[Congressional Record (Bound Edition), Volume 162 (2016), Part 11]
[House]
[Pages 15733-15736]
[From the U.S. 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''.

[[Page 15734]]



     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 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

[[Page 15735]]

     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 
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.

[[Page 15736]]

  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 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.

                          ____________________