''
       As the Pentagon continues to activate reserve and national 
     Guard troops, some of the biggest sacrifices are being made 
     on the home front. In addition to risking their lives, many 
     soldiers, sailors, airmen and Marines are risking their 
     livelihoods, leaving civilian jobs that pay much better than 
     the military. Families are selling second cars, canceling 
     vacations and postponing paying bills as they steel 
     themselves for drastic reductions in income.
       For the reservist on inactive status, the duty can be a 
     welcome source of extra cash. A private with less than two 
     years' experience can pick up $2,849 a year for one weekend a 
     month of drilling and an annual two-week training exercise. A 
     staff sergeant with six years can get $4,628. With a call to 
     active duty, the pay bumps up--$16,282 for a private first 
     class and $26,448 for the staff sergeant, which is tax-free 
     while the military member is in a combat zone.
       There are other benefits. Mortgage and credit card rates 
     are reduced. In some cases, the law prohibits landlords from 
     evicting military families even if they haven't paid rent. 
     And employers are required to take reservists back once they 
     return from duty, with no loss in pension benefits or 
     seniority.
       But the package comes nowhere near making up for many 
     civilian salaries.
       The reservists are volunteers, of course. They have been 
     reminded repeatedly that active duty could come at any time. 
     But many say they signed up for the several thousand a 
     year in extra pay and other perks, not for war.
       ``I thought I could get some money for school,'' said Spec. 
     Robert Moore of Pasadena, who spent a year on active duty 
     with the Army's 443rd Military Police Company after the Sept. 
     11, 2001, terrorist attacks and was shipped off again last 
     week for training at Fort Lee, Va.--most likely a prelude to 
     deployment overseas. ``I think most people just thought: 
     `We're just the reserves. We're not going anywhere.' ''
       Sgt. Kevin Green hears similar comments from his Army 
     National Guard troops in the 1229th Transportation Company.
       ``They don't want a weapon in their hands, riding around in 
     another country, worried that they won't come back,'' he 
     said.
       As of last week, 168,083 reserve and National Guard troops 
     were on active duty, including thousands from Washington, 
     Maryland and Virginia. They have guarded al Qaeda and Taliban 
     detainees from Afghanistan at Guantanamo Bay in Cuba and 
     patrolled Iraq's no-fly zone. Now, area troops are getting 
     ready to set up refugee camps in northern Iraq and to 
     transport equipment to the front lines. In the Maryland 
     National Guard, 3,000 of 8,000 members have been called up 
     since Sept. 11, 2001.
       ``The military can't conduct a war without the National 
     Guard and reserve components,'' said Maj. Charles Kohler, a 
     spokesman from the Maryland National Guard.
       Green's unit probably will be placed somewhere in the 
     Middle East, he said. He doesn't yet know where, but it will 
     be a world away from his civilian life, where he has two 
     children and is in charge of Sears deliveries in Maryland. 
     While on active duty, he expects to lost about $1,000 a 
     month, the equivalent of his monthly mortgage payment.
       Green was called up during the Persian Gulf War, and this 
     time around, he thought he knew how to prepare. But still he 
     was caught somewhat off guard.
       ``You try to put a few dollars away in case of an 
     emergency,'' he said. ``But this isn't an emergency; this is 
     a crisis.''
       Now, he's praying for two things: ``I hope we win the 
     lottery, or at least that our car doesn't break down.''
       His fiancee, Wanda Jones, will have to work overtime at her 
     pharmaceutical company job to help make up the difference. 
     And they've already had a conversation about finances when 
     he's gone.
       ``I'm going to cut out shopping at the mall,'' she said.
       Some firms continue to pay troops on active duty, or at 
     least to make up the difference between military and civilian 
     pay. A survey by the Reserve Officers Association of the 
     United States found that of the 154 Fortune 500 corporations 
     that responded to a query, 105 make up the differences in 
     pay. Last year, just 75 of 132 responding companies did so, 
     and in 2001, the number was 53 of 119.
       Army Reserve Sgt. Jeffery Brooks, a fraud detection manager 
     from Woodbridge, said his company, Capital One, has agreed to 
     pay him the difference. Otherwise, he would be losing 42,200 
     a month. ``I'd be in real trouble,'' he said.
       Daniel Ray, editor in chief of bankrate.com, an online 
     financial information service that helps reservists, said 
     many people are not so lucky. ``Those are generous bosses to 
     have,'' Ray said. ``But if you're self-employed, or you've 
     built up your practice over the years, it can be very hard. 
     When you go away, your practice dries up. Then it doesn't 
     just affect you but your secretary and the people who rely on 
     you.''
       Not everyone takes a financial hit. Army Reserve Lt. 
     Orlando Amaro would make the same amount guarding a POW camp 
     in Iraq as he does as a D.C. police officer patrolling the 
     streets of Columbia Heights. If he is shipped overseas, where 
     his income wouldn't be taxes, he may come out ahead.
       ``It won't affect me at all,'' he said.
       Lynn Brinker isn't thinking about coming out ahead. She may 
     sell the Chrysler she and her husband recently bought. She 
     wants desperately to let her 12-year-old son, Chris, continue 
     private viola lessons, and for Kevin, 10, to keep up with the 
     trumpet. She wonders whether she'll be able to afford the 
     registration fees and equipment for youth hockey in the fall.
       ``My thinking is we'll tap this line of credit and try to 
     keep my kids' lives as normal as possible while their father 
     is away. It's very traumatic for them,'' she said.
       ``People may say, `Well, he signed up for this. You knew 
     this could happen.' But he was away for an entire year, and 
     then leaves

