[House Report 106-403]
[From the U.S. Government Publishing Office]
106th Congress Report
1st Session HOUSE OF REPRESENTATIVES 106-403
=======================================================================
FOR THE RELIEF OF RICHARD W. SCHAFFERT
_______
October 20, 1999.--Referred to the Private Calendar and ordered to be
printed
_______
Mr. Smith of Texas, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1023]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1023) for the relief of Richard W. Schaffert, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
TABLE OF CONTENTS
Page
Purpose and Summary........................................ 1
Background and Need for the Legislation.................... 2
Hearings................................................... 2
Committee Consideration.................................... 2
Committee Oversight Findings............................... 2
Committee on Government Reform Findings.................... 3
New Budget Authority and Tax Expenditures.................. 3
Congressional Budget Office Cost Estimate.................. 3
Constitutional Authority Statement......................... 3
Agency Views............................................... 4
Purpose and Summary
H.R. 1023 would waive the three-year statute of limitations
on filing of an amended 1983 tax return for Mr. Richard W.
Schaffert so that he could recover a tax refund that would have
been due him based on a 1988 disability judgment by the
Veterans Administration.
Background and Need for the Legislation
Mr. Schaffert retired from the Navy in 1983--disabled with
injuries he sustained as a fighter pilot in Vietnam. He
originally filed for disability compensation in July of 1983.
Personal circumstances and appeals delayed the final processing
of his application until 1988. At that time, the VA rated Mr.
Schaffert with an 80 percent disability retroactive to February
1983. Because the amount of the disability compensation is
deducted from his military pension, the only actual benefit
from the disability award is that it is non-taxable. Mr.
Schaffert filed amended tax returns for all the years prior to
1988. He received a tax refund for each of the years except
1983 because a refund for 1983 was barred by the three-year
statute of limitations. The refund would be $2,133.33 plus
interest.
The official Department of the Treasury report on the bill
in the 102nd Congress opposed the legislation on the ground
that ``private relief bills work to undermine public confidence
in the tax system'' and that waiving the statute of limitations
for Mr. Schaffert would set a ``highly undesirable precedent''
and ``jeopardize the efficient administration of the tax
laws.'' However, the District Director of the Internal Revenue
Service sent Mr. Schaffert's congressman at the time a letter
stating ``Although we understand that Mr. Schaffert did not
cause the delay and we are sympathetic to Mr. Schaffert's
situation, we cannot allow his claim . . . The only solution
available to allow a refund to Mr. Schaffert would be the
introduction of special legislation''.
Under the subcommittee chairmanship of Congressman Barney
Frank, the House bill for Mr. Schaffert passed the House in the
102nd , but died in the Senate.
Hearings
The committee's Subcommittee on Immigration and Claims held
no hearings on H.R. 1023.
Committee Consideration
On September 30, 1999, the Subcommittee on Immigration and
Claims met in open session and ordered favorably reported the
bill H.R.1023 without amendment by voice vote, a quorum being
present.
On October 5, 1999, the Committee on the Judiciary met in
open session and ordered reported favorably the bill H.R. 1023,
by voice vote, a quorum being present.
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the committee reports
that the findings and recommendations of the committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform Findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of House Rule XI is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the committee sets
forth, with respect to the bill, H.R. 1023, the following
estimate and comparison prepared by the Director of the
Congressional Budget Office under section 403 of the
Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 12, 1999.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1023, a bill for
the relief of Richard W. Schaffert.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is John R.
Righter, who can be reached at 226-2860.
Sincerely,
Dan L. Crippen, Director.
H.R. 1023--A bill for the relief of Richard W. Schaffert.
H.R. 1023 would waive the statute of limitations on an
amended tax return for 1983. The waiver would allow Mr.
Schaffert to recover an overpayment of taxes that resulted from
the Veterans Administration granting him a military disability
appeal in 1988. The change in Mr. Schaffert's disability status
retroactively lowered his 1983 taxable income, resulting in an
overpayment of $2,133.33. CBO estimates that waiving the
statute of limitations for Mr. Schaffert would result in a
refund of this overpayment plus interest, thus increasing
direct spending in fiscal year 2000 by around $8,000. Because
the bill would affect direct spending, pay-as-you-go procedures
would apply.
