[Congressional Record (Bound Edition), Volume 154 (2008), Part 8]
[Senate]
[Pages 10427-10429]
[From the U.S. Government Publishing Office, www.gpo.gov]




         HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT OF 2008

  Mr. BAUCUS. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of H.R. 6081, which was received 
from the House.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (H.R. 6081) to amend the Internal Revenue Code of 
     1986 to provide benefits for military personnel, and for 
     other purposes.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the bill be 
read three time and passed, and the motion to reconsider be laid upon 
the table, with no intervening action or debate, and any statements 
related to the bill be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (H.R. 6081) was ordered to a third reading, was read the 
third time, and passed.
  Mr. BAUCUS. Mr. President, on Memorial Day in 1884, Justice Oliver 
Wendell Holmes said:

       It is now the moment when by common consent we pause to 
     become conscious of our national life and to rejoice in it, 
     to recall what our country has done for each of us, and to 
     ask ourselves what we can do for our country in return.

  I am pleased that today, on the eve of the Memorial Day weekend, the 
Senate has been able to recall what our service men and women have done 
for each of us. I am pleased that we can do something for them in 
return. And I am pleased that we have been able to pass the Heroes 
Earnings Assistance and Relief Tax Act of 2008.
  Nearly 1.5 million American service men and women have served in 
Iraq, Afghanistan, or both. Nearly 30,000 troops have been wounded in 
action there.
  It is time that Congress showed its gratitude to these brave men and 
women. They have devoted their lives to the pursuit of American 
freedom.
  Today, we are doing just that. We have passed a bill that offers tax 
relief to these men and women who serve our country so valiantly.
  During a trip to Iraq last year, I saw the amazing job that our 
troops are doing. I met many Montanans from small towns such as Roundup 
and Townsend.
  I saw firsthand what a heavy burden our troops bear for all of us. 
They face hardships and danger. But they keep at it every day.
  This bill makes permanent the special tax rules that make sense for 
our military. Many of these rules expired at the end of 2007.
  For example, most troops doing the heavy lifting in combat situations 
are lower ranking soldiers in the lower income brackets. Some of them 
are earning combat pay at levels that would qualify for the earned 
income tax credit. But under current law, combat pay does not count 
toward computing the EITC.
  Congress fixed that temporarily. But the provision that fixed the 
problem expired at the end of 2007.
  The EITC is a beneficial tax provision for working Americans. It 
makes no sense to deny it to our troops.
  Today, we have made combat duty income count for EITC purposes, and 
we have made that change a permanent part of the Tax Code.
  This military tax package also eliminates obstacles in the current 
tax laws that create problems for some veterans and service members.
  For example, family members of fallen soldiers killed in the line of 
duty receive a death gratuity benefit of $100,000. But the tax law does 
not allow the survivors to put this benefit into a Roth IRA. This bill 
will guarantee that the family members of fallen soldiers may take 
advantage of these tax-favored accounts.
  Another problem for our disabled veterans is the time limit for 
filing to get a tax refund. Most VA disability claims filed by veterans 
are quickly resolved. But many disability awards are delayed because of 
lost paperwork or the appeals of rejected claims. Once a disabled vet 
finally gets a favorable award, the disability award is tax-free.
  In many cases, however, these disabled veterans paid taxes on the 
payments in the past. The veterans cannot get the taxes paid back 
because the law bars them from filing a claim for a tax refund that 
goes back far enough.
  We take care of this problem by giving disabled veterans an extra 
year to claim their tax refunds.
  This bill is paid for by requiring that companies that do business 
with the Federal Government pay their employment taxes. The bill makes 
sure that foreign subsidiaries of U.S. parent companies that have 
contracts with the Federal Government pay employment taxes for their 
employees.
  Another offset in the bill is a provision that makes certain that 
individuals who relinquish their American citizenship or long-term 
residency pay their fair share of Federal taxes. This provision ensures 
that these folks pay the same tax for appreciation of assets, such as 
stocks or bonds, as they would pay if they sold them as U.S. citizens 
or residents.
  We owe the men and women fighting in our armed forces an enormous 
debt of gratitude. They leave their families and put their lives on the 
line to fight for our freedoms.
  And so today, the Senate pauses to recall what our service men and 
women have done for each of us. Today, the Senate pauses to ask 
ourselves what we can do for them in return. And today, the Senate 
pauses to say thank you.
  Mr. GRASSLEY. Mr. President, the Heroes Earnings Assistance and 
Relief Tax Act of 2008, the HEART Act, which passed the Senate by 
unanimous consent today, was a bipartisan effort that incorporates most 
of the provisions in the Defenders of Freedom Tax Relief Act of 2007, 
which passed the Senate last December. The HEART Act also makes 
permanent and expands upon some of the tax relief measures that I 
coauthored with Senator Baucus in 2003, while chairman of the Senate 
Finance Committee.
  Our men and women who serve in the military make tremendous 
sacrifices to keep this great Nation safe and