[[Page S4477]]

     four months later. And now we don't know how long he'll be 
     gone. I don't think he signed up for that.''
  Ms. LANDRIEU. This Post story captures the reality of reservists who 
are called to war and are asked to make the double sacrifice of 
enormous pay cuts to serve their country.
  Because of stories like these in my home State, and across the 
country, I introduced S. 442, the Reservists and Guardsmen Pay 
Protection Act. This bill would provide a tax credit to employers who 
take the patriotic step of covering the difference between their 
employee's pay and as a civilian, and their pay as a soldier. The tax 
cut would cover 50 percent of the amount, and last for 1 year. 
Additionally, the Senate just passed a budget resolution that calls for 
$350 billion in tax cuts over 10 years. Certainly, we should ensure 
that there is room in this tax cut to both promote economic growth and 
benefit the men and women in uniform willing to risk their lives in 
defense of this great Nation.
  As the chairman and ranking member know, I have been a strong 
supporter of Senate Bill 351, the Armed Forces Tax Fairness Act. It 
contains a provision that I introduced as separate legislation relating 
to dependent care benefits for military personnel, and I very much 
appreciate Senator Grassley's and Senator Baucus' effort to include 
these provisions in the bill.
  However, I think it would be a terrible mistake to ignore this 
looming question that affects so many Reservists and Guardsmen, 
especially after agreeing to $350 billion in tax cuts. S. 442 is both 
stimulative and necessary for the men and women on the front lines, as 
well as their families back at home. So, I ask my friends, the 
distinguished chairman and ranking member of the Senate Finance 
Committee, can anything be done to address this problem?
  Mr. GRASSLEY. I thank the junior Senator from Louisiana for her 
bringing this important issue to the committee's attention. The 
Congress has an obligation to see to the well being of the men and 
women who are defending this Nation even now. For these reasons, the 
committee has adopted S. 351, and we would like to pass that 
legislation immediately. I know it contains provisions of deep interest 
to the Senator from Louisiana, and she would agree that the sooner they 
are enacted the better. However, I share her concern about the need to 
take whatever steps we can to support our troops and their families. 
For a variety of reasons, I do not believe that the S. 351 is the 
correct vehicle to address this problem. I do recognize that the issue 
appears to have drawn broad support as similar proposals have been 
introduced by Senators DeWine and Allen. I say to my friend from 
Louisiana, I will work with her and Senators DeWine and Allen on 
including the Reservists and Guardsmen Pay Protection Act in the 
reconciliation package that we will bring to the floor soon.
  Mr. BAUCUS. I share the sentiments of Chairman Grassley. I would 
support tax treatment for our Guardsmen and Reservists like that 
proposed by Senators Landrieu, DeWine, and Allen. S. 351 is not the 
appropriate venue, but the reconciliation package should achieve the 
goals of S. 442. The junior Senator from Louisiana is correct that the 
$350 billion tax package should contain both tax cuts to promote growth 
and benefit the quality of life for the men and women in the United 
States Armed Forces.
  Ms. LANDRIEU. Mr. President, I appreciate the chairman's offer and 
the ranking member's offer, and look forward to working with them to 
include this important legislation in the reconciliation bill this 
year.
  Mr. BAUCUS. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. Mr. President, earlier I paid tribute to Senator Daniel 
Patrick Moynihan. There is a provision in the legislation we are 
considering which was very near and dear to the heart of Senator 
Moynihan, and that is the expatriation provision contained in this 
bill. It was actually developed by Senator Moynihan and Senator Roth 
several years ago. That is the genesis of this provision.
  As we know, there are many men and women overseas fighting for our 
country. For example, there are currently about 300,000 in Iraq. At the 
same time, there are individuals who attempt to escape their patriotic 
duty. While we have 300,000 men and women over in Iraq, other 
individuals are attempting to escape their patriotic duty. They 
relinquish their U.S. citizenship. Why? One basic reason: In order to 
avoid supporting the United States through taxes.
  Between 1991 and 2002, approximately 6,500 U.S. citizens have 
expatriated; that is, they gave up their U.S. citizenship. In 1966, as 
part of the Foreign Investors Tax Act, Congress created an alternative 
tax regime for U.S. citizens who expatriated in order to avoid paying 
taxes. The alternative tax regime taxes a former citizen on U.S. 
property for 10 years after expatriation.
  These tax rules were strengthened in 1996 following press reports and 
congressional hearings indicating that very wealthy individuals 
expatriated while maintaining significant contacts with the United 
States.
  Unfortunately, these changes to the law have not deterred citizens 
from expatriating to avoid paying U.S. taxes. The changes simply never 
worked as Congress intended.
  This year, the Joint Committee on Taxation published a study on 
individual expatriation. According to the Joint Committee, there is 
virtually no enforcement of the special tax and immigration rules 
applicable to tax-motivated citizenship relinquishment and residency 
termination.
  The Joint Committee also said that present law has been highly 
ineffective. Present law continues to provide tax incentives for 
individuals to expatriate. It also is difficult to collect U.S. taxes 
on former citizens who are no longer physically present in the United 
States.
  Additionally, a study conducted by the General Accounting Office 
concluded that the IRS did not have a systematic compliance effort. 
That means that we are not even enforcing the alternative tax regime 
that is on the books.
  That means a former citizen could avoid the alternative tax regime by 
holding foreign assets--which are not taxed. Or by waiting until the 
10-year period expires before disposing of U.S. property.
  The Armed Forces Tax Fairness Act includes a new system to address 
tax-motivated expatriation. Under this legislation, any U.S. citizen or 
long-term resident who relinquishes their U.S. citizenship or residency 
will be subject to an exit tax on the gains attributable to property 
owned during their U.S. citizenship.
  Under this proposal, if the gain exceeds $600,000, then a former 
citizen will be taxed on the net unrealized gain on property--as if it 
were sold at fair market value 1 day prior to expatriation. The 
Treasury Department believes that this new system will greatly improve 
the administrability of the tax on expatriates. The new system imposes 
the tax at the time the individual leaves the U.S. jurisdiction.
  Additionally, by including foreign assets within the regime, this 
eliminates a significant incentive for tax-motivated expatriation.
  This expatriation provision will raise $700 million. The military 
bill uses that $700 million to provide tax benefits to military 
personnel.
  In contrast, the House version of the military bill is simply a 
modification of the current alternative tax regime. It raises $328 
million. The House version will not go far enough. It simply adds more 
provisions for the IRS to enforce. This strikes me as odd considering 
none of the current provisions is being enforced.
  Sometimes the laws just do not work the way Congress intended. So, we 
must change the laws to ensure they are effective and administered as 
Congress intended.
  The current system to tax expatriates does not work. We have had 
nearly 40 years to make the system work. We should not wait any longer 
to collect taxes on those who do not value the freedoms our nation 
provides.
  The new proposal does not seek to tax expatriates on income earned 
after expatriation. It just says they have to

[[Page S4478]]

pay tax on the income earned while they were a U.S. citizen. While our 
military protected them.
  I thank former Senator Bill Roth and the late Senator Daniel Patrick 
Moynihan, who developed this proposal several years ago. And I thank 
Senator Harkin and others who have continued to work on this in the 
107th Congress and this year.