The CBO staff contact is John R. Righter, who can be
reached at 226-2860. This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to rule XI, clause 2(1)(4) of the Rules of the
House of Representatives, the committee finds the authority for
this legislation in Article 1, Section 8 of the Constitution.
Agency Views
The comments of the Department of Treasury and the
Department of Veterans Affairs in the 102nd Congress are as
follows:
Department of the Treasury,
Washington, DC, November 13, 1991.
Hon. Jack Brooks, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: This is in response to your letter of
October 17, 1991, to Secretary Brady requesting comments
regarding H.R. 2563, a bill for the relief of Richard W.
Schaffert. Your letter was referred to this office because it
concerns a matter of tax policy.
The bill would provide an exception for Mr. Schaffert from
the statutory period of limitations for claims of refund
provided by the tax code. The Treasury Department has
historically opposed bills which would grant private exemption
or relief from our tax system. We recognize that there are many
situations in which taxpayers, whether because of inadvertence
or misfeasance, are subject to tax consequences which they did
not expect or contemplate. In many cases, the taxpayers
involved are ones who would evoke universal sympathy or
respect. The Treasury Department believes, however, that
private relief bills work to undermine public confidence in the
tax system. Our system is premised on the assumption that the
tax law will apply equally to all taxpayers, big or small, rich
or poor.
The statutory period of limitations on filing claims is
essential to ensure finality in tax administration. The statute
serves to bar, after the lapse of a reasonable period of time,
both the filing of a claim for refund by the taxpayer and the
assessment of additional taxes by the government. Granting of
special relief would constitute a highly undesirable precedent,
encouraging other taxpayers who would seek to file untimely
claims for refund. Such a development would jeopardize the
efficient administration of the tax laws and would require the
government to retain records which could otherwise be destroyed
after the statutory period of limitations had expired.
Sincerely,
Kenneth W. Gideon, Assistant Secretary.
(Tax Policy)
The Secretary of Veterans Affairs,
Washington, DC, November 12, 1991.
Hon. Jack Brooks, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: We are pleased to respond to your
request for a report on H.R. 2563, 102d Congress, a bill ``For
the relief of Richard W. Schaffert.''
This bill provides that the limitations relating to the
filing and allowing of a claim for credit or refund of tax
overpayments set forth in sections 6511 and 6514 of the
Internal Revenue Code shall be waived for Richard W. Schaffert
for the taxable year 1983. The bill provides that in order for
its provisions to apply to Mr. Schaffert, he shall file a claim
within one year from the date of enactment of the bill.
Although the relationship of the Department of Veterans
Affairs (VA) to Mr. Schaffert is not stated in the bill itself,
it is our understanding the relationship is as follows. Mr.
Schaffert has been in receipt of military retirement pay since
his retirement from the service in 1983. In March 1985 he was
awarded VA disability compensation at the 10% rate effective
retroactively from February 1983, the month following his
discharge from active service. In May 1987, he was awarded VA
disability compensation at the 80% rate also effective
retroactively from February 1983.
Federal law (38 U.S.C. Sec. 5304) prohibits a veteran from
receiving military retirement pay and VA disability
compensation concurrently. A veteran, however, pursuant to 38
U.S.C. Sec. 5305 may waive military retirement pay up to the
amount of the VA compensation to which the veteran is entitled.
Since military retirement pay is taxable and VA compensation is
not, it is generally in the veteran's interest to waive as much
retirement pay as possible.
Military retirement pay, however, cannot be waived
retroactively, and accordingly, Mr. Schaffert received no VA
disability compensation until April 1985, at which time he
waived a portion of military retirement pay in order to receive
VA benefits at the 10% rate. In June 1987 he began to receive
VA disability compensation at the 80% rate.
Apparently, when VA disability compensation is awarded
retroactively, as in this case, the IRS presumes that a veteran
would have waived military retirement pay in order to receive
tax-exempt VA compensation. In 1988 Mr. Schaffert filed a claim
for a refund for the tax he paid on the amount of military
retirement pay which he would have been entitled to waive in
order to receive VA disability compensation for years from 1983
to 1987. Although we understand he received refunds for taxes
paid in and after 1984, the limitations on refunds imposed by
26 U.S.C. Sec. Sec. 6511 and 6514 prevent him from receiving a
refund for 1983.