[[Page 10428]]

strong. Oftentimes, this very service makes taxes complicated and 
sometimes unfair. It is only right that these honorable men and women 
get treated fairly under the Federal Tax Code. The Federal Tax Code 
shouldn't penalize people for serving their country.
  It has been a few years since Congress enacted a tax relief measure 
for the military. As such, we have updated the relief package to 
include some additional relief. Amongst some of these new measures is a 
clarification that members of the military who file a joint tax return 
would be eligible for the stimulus rebate payment even if one spouse 
does not have a Social Security number.
  The bill also ensures that U.S. employers of Americans working abroad 
pursuant to a Government contract pay Social Security and Medicare 
taxes, regardless of whether they operate through a foreign subsidiary. 
Amongst the offsets in the HEART Act is a provision that ensures 
individuals who relinquish their U.S. citizenship or long-term 
residency pay the same Federal taxes for the appreciation of assets as 
they would have paid if they sold them prior to relinquishing their 
U.S. citizenship or terminating their long-term residency.
  It is unfortunate that the Senate was not able to strike an agreement 
with the House to include a provision that Senator Roberts championed. 
This provision would make more service members eligible for low-income 
housing.
  However, Senator Roberts has been reassured by House, Ways and Means 
Democrats that this provision will be processed with the House's low-
income housing credit reform measures, which was part of their housing 
bill.
  Mr. KERRY. Mr. President, today the Senate has passed legislation 
which will assist military families. I agree with Ways and Means 
Chairman Charles Rangel that this legislation should be called the 
``thank you bill.'' As we approach Memorial Day, I am pleased that the 
House and Senate have passed this important legislation which will help 
thousands of military families.
  I would like to thank Senators Baucus and Grassley for the work they 
have done on this bill. The HEART Act reflects a compromise reached by 
the Ways and Means and Senate Finance Committees. Last year, Senator 
Smith and I introduced the Active Duty Military Tax Relief Act of 2007, 
which would help those who bravely serve their country and the families 
that they have left behind.
  The HEART Act includes several provisions from the Active Duty 
Military Tax Relief Act of 2007. It also includes additional provisions 
to help military families and veterans who often struggle financially.
  The best definition of patriotism is keeping faith with those who 
serve our country. That means giving our troops the resources they need 
to keep them safe while they are protecting us. And it means supporting 
our troops at home as well as abroad.
  Currently, there are over 160,000 military personnel serving in Iraq. 
There are approximately 33,000 United States servicemembers in 
Afghanistan. Many of these men and women are reservists and have been 
called to active duty, frequently for multiple tours.
  Most large businesses have the resources to provide supplemental 
income to reservist employees called up I applaud the businesses that 
have been able to pay supplemental income to their reservists, but it 
is not easy for small businesses to do the same.
  In January 2007, the Committee on Small Business and Entrepreneurship 
held a hearing on veterans' small business issues. A majority of our 
veterans returning from Iraq and Afghanistan are Reserve and National 
Guard members--35 percent of whom are either self-employed or own or 
are employed by a small business.
  We heard some disturbing statistics about the impact and unintended 
consequences the call up of reservists is having on small businesses. 
According to a January 2007 survey conducted by Workforce Management, 
54 percent of the businesses surveyed responded that they would not 
hire a citizen soldier if they knew that they could be called up for an 
indeterminate amount of time. I am concerned that long call ups and 
redeployments have made it hard for small businesses to be supportive 
of civilian soldiers.
  The Active Duty Military Tax Relief Act of 2007 provides a tax credit 
to small businesses to assist with the cost of paying the salary of 
their reservist employees when they are called to active duty. A 
similar provision is included in the HEART Act.
  In addition to helping small businesses, the Active Duty Military Tax 
Relief of 2007 addresses concerns related to differential military pay, 
income tax withholding, and retirement plan participation. These 
provisions will make it easier for employers who would like to pay 
their employees supplemental income, above their military pay, and make 
pension contributions. Our legislation would make differential military 
pay subject to federal income tax withholding. In addition, with 
respect to the retirement plan rules, the bill provides that a person 
receiving differential military pay would be treated as an employee of 
the employer making the payment, and allows the differential military 
pay to be treated as compensation. These provisions are included in the 
HEART Act.
  The Active Duty Military Tax Relief Act of 2007 would make permanent 
the existing provision which allows taxpayers to include combat pay as 
earned income for purposes of the earned income tax credit, EITC. 
Without this provision, some military families would no longer be 
eligible to receive the EITC because combat pay is currently not 
taxable. It also would provide tax relief for the death gratuity 
payment that is given to families that have lost a loved one in combat. 
This payment is currently $100,000. Our current tax laws do not allow 
the recipients of this payment to use it to make contributions to tax-
preferred saving accounts that help with saving for retirement. Both of 
these provisions are included in the HEART Act.
  Recently, Representatives Ellsworth and Emanuel and Senator Obama and 
I introduced the Fair Share Act of 2008 which ends the practice of U.S. 
government contractors setting up shell companies in foreign 
jurisdictions to avoid payroll taxes. I think that is appropriate that 
the Fair Share Act is included in the HEART Act. The revenue raised 
from closing this abusive loophole will help offset the tax relief 
provided to military families.
  On March 6, 2008, Farah Stockman of the Boston Globe reported that 
Kellogg, Brown and Root Inc.--KBR--has avoided payroll taxes by hiring 
workers through shell companies in the Cayman Islands. The article 
estimates that hundreds of millions of dollars in payroll taxes have 
been avoided a disturbing, yet not all too surprising discovery.
  The Fair Share Act of 2008 will end the practice of U.S. Government 
contractors setting up shell companies in foreign jurisdictions to 
avoid payroll taxes. The legislation amends the Internal Revenue Code 
and the Social Security Act to treat foreign subsidiaries of U.S. 
companies performing services under contract with the United States 
government as American employers for the purpose of Social Security and 
Medicare payroll taxes.
  Our service men and women need to know that we are honoring their 
service. These changes to our tax laws will help our military families 
with some of their financial burdens. It cannot repay the sacrifices 
they have made for us, but it is a small way we can support our troops 
and their families at home and abroad.
  Mr. HATCH. Mr. President, today I rise to congratulate Senator Webb 
on the passage of S. 22 the Post 9/11 Veterans Educational Assistance 
Act. This is an important piece of legislation worthy of serious 
consideration.
  However, despite its noble intent, I voted against the measure for 
two reasons. First, Senator Webb's legislation was attached to a 
massive spending amendment which, coupled with the rest of the wartime 
supplemental bill, exceeds the $108.1 billion expenditure limit set by 
the President. Therefore, for this reason, and others, I believe that 
the President will veto this legislation.