                           Amendment No. 433

                (Purpose: In the nature of a substitute)

  On behalf of Senator Grassley and myself, I call up amendment 
numbered 433.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Montana [Mr. Baucus], for Mr. Grassley, 
     and Mr. Baucus, proposes an amendment numbered 433.

  Mr. BAUCUS. I ask unanimous consent reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is in today's Record under ``Text of the Amendment.'')
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. WARNER. Mr. President, I rise in strong support for this piece of 
legislation. I compliment my long-time friend, the Senator from 
Montana, for his work. We have enjoyed many projects together over the 
quarter of a century, and our distinguished Senator Grassley has taken 
a strong hand, as always, on matters regarding revenue and also the 
Armed Forces of the United States.
  If I had named this bill, I would have called it the Armed Forces 
Family Tax Fairness Act of 2003 because as I have studied this 
legislation and made some contribution to the text of it, I have always 
had in mind the families of the men and women of the Armed Forces and 
others who serve in the cause of freedom for our citizenry the world 
over, who take enormous risks and, frankly, accept the hardships which 
for those who would lead sort of a normal life are hard to understand.
  Traveling about the world, most recently with Senators Levin and 
Rockefeller and my colleague from Kansas, covering that area in 
Pakistan and Qatar, Kuwait, we saw firsthand the brave men and women 
not only in uniform but the agency staff and others who hopefully will 
benefit from this legislation.
  I compliment my two colleagues on their timely action in extending 
these tax benefits to military and Foreign Service personnel and to the 
families of the Space Shuttle Columbia astronauts.
  At this historic moment in history, with Operation Iraqi Freedom in 
progress, it is fitting we take every opportunity to express 
appreciation we have for our men and women in uniform. Certainly one 
way to do that is to place a priority on legislation enhancing the 
compensation of Active-Duty, Reserve, and National Guard personnel, and 
their families.

  In the Armed Services Committee, we also are engaged in such an 
effort and we do it annually. I assure my colleagues that in connection 
with the fiscal year 2004 Defense Authorization Act, we do our utmost 
to make sure every aspect of pay and benefits is closely examined.
  With respect to the legislation before the Senate, I am particularly 
pleased to support the provision of capital gains relief to military 
homeowners in connection with the sale of their residence. This relief, 
which recognizes realities of military service, is long overdue.
  Senator McCain introduced legislation last year, S. 1678, and I was 
happy to be a cosponsor and sought to achieve this purpose with him and 
others. I also view as particularly timely and well justified the 
provisions that are above-the-line tax deductions to Reserve and 
National Guard personnel who incur out-of-pocket expenses as a result 
of training operations and those benefiting the families of the Space 
Shuttle Columbia heroes.
  It is fitting as hundreds of thousands of our military personnel--and 
many are engaged not only in the battle in Iraq but Afghanistan, which 
our group recently visited, and other trouble spots of the world--that 
the Senate recognize their contributions to freedom and the sacrifices 
they and their families make.
  There are roughly 290 million citizens in this country. There are on 
active duty today about 1.5 to 1.6 million individuals. The normal 
standing force of the active forces of the United States runs about 1.2 
to 1.3 million. Now with the augmentation of so many being called in 
the Reserve and the Guard to active duty, that is somewhat larger. 
However, that group represents only one half of 1 percent, roughly, of 
the population of 290 million citizens in this country.
  We should always be mindful that so many are on active duty, 
particularly those engaged in armed combat, those who are on the 
television screens 24 hours a day now, assuming these courageous roles 
they are taking in combined forces, trying to free the Iraqi people of 
the bondage of these many years and to remove the weapons of mass 
destruction which threaten the very Members who occupy this Chamber 
from time to time. If those mass weapons spread throughout the world 
through the net of terrorism, small quantities of biological and other 
types of weapons of mass destruction could reach our shores and, 
indeed, inflict enormous harm against our people.

  This is a very small group, less than \1/2\ percent, who take these 
risks to preserve the freedoms and give us a greater sense of security 
here at home.
  I hope this bill receives 100 votes. I thank those who made it 
possible.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield whatever time the Senator from 
Arkansas desires.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. PRYOR. Mr. President, I ask unanimous consent that I may speak 
for up to 5 minutes on the pending bill.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. PRYOR. Mr. President, in these halls we often talk about the need 
to provide our military personnel with the resources they need to 
complete their missions. We all acknowledge how unique and important 
our military personnel and their needs are to us.
  It is our responsibility to have a comprehensive picture to know what 
we need to do to make life better for our men and women in uniform. By 
that I mean not only salary but that we need to understand their health 
care needs, their housing needs, pension needs, education needs, 
disability and employment benefits. It is very important, as we work in 
Iraq and around the world and as we keep America safe, that we, as 
Congress, have this important information.
  Not long ago, I was in a hearing of the Armed Services Committee, of 
which I am a member, and we began discussing the home mortgage 
deduction. One thing I realized was the home mortgage deduction is a 
very important part of America's financial picture, but also it is an 
important cornerstone to the American way of life.
  As I thought about the home mortgage deduction for military 
personnel, I realized that the Tax Code is cumbersome and complicated. 
I could not find one place, one document, that laid out all the 
provisions in the Tax Code designed to benefit our military personnel.
  And on comes the military tax bill, this very important piece of 
legislation. I commend Senator Grassley and Senator Baucus for all 
their hard work on this bill. But I looked, and I saw a maze of Tax 
Code provisions, mainly for short-term solutions. Those are important, 
there is no question about it. But still, I could not find a 
comprehensive view of tax treatment for our Armed Forces.
  So what I am proposing is very simple and very clear; that is, I 
would like to ask the GAO and the Departments of Defense and Treasury 
to provide us with a comprehensive study of the tax treatment of U.S. 
military personnel, along with a complete study of the financial 
conditions of our troops. And I would request they make recommendations 
on whether the Tax Code could be used to improve the unique financial 
conditions of our troops.
  This powerful information will help this Congress, help this 
administration, and also help our men and women in uniform. This one 
document could be a very powerful tool for us to help our men and women 
in uniform.
  However, at this juncture, I do not want to slow down, in any way, 
this

