[Congressional Record (Bound Edition), Volume 147 (2001), Part 5]
[Extensions of Remarks]
[Pages 6443-6444]
[From the U.S. Government Publishing Office, www.gpo.gov]



A BILL TO AMEND THE INTERNAL REVENUE CODE OF 1986 TO PROVIDE A SPECIAL 
RULE FOR MEMBERS OF THE UNIFORMED SERVICES AND THE FOREIGN SERVICE, AND 
OTHER EMPLOYEES, IN DETERMINING THE EXCLUSION OF GAIN FROM THE SALE OF 
                         A PRINCIPAL RESIDENCE

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                        Thursday, April 26, 2001

  Mr. HOUGHTON. Mr. Speaker, I am pleased to join with several of my 
colleagues in introducing our bill, which would address an inequity 
caused by a change in the Internal Revenue Code in 1997. The proposed 
change would simply adjust an oversight and bring fairness and equality 
to the Code by recognizing the unique circumstances of the members of 
the Foreign Service, the Uniformed Services and U.S. business persons 
who are working abroad. The bill is the same as the one introduced in 
the 106th Congress, except that the applicability to business persons 
provision has been added. The bill is retroactive to May 1997, when the 
change occurred.
  The Code was changed in 1997 to provide a benefit to taxpayers who 
sell their principal residence--a change more generally beneficial than 
the prior law. Where the prior law provided for rollovers of capital 
gains and a one-time exclusion, the new law requires that the owner(s) 
occupy the principal residence for at least two years of the previous 
five years from the date of sale to qualify for the full exclusion.
  However, members of the Foreign Service and the Uniformed Services, 
as well as certain business persons posted abroad by their U.S. 
employers, may not be able to take advantage of the generous change 
enacted in 1997. The problem arises from the fact that we post our 
Foreign Service abroad for years at a time, and we move the military 
from post to post in the U.S. and abroad. The same problem can

[[Page 6444]]

arise for business persons who are moved abroad for longer and more 
frequent periods than in the past. With the globalization that is 
occurring, and affecting most economies, it is essential that our 
multinational companies compete on a worldwide basis. Globalization is 
certainly a major factor in our economy. In 2000, exports and imports 
for the U.S. totaled about $2 trillion--over 20% of our economy.
  The problem arises because it is difficult for these individuals to 
fit into the mold we created in the 1997 law change. This result occurs 
because their posting abroad and at home is controlled by others. The 
bill would alleviate this problem for Foreign Service and Uniformed 
Services members by suspending the five year period for ownership and 
principal use for any periods during which the taxpayer was under 
official orders to serve at a duty station away from his or her home. 
This change would retain the 5 year look-back and the 2 year principal 
residence rules, but would address the unfairness issue applicable to 
members of the Foreign Service and Uniformed Services. The bill would 
also address the issue for business persons by suspending for up to 
five years, the five year principal residence test for an individual 
relocated abroad by his or her employer.
  The proposed correction of this problem is not new. In fact, the 
Taxpayer Refund and Relief Act of 1999, H.R. 2488, which was passed by 
both the House and the Senate included provisions to correct the 
problem for all three groups. Unfortunately, the bill was vetoed for 
reasons unrelated to this proposal. Recently, we in the House have been 
focusing on tax bills that benefit and directly affect the American 
people--and this bill does just that. We urge our colleagues to join in 
cosponsoring this legislation.

                          ____________________