[Congressional Record Volume 149, Number 157 (Monday, November 3, 2003)]
[Senate]
[Pages S13831-S13833]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FALLEN PATRIOTS TAX RELIEF ACT
Mr. McCONNELL. Mr. President, I ask unanimous consent that the Senate
proceed to the immediate consideration of H.R. 3365.
The PRESIDING OFFICER. The clerk will report the bill by title.
The legislative clerk read as follows:
A bill (H.R. 3365) to amend title 10, United States Code,
and the Internal Revenue Code of 1986 to increase the death
gratuity payable with respect to deceased members of the
Armed Forces and to exclude such gratuity from gross income.
There being no objection, the Senate proceeded to consider the bill.
Mr. GRASSLEY. Mr. President, we are tonight adopting long overdue
legislation to rectify a number of inequities faced by members of our
Nation's armed services.
Since the terrorist attacks of September 11, these brave men and
women have been called upon to make terrific sacrifices. They have left
their families and friends behind for months at a time to willingly
cast themselves into harm's way. Whether in Afghanistan, Iraq, or on
whatever battlefield the war against terrorism must be fought, these
courageous patriots have put their lives on the line to defend our
freedoms.
While I realize that we could never begin to fully repay these fine
young Americans--not to mention the loved ones they leave behind--the
Senate has an opportunity tonight to show our gratitude for their
sacrifices.
The legislation before us, which the Finance Committee first
developed during the 107th Congress, will ensure that members of the
uniformed services, the National Guard, and the foreign service are
treated fairly in all aspects of the tax code.
First, this legislation ensures that the families of military
personnel called into active duty are not disadvantaged under the home
sale exclusion. Unlike most Americans, military personnel who are
called to active duty or asked to relocate often lack the flexibility
to meet residency requirements under the exclusion and are adversely
impacted by these rules. This legislation would suspend the residency
test for periods of active duty aggregating no more than 10 years.
We should not punish members of our military and their families who
are asked to relocate in the name of service to their country.
This legislation also clarifies that dependent care benefits provided
to families of the uniformed services will not be treated as taxable
compensation. The provision of affordable childcare is an important
function of the military during peacetime; but it is never more
critical than during periods of conflict--families.
We must also not forget about the increasing role that Reserve and
National Guard members fulfill in our Nation's defense. Currently, more
than 157,000 reservists and National Guard are on active duty status--
most assisting in Operation Iraqi Freedom. We have begun to rely
increasingly on these service personnel to defend our borders and to
serve and protect in other areas of the world.
This legislation will allow an above-the-line deduction for travel
expenses that these men and women incur related to training
assignments. This provision will at least partially reimburse national
guard members and reservists for the expenses they incur when they
travel for weekend drills.
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The Armed Forces Tax Fairness Act also ensures that military
personnel serving in Secretary of Defense designated ``contingency
operations'' receive appropriate relief from the administrative burdens
of our tax laws during participation in those operations.
What's more, this legislation is completely offset. All of the
military tax fairness provisions in this legislation are fully funded
by extending Customs user fees.
As we consider this legislation tonight, the men and women of our
armed forces remain in hostile situations, battling terrorism wherever
that battle may lead. At the same time, their loved ones--wives,
husbands, parents, children--remain at home, making equally demanding
sacrifices as they struggle to make ends meet. It is deeply regrettable
that Congress has delayed so long to enact this commonsense
legislation.
We must delay no longer. I urge my colleagues to support this
legislation to provide the tax relief that our military personnel need
and deserve.
Mr. BAUCUS. Mr. President, I rise today in support of this amendment
to the Fallen Patriots Tax Benefit Act of 2003. The bill that we
received from the House includes two important provisions that the
Senate has already approved this year. However, it does not include the
numerous other provisions that the Senate has passed to ensure equity
for military personnel. This amendment would add these important
provisions.
First, the House bill doubles the amount of the death gratuity
payments for members of our military. Under current law, the families
of military personnel receive a death gratuity benefit of $6,000. This
bill would increase that amount to $12,000. The Senate included this
provision in the defense authorization bill that is currently in
conference.
Second, the House bill ensures that these payments will not be
subject to taxation. Under current law, death gratuity benefits are
excludable from income only to the extent they were as of September 9,
1986, which was $3,000.
In 1991, the benefit was increased to $6,000, but the Tax Code was
never adjusted to exclude the additional $3,000 from income. Because of
this oversight, the U.S. Government has been taxing families for the
death of a family member who died in combat.
The House bill would make the entire $12,000 death gratuity benefit
tax-free, and ensure that families are not hit with a tax bill during
their most difficult hour. This provision was included in the Senate
passed Armed Forces Tax Fairness Act.
That is what this bill does. Now let me talk about what the House
bill does not do.
