[Congressional Record Volume 162, Number 174 (Monday, December 5, 2016)]
[House]
[Pages H7156-H7159]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1715
COMBAT-INJURED VETERANS TAX FAIRNESS ACT OF 2016
Mr. BRADY of Texas. Mr. Speaker, I move to suspend the rules and pass
the bill (H.R. 5015) to restore amounts improperly withheld for tax
purposes from severance payments to individuals who retired or
separated from service in the Armed Forces for combat-related injuries,
and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5015
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Combat-Injured Veterans Tax
Fairness Act of 2016''.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) Approximately 10,000 to 11,000 individuals are retired
from service in the Armed Forces for medical reasons each
year.
(2) Some of such individuals are separated from service in
the Armed Forces for combat-related injuries (as defined in
section 104(b)(3) of the Internal Revenue Code of 1986).
(3) Congress has recognized the tremendous personal
sacrifice of veterans with combat-related injuries by, among
other things, specifically excluding from taxable income
severance pay received for combat-related injuries.
(4) Since 1991, the Secretary of Defense has improperly
withheld taxes from severance pay for wounded veterans, thus
denying them their due compensation and a significant benefit
intended by Congress.
(5) Many veterans owed redress are beyond the statutory
period to file an amended tax return because they were not or
are not aware that taxes were improperly withheld.
SEC. 3. RESTORATION OF AMOUNTS IMPROPERLY WITHHELD FOR TAX
PURPOSES FROM SEVERANCE PAYMENTS TO VETERANS
WITH COMBAT-RELATED INJURIES.
(a) In General.--Not later than one year after the date of
the enactment of this Act, the Secretary of Defense shall--
(1) identify--
(A) the severance payments--
(i) that the Secretary paid after January 17, 1991;
(ii) that the Secretary computed under section 1212 of
title 10, United States Code;
(iii) that were not considered gross income pursuant to
section 104(a)(4) of the Internal Revenue Code of 1986; and
(iv) from which the Secretary withheld amounts for tax
purposes; and
(B) the individuals to whom such severance payments were
made; and
(2) with respect to each person identified under paragraph
(1)(B), provide--
(A) notice of--
(i) the amount of severance payments in paragraph (1)(A)
which were improperly withheld for tax purposes; and
(ii) such other information determined to be necessary by
the Secretary of the Treasury to carry out the purposes of
this section; and
(B) instructions for filing amended tax returns to recover
the amounts improperly withheld for tax purposes.
(b) Extension of Limitation on Time for Credit or Refund.--
(1) Period for filing claim.--If a claim for credit or
refund under section 6511(a) of the
[[Page H7157]]
Internal Revenue Code of 1986 relates to a specified
overpayment, the 3-year period of limitation prescribed by
such subsection shall not expire before the date which is 1
year after the date the information return described in
subsection (a)(2) is provided. The allowable amount of credit
or refund of a specified overpayment shall be determined
without regard to the amount of tax paid within the period
provided in section 6511(b)(2).
(2) Specified overpayment.--For purposes of paragraph (1),
the term ``specified overpayment'' means an overpayment
attributable to a severance payment described in subsection
(a)(1).
SEC. 4. REQUIREMENT THAT SECRETARY OF DEFENSE ENSURE AMOUNTS
ARE NOT WITHHELD FOR TAX PURPOSES FROM
SEVERANCE PAYMENTS NOT CONSIDERED GROSS INCOME.
The Secretary of Defense shall take such actions as may be
necessary to ensure that amounts are not withheld for tax
purposes from severance payments made by the Secretary to
individuals when such payments are not considered gross
income pursuant to section 104(a)(4) of the Internal Revenue
Code of 1986.
SEC. 5. REPORT TO CONGRESS.
(a) In General.--After completing the identification
required by section 3(a) and not later than one year after
the date of the enactment of this Act, the Secretary of
Defense shall submit to the appropriate committees of
Congress a report on the actions taken by the Secretary to
carry out this Act.
(b) Contents.--The report submitted under subsection (a)
shall include the following:
(1) The number of individuals identified under section
3(a)(1)(B).
(2) Of all the severance payments described in section
3(a)(1)(A), the aggregate amount that the Secretary withheld
for tax purposes from such payments.
(3) A description of the actions the Secretary plans to
take to carry out section 4.
