[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--
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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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