[[Page S4479]]

very important bill on which Senator Grassley and Senator Baucus have 
spent so much time. I support their efforts to move this bill through 
quickly. We all understand how important that is.
  Therefore, I am not asking that my amendment be adopted. But what I 
am asking, very respectfully, is that Senators Grassley and Baucus join 
me in a letter asking the GAO to do what our amendment otherwise would 
accomplish. I thank them for their hard work, and I thank them for 
their leadership on these very important issues, issues the American 
people are very concerned with, and issues on which they have shown 
great leadership.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, that is a very important statement and 
request that the Senator from Arkansas has made. I can speak on behalf 
of myself, and I am sure Senator Grassley, that we would be more than 
honored to join with the Senator from Arkansas in making that request. 
It is a very timely request. It is one that is very important. Frankly, 
I am a little bit surprised none of us made that same request that he 
has made because it is so important, and it is going to give us a lot 
better idea of the financial condition of our armed services. It is a 
good idea.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I yield myself such time as I might 
consume.
  I associate myself with the remarks of the Senator from Montana. I 
share Senator Pryor's interest in a GAO study and will be glad to work 
with him on a letter. And, obviously, a person such as I, who relies 
upon the GAO for so much study on matters in which I am involved, would 
not discourage my colleague from likewise seeking the General 
Accounting Office's expertise and look forward to what such a study 
would show in regard to the treatment of our military personnel.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, when the space program began in 1959 there 
were only seven astronauts in the entire country. They all were or had 
been in the Armed Forces.
  That was only 44 years ago and since then, much has changed. Today, 
astronauts are comprised of Americans from every race, creed, color and 
gender.
  While many still come from the military, the astronaut corps now 
includes civilian doctors, scientists, and engineers. They are our best 
and our brightest. They risk their lives to advance our knowledge and 
understanding of the world.
  On February 1, 2003, seven men and women aboard the space shuttle 
Columbia lost their lives. LTC Michael P. Anderson, U.S. Navy CAPT 
David Brown, U.S. Navy CDR Laurel Clark, Dr. Kalpana Chawla, U.S. Air 
Force COL Rick Husband, Naval CDR William McCool, and Israeli Air Force 
COL Ilan Ramon will be remembered forever.
  Five of the six Columbia crew members, from the United States, had 
military backgrounds. They were national heroes who are deeply missed 
by their family and friends. Through their dedication to space 
exploration, they lived their lives to the fullest and made long 
lasting contributions.
  In honor of their sacrifice, I along with 13 of my Senate colleagues, 
introduced S. 298, the Assistance for Families of Space Shuttle 
Columbia Heroes Act.
  I am pleased that the legislation was included by the Senate Finance 
Committee as part of the Armed Forces Tax Fairness Act of 2003.
  Under the legislation, the families of the Columbia heroes would 
receive the same benefits as families of military personnel who die in 
the line of duty.
  The provisions are similar to legislation passed in 2001 that 
provided relief to victims of the September 11, anthrax and the 
Oklahoma City attacks.
  Specifically, the bill expands the class of those eligible for these 
benefits to include astronauts killed in the line of duty.
  The legislation provides income tax relief. Current law generally 
excludes from tax income received in the year of death or in a previous 
year for soldiers killed in combat zones, and victims of September 11, 
anthrax and Oklahoma City.
  The legislation expands this benefit to apply to astronauts who die 
in the line of duty.
  The legislation provides death benefit relief. Current law excludes 
from income any death benefit paid by the U.S. Government to a soldier 
killed in a combat zone or paid by an employer to the families of the 
victims of September 11, the anthrax attacks, or the Oklahoma City 
bombing.
  The legislation expands this benefit to apply to death benefits paid 
to the families of astronauts killed in the line of duty.
  The legislation provides for estate tax relief. Current law provides 
estate tax relief that effectively lowers the estate tax rate to 20 
percent for the estates of soldiers killed in combat zones, the victims 
of September 11, the anthrax attacks or the Oklahoma City bombing.
  The legislation expands this benefit to apply to the estates of any 
astronaut killed in the line of duty.
  The best way to honor Columbia's fallen heroes is to promptly pass 
this legislation and pledge that the goals and missions of NASA will 
live on in the years to come.
  I urge my colleagues to support the Armed Forces Tax Fairness Act of 
2003 which includes tax relief for the families of the Space Shuttle 
Columbia heroes.
  Mr. President, since September 11, significant progress has been made 
to disrupt and dismantle the financial components of terrorist 
organizations.
  Special agents from the IRS and other law enforcement agencies have 
successfully investigated numerous terrorist related entities--
including tax exempt organizations that have engaged in terrorist 
fundraising.
  The Armed Forces Tax Fairness Act of 2003 contains a provision that 
would suspend the tax-exempt status of any organization designated by 
U.S. authorities as a terrorist organization or supporter of terrorism.
  There is no procedure under present law for the IRS to suspend the 
tax-exempt status of an organization.
  The IRS can revoke an organization's tax-exempt status only after 
conducting an examination of the organization.
  Even then, the IRS must issue a letter proposing revocation and allow 
the organization to exhaust its administrative appeals rights.
  The provision in this legislation is simply common sense. It is an 
important weapon in our war on terrorist financing.
  An organization that has been designated by the Federal Government as 
a terrorist organization should not be exempt from Federal income tax. 
Moreover, contributions to such organizations should not be tax 
deductible.
  Once the Federal Government determines that an entity is a terrorist 
organization pursuant to certain authority--for example, the 
International Emergency Economic Powers Act--a separate investigation 
by the IRS is not necessary.
  Further, because a terrorist organization may challenge the Federal 
government's designation under the law authorizing the designation, 
recourse to the declaratory judgment procedures of the Tax Code is not 
appropriate.
  If a tax-exempt organization's suspension is determined to be 
erroneous, the provision would allow tax refunds for any overpayments.
  Lastly, the IRS will be required to update its listings of tax-exempt 
organizations to take into account organizations that have had their 
exemption suspended. This will give notice to taxpayers that 
contributions to these organizations are no longer deductible.
  I urge my colleagues to support the Armed Forces Tax Fairness Act of 
2003.
  Mr. President, this bill includes many important changes in the tax 
treatment of income and benefits received by members of our armed 
forces. One provision is particularly important for members that face 
the dual challenge of serving their nation while raising a family. The 
bill explicitly states that child care subsidies that members of the 
military receive shall not be subject to income tax.
  In 1986, we passed a law which stated that military benefits should 
not be included in income for tax purposes. The statute lists a number 
of benefits received by members of the military--