(c) Appropriate Committees of Congress Defined.--In this
section, the term ``appropriate committees of Congress''
means--
(1) the Committee on Armed Services, the Committee on
Veterans' Affairs, and the Committee on Finance of the
Senate; and
(2) the Committee on Armed Services, the Committee on
Veterans' Affairs, and the Committee on Ways and Means of the
House of Representatives.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Texas (Mr. Brady) and the gentleman from Massachusetts (Mr. Neal) each
will control 20 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. BRADY of Texas. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous material on H.R. 5015, currently
under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, we have responsibilities for all the brave men and women
who protect and defend our great Nation, especially those who are
injured in the line of duty. The bill we are considering today by
Representative Rouzer does just that.
Under our tax system, veterans who suffer from combat-related
injuries are not required to pay taxes on the one-time lump-sum
disability payment they receive when they leave the military.
Unfortunately, errors in the Defense Department's automatic payment
system have resulted in taxes being improperly withheld from these
injured troops' payments--sometimes for years on end.
As a result, thousands of combat-injured veterans--men and women who
have sacrificed greatly for our country--have not received the full
compensation they are rightfully due. The Combat-Injured Veterans Tax
Fairness Act provides an opportunity to right this wrong for veterans
injured during their service. This legislation will allow veterans to
recover income taxes that were improperly collected by the Department
of Defense on certain disability severance payments.
Under this bill, the Defense Department will be required to identify
all the veterans who have been impacted by this problem. They will
inform these veterans of the full amount that has been improperly
withheld from their disability payments, and they will provide detailed
instructions on how veterans can recover the money through an amended
tax return.
Our men and women in uniform and their families have sacrificed so
much for our Nation. Errors like this are completely unacceptable and
cannot be allowed to go unaddressed.
I thank Representative Rouzer for his leadership on the Combat-
Injured Veterans Tax Fairness Act and his dedication. This legislation
takes important action to ensure America's promises are kept to our
combat-injured heroes and their families.
Mr. Speaker, I urge all of my colleagues to join me in supporting its
passage.
I reserve the balance of my time.
Committee on Armed Services,
House of Representatives,
Washington, DC, November 30, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means, House of
Representatives, Washington, DC.
Dear Mr. Chairman: I write concerning H.R. 5015, the
Combat-Injured Veterans Tax Fairness Act of 2016, which was
referred to the Committee on Armed Services, and in addition
to the Committee on Ways and Means, for a period to be
subsequently determined by the Speaker.
In order to expedite this legislation for floor
consideration, the Committee on Armed Services will forgo
action on this bill. This decision is conditional on our
mutual understanding that forgoing consideration in no way
diminishes or alters the jurisdictional interests of the
Committee on Armed Services in this bill, any subsequent
amendments, or similar legislation.
Please place a copy of this letter and your response
acknowledging our jurisdictional interest into the
Congressional Record during consideration of the measure on
the House floor.
Sincerely,
William M. ``Mac'' Thornberry,
Chairman.
____
Committee on Ways and Means,
House of Representatives,
Washington, DC, December 1, 2016.
Hon. William M. ``Mac'' Thornberry,
Chairman, Committee on Armed Services, House of
Representatives, Washington, DC.
Dear Chairman Thornberry: Thank you for your letter
regarding H.R. 5015, the ``Combat-Injured Veterans Tax
Fairness Act of 2016.'' As you noted, the bill was referred
to the Committee on Armed Services.
I am most appreciative of your decision to waive formal
consideration of H.R. 5015 so that it may proceed
expeditiously to the House floor. I acknowledge that although
you waived formal consideration of the bill, the Committee on
Armed Services is in no way waiving its jurisdiction over the
subject matter contained in those provisions of the bill that
fall within your Rule X jurisdiction.
I will include a copy of our letters in the Congressional
Record during consideration of this legislation on the House
floor.
Sincerely,
Kevin Brady,
Chairman.
Mr. NEAL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank Chairman Brady for his efforts on behalf of this
legislation.
This is a pleasant responsibility that we have when you consider that
its corrective action will alone help 175 former military members in
the State of Massachusetts and 13,800 across the country.
Let me reiterate some of the points that were made by Chairman Brady.
The bill before us corrects an issue related to a provision that was
designed to alleviate some of the tax burdens of our Nation's combat-
injured veterans. Under Federal law, veterans who suffer combat-related
injuries and who are separated from the military are not supposed to be
taxed on the one-time lump-sum disability severance payment they
receive from the Department of Defense.
Due to an accounting error at the Defense Finance and Accounting
Service, approximately $78 million in tax payments were inadvertently
taken from combat-disabled servicemembers. Some of this improper
withholding has taken place outside the 3-year period in which
taxpayers could file an amended tax return.
H.R. 5015 would right this wrong by instructing DOD to identify those
who were wrongfully taxed so that they can be reimbursed. This bill
would allow those veterans identified by the DOD to file amended
returns to recoup those unintentionally withheld funds.