[[Page 10429]]

  The second reason is that I believe that Senators Graham, Burr, and 
McCain have offered a superior piece of legislation, S. 2938 the 
Enhancement of Recruitment, Retention and Readjustment through 
Education Act. S. 2938 will assist our nation's veterans by 
significantly improving education benefits for both those who have left 
the services and those who decided to make the military their career.
  Specifically, S. 2938 will permit Guard and Reservists to more easily 
qualify for benefits; eliminate the $1,200 fee that servicemembers are 
currently required to pay in order to qualify for education benefits; 
and increase the annual stipend for books to $1,000. Most importantly, 
the Graham, Burr and McCain legislation will increase the level of 
monthly payments for a college education from $1,100 to $1,500.
  I view this as a much simpler and fairer compensation package than S. 
22. S. 22 would provide tuition assistance equal to the sum charged by 
the program in which the veteran is enrolled. However, this assistance 
is capped at the amount of in-state tuition imposed by the most 
expensive public college in the same state as the school where the 
veteran is enrolled.
  Obviously, this is a very complicated funding mechanism which I fear 
will unnecessarily complicate the future education plans of many 
servicemembers. I am also concerned that such a funding scheme will 
adversely affect those veterans who wish to pursue educational 
opportunities at private and parochial colleges and universities.
  However, S. 22 is not without its advantages, since it provides a 
basic housing allowance. But, the Graham, Burr and McCain bill also 
supports military families by enabling servicemembers and veterans the 
option of transferring some of those benefits to a spouse or child. 
This is a provision that S. 22 does not contain.
  In final analysis these are two serious pieces of legislation that 
merit close scrutiny. However, in my final analysis, I believe that the 
Graham, Burr and McCain bill is the superior bill and I look forward to 
debating that measure and voting for it once the Senate returns from 
the Memorial Day recess.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized.
  Mr. ENZI. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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