[[Page S4480]]

housing allowances, medical benefits, education assistance, and many 
others. But child care subsidies do not appear on the list.
  When we passed this law, the Department of Defense did have a program 
to assist members of the military in caring for their children. But the 
importance of this program has increased as the demographics of the 
members of the military have changed.
  There was a time when our forces were primarily young single men. 
However, times have changed. Twelve percent of the forces are women. 
Over half of the active duty members are married. Two-thirds of 
military spouses work outside the home. Six percent of members are 
married to another member of the military. And 6 percent are single 
parents.
  Young single soldiers are no longer the norm. Recognizing these 
changes, the Department of Defense has placed a reinforced importance 
on assisting military families.
  The Department of Defense recognizes the additional challenges faced 
by military families as they raise children. The average military 
family moves every two and a half years, making it difficult for them 
to find quality child care, or friends and neighbors to look to for 
help with child care responsibilities. And with work schedules that are 
often long and unpredictable, help is often necessary. In addition, 
members of the military face the possibility of deployment anywhere in 
the world at any time.
  They now operate over 800 child care centers in the U.S. and abroad. 
These include child development centers for young children, after-
school centers for older children, and other family care programs. They 
provide night and weekend services as well, to accommodate the often 
hectic schedules that military families face. All in all, these 
programs provide care for over 200,000 children every day.
  The cost of these programs varies depending on the income of the 
parents--on average, it is about $7,700 per child. This cost is shared 
by the military parents and the government, with each paying about half 
the cost.
  The law is unclear about whether these benefits are subject to income 
tax. A provision in this bill ends that confusion. It states that these 
child care subsidies, shall not be included in income, for tax 
purposes.
  As the demographics of the members of the military have changed, so 
has the policy of the Department of Defense. Now it is time that we 
follow with these changes to the tax code.
  I compliment Senator Landrieu of Louisiana, who developed this 
proposal, and insisted on its inclusion in this military tax bill.
  It is one more reason the Senate should pass this legislation today.
  I yield the floor.
  The PRESIDING OFFICER. Under the previous order, all time is yielded 
back, amendment No. 433 is agreed to, and the clerk will read the bill, 
as amended, for the third time.
  The amendment (No. 433) was agreed to.
  The amendment was ordered to be engrossed and the bill to be read the 
third time.
  The bill was read the third time.
  Mr. HARKIN. Mr. President, I am very pleased that the Finance 
Committee has moved the important provisions of this bill to the Senate 
floor and I urge that the bill be passed.
  The current Tax Code does not adequately deal with the special 
circumstances that some in our military face. One of the most important 
provisions, in my view, is providing for an above-the-line deduction 
for overnight travel expenses of National Guard and Reserve members.
  I have taken a personal interest in a provision included in this 
measure that provides that descendants of current or former active 
military personnel may be members of veterans organizations. Without 
this provision, many local veteran posts which operate food operations 
will find themselves having to pay unrelated business income taxes as 
the portion of service to members falls. A large share of the local 
posts in Iowa are very small operations and this would be a real 
burden. I introduced legislation in the last Congress and this one 
which has been included in the bill and I appreciate the inclusion of 
this provision.
  Lastly, I want to discuss the inclusion of a provision that will 
effectively prevent very rich individuals from reducing their taxes by 
renouncing their U.S. citizenship. I cannot stress too strongly how 
disgusting I find this group's behavior. Their number is small, but 
their cost to the Treasury is significant. The Joint Tax Committee has 
estimated the savings of this provision at $700 million over 10 years.
  Back in 1996, I became very interested in this issue and introduced 
legislation on the subject. Senator Monynihan took the lead in the 
Senate and we passed solid legislation at that time. Unfortunately, the 
House resisted the provision and successfully proposed a mechanism 
which has proven to be grossly inadequate.
  The Joint Tax Committee staff issued an extensive report on this 
issue earlier this year with considerable cooperation from the GAO and 
the Treasury. The report found that ``there is little or no enforcement 
of the special tax and immigration rules applicable to tax-motivated 
citizenship relinquishment and residency termination.'' It went to say, 
``The Joint Committee staff believes that a key reason for inadequate 
enforcement of the alternative tax regime is the inability to obtain 
necessary information from individuals.'' With appendices, the report 
is over 500 pages in length. But it comes down to a simple point: A 
small number of people continue to evade U.S. income taxes by turning 
their back on our country because of the weakness of the 1996 
provisions. That should stop today.
  In both this Congress and the last, I introduced legislation with 
Senator Stabenow to effectively prevent very rich individuals from 
reducing their taxes by renouncing their U.S. citizenship. It is a 
companion to a measure introduced by Congressman Charles Rangel in 
2002. The Joint Tax Committee now estimates that it saves $700 million. 
The savings to the Treasury are important and the reality that people 
are able to save on their fair share of taxes by turning their back on 
our country is in some ways even more important. I call them Benedict 
Arnold.
  Under current law, 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. In reality, the tax is nominally on a broader based 
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. Unfortunately, the reality is 
that taxes are very often not paid.
  Once a person has expatriated and removed U.S. assets from U.S. 
jurisdictions, as the Joint Tax Committee report notes, 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 one's 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 who remain in 
the U.S. in such a way as to remove any tax benefit from the 
renouncement of citizenship.
  Revenue of $700 million from these very few former citizens is a 
significant amount of money that must be made up by loyal Americans in 
the form of higher debt or taxes that Americans will face. Last year, 
the Senate passed this measure as a part of the Armed Forces Tax 
Fairness Act but, unfortunately, the House opposed this provision.
  I am hopeful that the Senate will strongly resist any effort to 
weaken these provisions in any way. This is a matter where the Senate 
should insist that the loopholes be completely closed. It is an area 
where lobbyists for the Benedict Arnolds should have no success in 
their efforts to escape their tax obligations.
 Mr. KERRY. Mr. President, I offer my strong support for the 
Armed Forces Tax Fairness Act and am proud to be a cosponsor of the 
original bill.