Mr. Speaker, I am curious with respect to two items in this bill, and
I just would like to raise this ever so politely with the majority
party. Veterans' issues in the Congress have long had a bipartisan
flavor to them. We have been supportive across the board in the efforts
that we make as it relates to our veterans, and the differences we have
generally are very small; but in this case, it does not appear that a
Democrat was asked to cosponsor the bill in its original introduction.
So I would hope in the future that even though this bill was largely
[[Page H7158]]
sponsored by Republican Members, that on this side you could have
easily picked up 33 Members as well.
So I hope going forward there will be that effort that we would
continue with here to ensure that matters of this magnitude are well
met by both parties. I would say that I don't want to suggest for a
moment that this was done in a partisan atmosphere as much as I would
like to think that it was just overlooked. I hope in the future that we
would be considered for sponsorship of this sort of legislation as
well.
Also, I would like to highlight an issue that is akin to the matter
that is before us, and it comes from our friends on the committee, Sam
Johnson and John Larson. They worked together on legislation that would
prevent exonerated felons from facing an undue tax burden with respect
to payments they received due to their wrongful conviction--emphasis on
``wrongful conviction.''
Similar to the veterans in the situation before us, these wrongfully
convicted individuals should not face an improper tax liability on
amounts intended to compensate for the tremendous injustices they faced
under our legal system. Legislation to that effect became law in 2015.
However, due to the lengthy IRS process in providing guidance on the
issue, the statute would only allow less than 5 months for these
exonerated individuals to amend their prior year tax returns.
Mr. Johnson and Mr. Larson of Connecticut have worked tirelessly to
make sure that these individuals are not unfairly burdened further than
they already have been and they have proposed extending the statutory
deadline for these individuals to file amended returns.
So while I think the legislation before us is sound, I do hope that
the committee and the Congress will find time to consider similar IRS
filing-deadline legislation with respect to these exonerated
individuals.
Mr. Speaker, I reserve the balance of my time.
Mr. BRADY of Texas. Mr. Speaker, I yield 3 minutes to the gentleman
from North Carolina (Mr. Rouzer), who is the author of the bill in the
House. Besides his advocacy for small businesses and job growth, he is
also a champion for our military, especially those who have been
injured in combat.
Mr. ROUZER. Mr. Speaker, first, I want to make mention to the fine
ranking member of the committee that we did reach out, certainly, to as
many staff on the Democrat side as we possibly could. Perhaps we could
have done a little bit better job of that, but I do want to make
mention that we did make that effort--a point duly noted, though--and
we will follow up multiple times the next time I have a bill that I
think the gentleman would be interested in.
Mr. Speaker, I filed H.R. 5015, the Combat-Injured Veterans Tax
Fairness Act, after learning that nearly 14,000 veterans from all 50
States and the District of Columbia who suffered service-ending,
combat-related injuries never received the full amount of their
severance payment because taxes were wrongly withheld. Let me repeat
that: nearly 14,000 veterans did not receive the money to which they
were entitled because of a taxing error made by the Federal Government.
Now, in case you are wondering how this error occurred, here is some
background: the Internal Revenue Code excludes recurring disability
payments from taxable income for personal injuries or sickness
resulting from active service in our Armed Forces. In 1991, a Federal
district court case, St. Clair v. United States, determined that one-
time lump-sum disability severance payments received for injuries
resulting from active service should be excluded from taxable income as
well.
Despite this court decision and the resulting regulatory guidance
that stemmed from it, taxes on combat-related disability severance
payments have been withheld for many years. As was mentioned earlier,
the Defense Finance and Accounting System claimed this was due to the
limitations of its automated computer payment system. Go figure.
Regardless, this is an issue that needs to be addressed.
Many of the veterans affected are not even aware that their benefits
were improperly reduced. In most cases, the 3-year period in which they
could file an amended tax return to get their money back has long since
passed.
This legislation directs the Department of Defense to identify
instances of improper withholding and determine how much these combat-
wounded veterans are owed. Those veterans who were adversely affected
will then be able to apply to the IRS to receive the money they are
rightfully due.
Our soldiers, sailors, airmen, and marines risk their lives every day
to protect our freedoms, our values, and our Republic. The revelation
that there are thousands of veterans who did not receive their full
disability severance pay is unacceptable, and it must be corrected
immediately.
Today we can make a great step towards rectifying this problem. I
think we can all agree that these veterans deserve no less for their
service and sacrifice to our Nation.