This bill does not include the numerous other provisions for military
personnel that were included in the Armed Forces Tax Fairness Act of
2003, which was passed by the Senate in May. These provisions are vital
to ensuring tax equity for our active duty military and reservists.
Let me explain these provisions.
First, the House bill does not include the exclusion of gain on the
sale of a principal residence.
In 1997, Congress passed legislation revising the taxation of capital
gains on the sale of a person's principal residence.
The new law provides that up to $250,000--or $500,000 for a married
couple--is excluded on the sale of a principal residence if the
individual has lived in the house for at least 2 of the previous 5
years.
However, when enacted, Congress failed to provide a special rule for
military and Foreign Service personnel who are required to move either
within the U.S. or abroad.
Our proposal in the Armed Forces Tax Fairness Act would permit
service personnel and members of the Foreign Service to suspend the 5-
year period while away on assignment. That means that those years would
not count toward either the 2 years or the 5-year periods. Senators
McCain, Graham, and Lincoln proposed a bill in the last session to
correct this.
Second, the House bill does not allow for the exclusion from taxable
income of amounts received under the Military Housing Assistance
Program. The Department of Defense provides payments to members of the
Armed Services to offset diminution in housing values due to military
base realignment or closure.
For example, if a house near a base was worth $140,000 prior to the
base closure and $100,000 after the base closure, DOD may provide the
owner with a payment to offset some, but not all, of the $40,000
diminution in value. Under current law, those amounts are taxable as
compensation.
We should ensure that those men and women losing value in their homes
due to a Federal Government decision are not adversely affected
financially.
The proposal in the Armed Forces Tax Fairness Act would provide that
payments for this type of lost value are not includible into income.
Third, the House bill does not expand the combat zone filing rules to
include contingency operations. Under current law, military personnel
in a combat zone are afforded an extended period for filing tax
returns.
However, this does not apply to contingency operations. This proposal
in the Armed Forces Taxes Fairness Act would extend the same benefits
to military personnel assigned to contingency operations.
It cannot be easy trying to figure out our complicated tax system
while you are overseas and protecting our nation's freedom. Those men
and women who are sent to uphold democracy and freedom in other
countries are confronted with the same filing complications as combat
zone personnel.
Contingency operations are just as demanding as combat zone
deployment, although not always in the same manner. For example, in our
current war on terrorism, this proposal would help members of our
Special Forces in the Philippines supporting Operation Enduring
Freedom. These troops are just as focused on accomplishing their
critical mission as our troops in the Iraqi combat zone.
Fourth, the House bill does not provide an above-the-line deduction
for overnight travel expenses of National Guard and Reserve members.
Some reservists who travel one weekend per month and two weeks in the
summer for Reserve duty incur significant travel and lodging expenses.
For the most part, these expenses are not reimbursed. Under current
law, these are deductible as itemized deductions but must exceed 2
percent of adjusted gross income.
For lower income reservists, this deduction does not provide a
benefit, because they do not itemize. For higher income reservists, the
2 percent floor limits the amount of the benefit of the deductions.
In my home State of Montana, we have approximately 3,500 reservists--
800 of whom travel each month across the State for their training.
These 800 reservists pay travel and lodging expenses out of their own
pocket.
Montana ranks 48th in the Nation for per capita personal income. So
that $200 expense for Reserve duty every month means a lot to the
Montana reservist. Yet, they continue selflessly to provide their
services to our country at their own expense. For those reservists who
travel out of State for their training, this expense is even higher.
The proposal in the Armed Forces Tax Fairness Act would provide an
above the line deduction for overnight travel costs and would be
available for all reservists and members of the National Guard.
Fifth, the House bill does not expand the rules to qualify for
membership of veterans organizations. Currently, qualified veterans
organizations under section 501(c)(19) of the tax code both tax-exempt
and contributions to the organization are tax deductible.
In order to qualify under 501(c)(19), the organization must meet
several tests. For example, 75 percent of the members must be current
or former military, and substantially all of the other members must be
either spouses, widows, or widowers of current or former military.
The proposal in the Armed Forces Tax Fairness Act would permit lineal
descendants and ancestors to qualify as eligible members of these
important groups.
It is important that our veterans organizations continue the good
work that they do. But, as the organizations age, they are in danger of
losing tax-exempt status. The Armed Forces Tax Fairness Act helps
ensure the vitality of these organizations.
[[Page S13833]]
Sixth, the House bill does not clarify the tax treatment of childcare
subsidies. I want to ensure that parents in the military can continue
their dedicated service with the knowledge that their children are well
taken care of.
The military provides extensive childcare benefits to its employees.
Employees at DoD-owned facilities provide childcare services while
other areas with non-DoD owned facilities contract out their childcare.
When Congress passed the Tax Reform Act of 1986, we included a
provision stating that qualified military benefits are excluded from
income. It is not absolutely clear whether childcare provisions are
covered under this provision.