[[Page S4481]]

This legislation, among other measures, will remedy several provisions 
in the Tax Code that needlessly penalize the members of our Armed 
Forces.
  The act eliminates taxes on military death gratuities. It allows 
service members to benefit from the sale of a home as civilian 
taxpayers now do by exempting up to $250,000 of the revenue from the 
sale of a principal residence even if the owner is away on active duty. 
It excludes amounts received under the military housing assistance 
program. It expands combat zone filing rules to include contingency 
operations. And it takes other sound steps that will benefit Americans 
who have chosen to serve their country so admirably in our armed 
services. There is also a provision to assist the families of 
astronauts lost in the tragic crash of the Space Shuttle Columbia.
  As a veteran, I hold the dedication and commitment of our military 
personnel in especially high regard. They are putting their time, 
talent, energy and, often, their very lives on the line for our Nation. 
For that, I thank them and am proud to support this 
legislation.
  Mr. HATCH. Mr. President, I rise today to express my support for the 
military tax bill that is currently pending before the Senate.
  First, I would like to commend Senator Grassley, the chairman of the 
Finance Committee, and Senator Baucus, the committee's ranking 
Democrat, for their leadership in bringing this legislation to this 
point. Although this bill has a great deal of support in the Senate and 
in the House, it has not been an easy process to get it enacted, as the 
Senate and House each have different versions of the bill. In fact, 
this legislation was passed in the Senate and in the House last fall in 
the final days of the 107th Congress. Unfortunately, Congress adjourned 
before the differences in the bills could be worked out.
  As we debate this bill today, hundreds of thousands of our military 
men and women are in harm's way in Iraq, including 3,000 National 
Guardsmen and reservists from Utah who have been called into active 
service. These brave individuals are selflessly risking their lives for 
their country. Most, if not all, of these people are also making big 
financial sacrifices to serve in the military. While this bill will not 
come close to compensating our service people for these financial 
sacrifices, it will bring some basic fairness to their tax lives.
  The tax provisions in this bill are targeted and modest. They are 
also very much needed. I urge my colleagues to quickly join me in 
supporting this bill, and I hope the House will join with us in working 
out the differences in the two versions of this legislation so that 
these modest relief measures can be quickly sent to the President and 
signed into law.
  Ms. LANDRIEU. Mr. President, our Nation has always risen to the 
challenges of war. During such times, Congress has spared no expense to 
make sure that our dedicated armed services personnel have everything 
they need to fight and win. We will always meet this obligation.
  But the men and women on the battlefield have families back home and 
there is more that we can do for them. I am talking about the families 
of the troops from Barksdale, Belle Chasse, and Fort Polk in Louisiana, 
as well as our guardsmen from all across the State. Every one of my 
colleagues represents military families. We need to make sure that we 
support them as well.
  That is why today I would like to add my voice of strong support for 
the Armed Forces Tax Fairness Act of 2003. I congratulate Senator 
Grassley, the Finance Committee chairman, and Senator Baucus, the 
ranking member, for bringing this bill to the floor today. I urge my 
colleagues to vote in favor of this legislation.
  This bill contains several provisions that would reduce taxes for 
members of our armed services. The bill would clarify that childcare 
benefits provided to military personnel are to be excluded from income, 
a provision based on legislation that I introduced earlier in this 
Congress, S. 235. In addition, the bill excludes all death gratuity 
payments from the income of surviving family members. Military and 
Foreign Service personnel would receive capital gains tax relief when 
they have to sell a home and move because of reassignment or deployment 
orders. National Guard and Reserve members would receive an above-the-
line deduction for overnight expenses when they travel more than 100 
miles from home to attend National Guard and Reserve meetings. There 
are other important provisions in this bill that give needed tax relief 
to our families.
  I had hoped to include language in this bill to give a much-needed 
tax break to the employers for Reserve personnel. When a reservist gets 
called up, as many have, to go fight in Iraq, employers have to keep 
his or her job open, but do not have to pay a salary to the reservist 
while they are gone. This can cause an extreme hardship on a 
reservist's family. While the reservist receives military pay, in many 
cases this is much less than their civilian pay. Some employers, but 
not all, will pay the difference between the civilian and military pay, 
but they do not receive any benefit for this act of patriotism. I 
introduced S. 442, the Reservist and Guardsmen Pay Protection Act, to 
give a 50 percent tax credit to these patriotic employers.
  I regret that we were not able to include my bill in the Armed Forces 
Tax Fairness Act. But I deeply appreciate the chairman and ranking 
member for their commitment to address my tax credit proposal in the 
future reconciliation package. I look forward to working with them.
  Again our men and women in the Armed Forces and their families 
deserve our support. For all these reasons and more, this legislation 
deserves to pass. I urge my colleagues to join me in supporting this 
bill.
  Mr. McCAIN. Mr. President, I am proud to be an original cosponsor of 
the Armed Forces Tax Fairness Act of 2003, H.R. 1307. This important 
legislation provides Congress with the opportunity to demonstrate our 
firm resolve to support the men and women who sacrifice so much in the 
service of our country. I applaud Chairman Grassley's and ranking 
member Baucus' efforts, and those of my colleagues who have worked so 
hard on these initiatives, in some cases, for many years. I want to 
particularly thank Senator DeWine for his stalwart leadership on the 
above-the-line deduction for expenses incurred by our National Guard 
and Reserve service members who have to travel great distances for 
their duty and training.
  This long overdue tax benefit for our true citizen-soldiers is even 
more important today considering these facts: During each of the past 5 
years, Reserve and National Guard service members have performed 
between 12 and 13.5 million duty days in support of the Active Force. 
These numbers are in a direct contrast to 1990, when 1 million duty 
days were performed at a time when there were 25 percent more 
reservists.
  Reservists and National Guardsmen currently comprise more than half 
of the airlift crews and 85 percent of the sealift personnel that are 
needed to move troops and equipment in either wartime or peacetime 
operations. In addition, Reserve medical and construction battalions 
and other specialists are critical to a wide range of operations. 
Efforts by the Reserve components to move beyond a traditional wartime 
backup role and to provide peacetime support to active units are thus 
desirable. The Naval Reserve and Air Force Reserve components have made 
particularly impressive progress in this area.
  The Reserve components are performing many vital tasks: From direct 
involvement in military operations to liberate Iraq in the air, on the 
ground, and on the sea; to guarding nuclear power plants in the United 
States; to providing support to the war on terrorism through guarding, 
interrogating, and providing medical service to detainees in Guantanamo 
Bay Cuba; to rebuilding schools in hurricane-stricken Honduras and 
fighting fires in our Western States; to overseeing civil affairs in 
Bosnia; to augmenting aircraft carriers short on Active-Duty sailors 
with critical skilled enlisted ratings during at-sea exercises as well 
as periods of deployment.
  I believe that the civilian and uniformed leadership of our Armed 
Forces and the Congress must recognize this involvement. At a minimum, 
Congress must provide equality in benefits for Reserve component 
service members