In order to permit the Committee to fully consider all
aspects of this matter, I have had my staff prepare the
enclosed chronology detailing the adjudication of Mr.
Schaffert's VA claim. I understand that Mr. Schaffert believes
it took VA five years to process his claim and to correctly
notify him of his rating. That, however, is not a completely
accurate characterization.
Although Mr. Schaffert's original claim was filed in July
1983, he was not available for a medical examination until he
returned from Europe in August 1984. After an examination,
service connection was granted in March 1985, eight months
after his return from Europe. One year later, in March 1986, he
appealed the rate of disability awarded in that decision. In
May 1987, based on additional medical evidence, he was granted
an evaluation of 80% assigned retroactively from the date of
his discharge from service. This was considered a full grant of
the benefits sought on appeal.
In any event, whether the limitations provided in sections
6511 and 6512 should be waived in this case is a matter within
the purview of the Treasury Department. Accordingly, VA defers
to that department, who we understand will be responding to you
under separate cover, as to whether this measure is warranted.
The Office of Management and Budget advises that there is
no objection from the standpoint of the Administration's
program to the submission of this report to the Congress.
Sincerely yours,
Edward O. Derwinski.
CHRONOLOGY OF DISABILITY COMPENSATION CLAIM OF RICHARD W. SCHAFFERT
CSS 507 40 0380
5-18-56 Honorable service.
to
1-31-83
7-26-83 Received VA Form 21-526 as a claim for disability
compensation for hearing loss and a neurological
disease affecting the upper extremities, back, and
right leg. Subsequently, requests for service medical
records and a VA examination were processed.
9-29-83 Received letter from the veteran stating he was in
Europe and would not be able to report for an
examination.
10-13-83 Our letter to the veteran explaining that we could not
take action on his claim without a VA examination. He
was asked to inform us when he returned to the United
States.
6-25-84 Received letter from the veteran stating that he was
returning to this country and would like an
examination to be scheduled between 8-15-84 and 8-21-
84 because that would fit into his schedule.
7-12-84 Our letter to the veteran asked for evidence of medical
treatment since discharge from service.
7-20-84 A VA examination was requested.
8-20-84 The VA examination form was returned with the statement
that the examination was cancelled by the veteran.
Apparently, this was a miscommunication by the
examining station since the veteran wished to re-
schedule his examination.
11-14-84 Received letter from the veteran requesting the status
of his claim.
11-19-84 Request for a VA examination was processed.
2-8-85 VA examination was accomplished.
3-27-85 Rating decision granting service connection for
myelitis at a 10 percent level and for bilateral
hearing loss at a O percent level. The combined
evaluation of 10 percent was effective 2-1-83, the
date after discharge from service.
4-9-85 Award action paying compensation from 4-1-85 because
the veteran was receiving retired pay which could not
be waived retroactively.
4-16-85 Letter from the veteran stating that the effective date
of his award should have been 2-1-83, the date after
discharge from service.
5-2-85 Our letter to the veteran explaining that, due to the
receipt of retired pay, compensation could not be paid
retroactively.
3-18-86 Received letter from the veteran appealing our decision
granting a 10 percent evaluation for myelitis.
5-30-86 Statement of the Case was sent to the veteran outlining
our decision and citing the pertinent laws and
regulations.
6-18-86 Received the veteran's VA Form 1-9 as a substantive
appeal. Another VA examination was scheduled to
accurately assess the current level of disability. The
veteran also submitted additional medical evidence
showing increased severity.
8-1-86 A complete and extensive VA examination was conducted
in Vienna, Austria.
5-8-87 After an extensive delay in receiving the completed
examination report, rating action was completed
granting an increased evaluation of 80 percent which
was retroactively effective 2-1-83. This was
considered a full grant of benefits sought on appeal.
5-22-87 Action taken to award the increase only from 6-1-87
because the veteran was in receipt of retired pay
which could not be waived retroactively.
7-2-87 Received VA Form 21-686C and a certified copy of the
veteran's marriage certificate.
10-13-87 Award action adding one dependent to the veteran's
award.
4-11-91 Received VA Form 21-686C showing the veteran was
divorced on 5-14-89 and remarried on 8-30-90.
5-30-91 Award action taken to correctly reflect the veteran's
reported dependency status.