I want to make special mention of Senator Boozman of Arkansas and
Senator Warner of Virginia who have sponsored an identical bill in the
United States Senate. Their leadership on this issue has been
absolutely critical. I commend this legislation to my colleagues and
encourage its passage.
Mr. NEAL. Mr. Speaker, I want to acknowledge the gentleman for his
good effort and his thoughtful response to the point that I raised.
Of course, thanks to Chairman Brady, this is an example, again, in a
small way of how we can do some good things around here in a bipartisan
manner.
Mr. Speaker, I yield back the balance of my time.
Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may
consume.
First, I really do applaud the work of Representative Rouzer in this
area and the bipartisan work of Senators Boozman and Warner.
This is an area that could have easily been just swept aside over the
years and never really addressed. The gentleman continued to raise the
issue, bring it to our attention, and work through the legislative
process. Again, I thank the gentleman for his very important
leadership.
I also thank the chairman of the Armed Services Committee, Chairman
Mac Thornberry, and his team for their approval of this measure and
willingness to work with the author to bring this forward.
I, too, thank the ranking member, Mr. Neal, and congratulate him on
his naming as ranking member for the Ways and Means Committee. I look
forward to working with the gentleman on these and other issues moving
forward.
On behalf of 14,000 veterans who deserve to get the dollars they
earned from the Department of Defense, late is better than never. I
applaud the efforts of Mr. Rouzer in doing that.
Mr. Speaker, I urge support for this bipartisan bill.
I yield back the balance of my time.
Ms. JACKSON LEE. Mr. Speaker, I rise in support of H.R. 5015, Combat-
Injured Veterans Tax Fairness Act of 2016, because the legislation
directs the Defense Department (DoD) to restore improperly withheld for
taxes from severance payments to individuals who retired or separated
from service in the Armed Forces for combat-related injuries.
The bill also requires the DoD to notify combat-injured veterans if
it had improperly withheld tax on their severance pay any time after
January 17, 1991 and provide the veterans with information on how to
seek a refund from the Internal Revenue Service (IRS).
H.R. 5015 works to remedy the egregious action of withholding more
than $78 million in taxes from almost 14,000 combat-injured veterans.
This legislation additionally ensures that further tax amounts will
not be taken from combat-injured veterans in the future.
As a member of the House Committee on Homeland Security since its
establishment, and current Ranking Member of the Judiciary Subcommittee
on Crime, Terrorism and Homeland Security this bill is of importance to
me.
The DoD held an average of over $5,500 from each of the veterans
since 1991.
That amount of money could help combat-injured veterans with hospital
bills and the difficult transition back into civilian life.
I am pleased that the DoD will also have to submit a report on the
number
[[Page H7159]]
of times it had withheld pay to combat-injured veterans, the amount of
each severance payment it withheld, and its actions to prevent future
improper withholding to Congress within one year of the bill's
enactment for Congress to assess the situation.
Our veterans deserve to be treated with respect.
It is only through the efforts and sacrifice of our veterans that
America has the freedoms and privileges we do today.
I urge my colleagues to join me in supporting H.R. 5015.
Mr. DANNY K. DAVIS of Illinois. Mr. Speaker, I rise in strong support
of H.R. 5015, a bill that would improve the fairness of the tax code
and treat our service members with the respect they are due.
Veterans who suffered combat-related injuries who separated from the
military are not supposed to be taxed on any one-time disability
payments. Unfortunately, an accounting error has cost about 14,000
veterans more than $78 million in taxes. Just under 500 of these
veterans are from my home state of Illinois.
H.R. 5015 fixes this problem by instructing the DoD to identify those
who were wrongfully taxed so that they can be reimbursed. The lion's
share of the affected veterans are outside of the window for amending
their tax returns to recoup the funds.
Consequently, this bill would allow those veterans identified by the
DoD to file amended returns to recoup these unintentionally-withheld
funds. This is a good bill that helps our service members as we should.
I hope that this chamber can engage in similar bipartisan efforts to
support other needy Americans as we move into the next Congress.
I am troubled that some stakeholders are advocating that a 15 to 20
percent corporate tax rate serve as the central metric by which we
judge any tax reform effort. To achieve this rate, middle- and low-
income families and small businesses will have to subsidize the
wealthiest corporations, foregoing critical credits and deductions that
provide much needed assistance.
I sincerely hope that we advance the intent of this bill to help
Americans in need as we consider tax reform next year.
I strongly support H.R. 5015, and I urge my colleagues to support its
passage.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Texas (Mr. Brady) that the House suspend the rules and
pass the bill, H.R. 5015, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. BRADY of Texas. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this motion will be postponed.
____________________