[[Page S4482]]

when they put on the uniform and perform their weekend drills or other 
critical training evolutions. Quality of life is not just an Active-
Duty obligation that Congress must provide. Reservists, on duty, who 
resemble their Active-Duty counterparts during training evolutions and 
are deployed at times around the world, should be treated equally when 
the administration and Congress provide for quality of life benefits.
  I would like to take a moment to discuss a provision in the bill that 
I have personally worked on for some time. Section 101 would allow 
members of the uniformed services, as well as State Department 
personnel who are away on extended duty overseas, 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 representing 5.5 million 
veterans, the American Foreign Service Association, and the American 
Bar Association.
  The average American participates in our country'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.
  Under the 1997 Act the taxpayer must meet two requirements to qualify 
for this tax relief. The taxpayer must: (1) own the home for at least 2 
of the 5 years preceding the sale, and (2) live in the home as their 
main home for at least 2 years of the last 5 years. 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 our communities, even though they 
will not live there much of the time. Under current 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 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 
``lives'' in the house for enough time to qualify for the exclusion.
  Section 101 simply remedies this inequality in there 1997 law. It 
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.
  With Operation Iraqi Freedom, the global war on terrorism, and 
continuing operations in Afghanistan, Bosnia, and Kosovo, our Armed 
Forces are deployed to an unprecedented number of locations. They are 
away from their primary homes, protecting and furthering the freedoms 
we Americans hold so dear. It is wrong to penalize them for doing their 
duty. Military service entails sacrifice. We must do all that we can to 
ensure that Congress is not adding to the burdens service men and women 
bear with an unfair Tax Code. This narrowly tailored remedy will grant 
equal tax relief to the members of our uniformed and foreign services, 
and restore fairness and consistency to our increasingly complex Tax 
Code.
  This military tax package is a clear show of support for our men and 
women in uniform. It is the right thing to do, and I hope that all my 
colleagues will support this critical measure.
  Mrs. FEINSTEIN. Mr. President, I rise in support of the Armed Forces 
Tax Fairness Act, S. 351.
  Whether we are at war, as is currently the case, or at peace, members 
of the armed services should not be treated unfairly by the Tax Code as 
a result of their decision to serve our county.
  Inequities in the Tax Code that disadvantage men and women in uniform 
not only make it harder for them to support their families and 
themselves, but also threaten our own security by making it harder for 
the armed services to recruit talented service men and women.
  We have a responsibility to eliminate any disincentives to serving in 
the United States military, and this bill does much to fulfill that 
goal.
  The two most important provisions in this bill are relaxed rules on 
the treatment of capital gains on the sale of a home by military 
personnel, and an above-the-line deduction on travel expenses for 
members of the National Guard and Reserve.
  Anyone who has ever served in the military or grown up in a military 
family knows that frequent travel is a way of life for those in 
uniform. A U.S. Marine might spend a year or two at Camp Pendleton, in 
my home State of California, then transfer to Quantico, and finally end 
up at Camp Lejeune in North Carolina.
  Under current law, that Marine might not qualify for the home sale 
capital gains exclusion available to most homeowners, due to his or her 
frequent postings to different bases, or to combat duty abroad. This 
bill corrects that inequity, and makes it easier for all military 
personnel to sell their home tax free.
  National Guard and Reserve members would also benefit under the bill 
from an above-the-line deduction for travel expenses up to $1,500. This 
puts those who serve on the National Guard and Reserve on equal footing 
with those who travel on company business and do not pay for those 
expenses out of after-tax income.
  No one who chooses to serve in the Guard or Reserve should have to 
pay for a plane ticket or hotel room out of their after-tax income in 
order to join their unit when called up for duty.
  This bill also contains a number of smaller, but no less important, 
provisions designed to ease the tax burden on military personnel, such 
as the treatment of service academy appointments as scholarships when 
personnel apply to tuition programs and Coverdell Education Savings 
Accounts.
  I wish we could do more in the Senate to keep our soldiers, pilots, 
and sailors out of harm's way during the current conflict in Iraq. I 
wish we could pass a bill that guarantees that each and every one of 
them returns home safely to their husbands, wives, children, and 
parents.
  We cannot do that. But by passing this bill we can improve their 
financial security and make it easier for them to continue to serve and 
to protect our country.
  I urge my colleagues to support the Armed Forces Tax Fairness Act.
  Ms. CANTWELL. Mr. President, I rise today in support of the Armed 
Forces Tax Fairness Act substitute offered by Senator Grassley. This 
legislation is a critical step towards full tax fairness for our 
military personnel and Foreign Service officers.
  The American people and Congress stand with our men and women in 
uniform, and this is the right time to advance tax parity.
  Last Congress, I was proud to cosponsor the Foreign and Armed 
Services Tax Fairness Act of 2002, which included many of the 
provisions that we are passing today. I was pleased to cosponsor the 
bill again this Congress when it was reintroduced.
  This legislation will bring some commonsense changes to the way 
military and Foreign Service families are treated under the Tax Code. 
It will allow military and Foreign Service families to exclude up to 
half a million dollars in capital gains from home sales; make death 
gratuity benefits tax exempt; exclude compensation from the Homeowners 
Assistance Program; provide a deduction for the National Guard's 
unreimbursed travel expenses; clarify that dependent care assistance 
for military families is exempt from taxation; and support education 
individual retirement accounts for students at service academies.

