[Congressional Record Volume 152, Number 41 (Tuesday, April 4, 2006)]
[Senate]
[Pages S2804-S2805]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. LINCOLN (for herself and Mr. Thomas):
  S. 2503. A bill to amend the Internal Revenue Code of 1986 to provide 
for an extension of the period of limitation to file claims for refunds 
on account of disability determinations by the Department of Veterans 
Affairs; to the Committee on Finance.
  Mrs. LINCOLN. Mr. President, I rise today with my colleague, Senator 
Craig Thomas, to introduce the Disabled Veterans Tax Fairness Act. This 
much-needed legislation would protect disabled veterans from being 
unfairly taxed on the benefits to which they are entitled, simply 
because their disability claims were not processed in a timely manner. 
This legislation is supported by the Military Coalition, a group 
representing more than 5.5 million members of the uniformed services 
and their families.
  While the Department of Veterans Affairs (VA) resolves most of its 
filed disability claims in less than a year, there are also instances 
of lost paperwork, administrative errors, and appeals of rejected 
claims that often delay thousands of disability awards for years on 
end. When this occurs, disability compensation is awarded retroactively 
and for tax purposes, a disabled veteran's previously received taxable 
military retiree pay is re-designated as nontaxable disability 
compensation. Thereby, the disabled veteran is entitled to a refund of 
taxes paid and must file an amended tax return for each applicable 
year.
  Unfortunately, under current law the IRS Code bars the filing of 
amended returns beyond the last three tax years. As a result, many of 
our disabled veterans are denied the opportunity to file a claim for 
repayment of additional years of back taxes already paid--through no 
fault of their own--even though the IRS owes them a refund for the 
taxes that were originally paid on their retiree pay.
  The Disabled Veterans Tax Fairness Act of 2006 would add an exception 
to the IRS statute of limitations for amending returns. This exception 
would allow disabled military retirees whose disability claims have 
been pending for more than 3 years to receive refunds on previous taxes 
paid for all the years their claim was pending. Specifically, the bill 
would extend the IRS three year period of limitation for amending 
returns to one year from the date a VA determination is issued.
  My father and grandfather both served our Nation in uniform and they 
taught me from an early age about the sacrifices our troops and their 
families have made to keep our Nation free. This is particularly true 
for our disabled veterans. During a time when a grateful Nation should 
be doing everything it can to honor those who have sacrificed so 
greatly on our behalf, the very least it can do is ensure they and 
their families are not unjustly penalized simply because of 
bureaucratic inefficiencies or administrative delays which are beyond 
their control. This situation is unacceptable and our veterans deserve 
better.
  That is why I am proud to introduce this legislation today to provide 
relief to our Nation's veterans. It is the least we can do for those 
whom we owe so much, and it is the least we can do to reassure future 
generations that a grateful Nation will not forget them when their 
military service is complete.

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