The proposal in the Armed Forces Tax Fairness Act would clarify that
any childcare benefit provided to military personnel would be
excludable from income.
Seventh, the House bill does not allow students at the Service
Academies to use their education savings account funds. In contrast,
the Armed Forces Tax Fairness Act does permit penalty-free withdrawals
from education savings accounts and qualified tuition programs made on
account of the attendance of the account holder or beneficiary at any
of the Service Academies. The amount of the funds that can be withdrawn
penalty-free is limited to the costs of advanced education in that
calendar year.
Eighth, the House does not allow the IRS to suspend the tax-exempt
status of terrorist organizations. Under current law, there is no
procedure for the IRS to suspend the tax-exempt status of an
organization.
The Armed Forces Tax Fairness Act would allow the suspension of the
tax-exempt status of an organization for any period during which the
organization is designated or identified by Executive Order as a
terrorist organization.
Ninth, the House bill does not provide tax relief for families of
those killed in the Space Shuttle Columbia. Current law provides for
income tax, estate tax, and death benefit relief to soldiers who are
killed in a combat zone, victims of the September 11 attacks, the
Oklahoma City bombing victims, and the victims of the anthrax attacks.
The crew of the Space Shuttle Columbia was heroic in every sense of
the word. We have a duty to those who lost their lives for the
advancement of science and increasing our knowledge of the world we
live in. The Armed Forces Tax Fairness Act would make all of the above
benefits available to the families of the Columbia crew.
The tenth and final difference between the House bill before us and
the Armed Forces Tax Fairness Act is that the bill before us is not
offset. In contrast, the Armed Forces Tax Fairness Act is completely
offset by strengthening the collection of taxes from people who have
renounced their U.S. citizenship in order to avoid U.S. taxes.
However, some of our colleagues in the House have objected to this
provision. So in the interest of enacting these important military tax
provisions as quickly as possible, the Senate changed the offset to a
simple extension of the present law customs user fees.
The Senate amendment to the House bill would add these very important
nine provisions. In addition, it would add an offset that the House has
not opposed this offset in the past. We hope that this compromise on
our part will allow them to pass the provisions from the Armed Forces
Tax Fairness Act that we have included in this amendment.
The passage of the death gratuity payments provision is an important
first step. However, there are thousands of men and women in uniform
that are depending on us to pass the other ten provisions included in
the Armed Forces Tax Fairness Act.
Simply put, there is absolutely no excuse if Congress fails to pass
the Armed Forces Tax Fairness Act this year.
Everyday, our military men and women fight for our freedom and the
freedom of every American. Their sacrifices are great. Passing the
other ten provisions included in the Armed Forces Tax Fairness Act is
not a lot for them to ask of Congress.
I urge my colleagues in the House to pass the Senate amendment to the
Fallen Patriots Act of 2003.
Ms. COLLINS. Mr. President, I want to express my full support for the
passage of H.R. 3365, the Fallen Patriots Tax Relief Act. Earlier this
year, the Senate passed S. 704, introduced by myself, Senator Warner,
Senator McCain, Senator Allen, and Senator Ben Nelson, which would have
increased the death gratuity paid to the survivors of deceased members
of our military from $6,000 to $12,000. Further, it would make this
increase retroactive to September 11, 2001. I am pleased that H.R. 3365
incorporates this legislation.
There is no better way to honor the memories of fallen soldiers than
to ensure that their loved ones receive the support they deserve. The
death gratuity is provided within days to the family of the
servicemember killed while on active duty. These funds help the family
to deal with immediate needs during this difficult time. Given the
sacrifices of our troops currently in Iraq. I believe that this
increase in assistance is far past due.
H.R. 3365 also ensures that the death gratuity is tax free. I fully
support this legislation, and believe that it sends a strong message of
support to our troops. As the brave men and women of our military
continue to go in harm's way in defense of our Nation, it is crucial
that they do so with the confidence that their families will have our
full support should tragedy occur.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the
McCain-Baucus-Grassley amendment, which is at the desk, be agreed to;
that the bill, as amended, be read a third time and passed; that the
title amendment be agreed to; that the motions to reconsider be laid
upon the table, en bloc; and that any statements relating to the bill
be printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 2051) was agreed to.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
The title amendment (No. 2052) was agreed to, as follows:
Amend the title so as to read: ``An Act to amend title 10,
United States Code, and the Internal Revenue Code of 1986 to
increase the death gratuity payable with respect to deceased
members of the Armed Forces and to exclude such gratuity from
gross income, to provide additional tax relief for members of
the Armed Forces and their families, and for other
purposes.''.
The bill (H.R. 3365), as amended, was read the third time and passed.
(The bill will be printed in a future edition of the Record.)
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