[[Page S4483]]

  The legislation also extends these benefits to the families of the 
victims of the space shuttle Columbia tragedy. The Columbia provisions 
address many of the goals in the Assistance for Families of Space 
Shuttle Columbia Heroes Act, which I cosponsored with Senator Baucus.
  Finally, I would like to emphasize a crucial provision addressing IRS 
treatment of terrorist organizations. Currently, when the United States 
designates an entity a terrorist organization, there is a long delay 
before the IRS revokes its tax-exempt status. There is no reason to 
postpone the action, but it takes time to update these lists. This bill 
will automatically suspend the tax-exempt status of designated 
terrorist organizations, expediting the consequences of the 
designation. Last Congress, Senators Grassley and Johnson introduced 
bills with this practical remedy, but we have yet to pass it into law. 
The House version of the Armed Forces Tax Fairness Act does not contain 
this language, but I will work with my colleagues in both bodies to 
ensure that when we send this bill to the President, this important 
provision is included.
  Mr. President, the Armed Forces Tax Fairness Act supports our men and 
women in uniform during these trying times. I urge my colleagues to 
give it their full support.
  I yield the floor.
  Mr. ROCKEFELLER. Mr. President, I rise today with great pride to 
support the Armed Forces Tax Fairness Act. As I speak, America's 
military is fighting in the dangerous and inhospitable deserts of Iraq. 
And when I watch the remarkable news coverage of the progress in Iraq, 
I am awed by the skills, dedication, and courage of our fighting 
forces. Passing this legislation is the least that we can do to show 
those brave men and women that we support them, we are proud of them, 
and their nation is grateful for their sacrifice.
  This Congress ought not to pretend that the bill we are considering 
is some altruistic gift to the men and women serving our country in the 
military. Rather, today we will pass legislation that restores basic 
fairness to the tax code. We demand extraordinary sacrifices of our 
soldiers, sailors, airmen, and marines. They are often stationed far 
away from their families. They are frequently uprooted and forced to 
sell their homes on short notice. And in a military increasingly 
dependent on the National Guard and Reserves, we ask some of our vital 
troops to travel great distances at their own expense to train with 
their units.
  Often the burden of these sacrifices is increased by the 
inflexibility of the Tax Code. For example, a serviceman stationed in 
Saudi Arabia obviously cannot meet the residency requirements 
associated with the capital gains tax exclusion for his house in the 
States. It is spectacularly unfair for us to send a soldier away from 
his home, and then punish him with increased taxes if he decides to 
sell that home. The bill we will pass today rectifies this problem by 
suspending the residency requirements for military personnel that are 
away from home on active duty assignment.
  This bill also ensures that the full death gratuity payment made to 
the survivors of military personnel killed on duty will be exempt from 
income tax. The death benefits paid to survivors are intended to cover 
funeral costs and immediate expenses while the family gets back on its 
feet. The current death benefit is not large; it is $6,000. 
Inexcusably, half of that benefit is subject to income tax. This 
legislation excludes the full value of the death benefit from tax. To 
say that the survivors of those recently killed in Iraq deserve to 
receive the entire death benefit, tax-free, is an extraordinary 
understatement.
  One of the most important provisions of this bill is the above-the-
line-deduction for overnight travel expenses for members of the 
National Guard and Reserves. Many of these troops travel more than 100 
miles to serve with their units. They have to pay the costs of 
traveling to their base; and many of them also have to pay for their 
meals and lodging while away from home. Under current law, these 
expenses can be deducted from income only if the individual itemizes 
deductions on his or her tax return. This onerous requirement prevents 
many eligible individuals from taking advantage of the deduction.
  The bill we will pass today ensures that the expenses associated with 
overnight travel to attend National Guard and Reserve meetings can be 
deducted even if a person does not itemize deductions. This provision 
is expected to save National Guardsmen and reservists more than $800 
million over the next 10 years. We have seen how valiantly these 
members of our Armed Forces are serving--leaving their homes, families, 
and regular jobs, to serve in Iraq, Afghanistan, or wherever their 
Commander in Chief sends them. It is the least we can do to minimize 
the financial burden this service places on them and their families.
  I have highlighted just a few of the important provisions of this 
bill. Let me speak for a moment about how important this legislation 
will be for my own State of West Virginia. West Virginians have a proud 
tradition of serving in the military. Tens of thousands of West 
Virginians are serving on Active Duty in our Army, Navy, Air Force, and 
Marine Corps. More than 3,000 West Virginia members of the National 
Guard and Reserves have been activated. I am pleased to be able to 
support legislation that recognizes their sacrifices and rewards their 
service.
  The Senate passed legislation very similar to this bill last year. I 
was extremely disappointed that the House of Representatives did not 
act on that bill in the 107th Congress. We should waste no more time. 
Recently, the House passed a bill to provide tax fairness for members 
of our Armed Forces. However, the Senate has taken the responsible step 
of offsetting the costs of these changes to the tax code. The Senate 
bill will close loopholes that currently allow some individuals to 
renounce their American citizenship simply to avoid paying income 
taxes. I can think of no better way to finance tax relief to the brave 
patriots in our military than by forbidding anyone to shirk income 
taxes by renouncing citizenship in the United States. The tax loophole 
that rewards such unconscionable behavior ought to be closed and now is 
the time to do so. I urge the House of Representatives to approve the 
Senate bill.
  Let me close by thanking all of the members of our Armed Forces. 
Whether they are currently serving overseas or at home, whether they 
will see combat this week or provide support from far away, all these 
brave men and women are making America very proud. This legislation 
recognizes their sacrifices. I urge my colleagues to support the bill 
and hope that Congress will send it to the President without delay.

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