[Congressional Record Volume 153, Number 9 (Wednesday, January 17, 2007)]
[Senate]
[Page S702]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. LINCOLN (for herself, Mr. Thomas, Mr. Bingaman, Mr. 
        Durbin, Ms. Mikulski, Mr. Akaka, Mr. Pryor, Ms. Klobuchar, Mr. 
        Enzi, Mr. Harkin, Mr. Rockefeller, and Mr. Kerry):
  S. 326. A bill to amend the Internal Revenue Code of 1986 to provide 
a special period of limitation when uniformed services retirement pay 
is reduced as result of award of disability compensation; 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 of 
2007. 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.
  However, under current law the IRS Code bars the filing of amended 
returns beyond the last 3 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 2007 would add an exception 
to the IRS statute of limitations for amending returns. This exception 
would allow disabled veterans whose disability claims have been pending 
for more than 3 years to receive refunds on previous taxes paid for up 
to 5 years--the length of time the IRS keeps these records. Affected 
veterans would have 1 year from the date the VA determination is issued 
to go back and amend previous years' tax returns.
  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 reintroduce 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.
                                 ______