[108th Congress Public Law 121]
[From the U.S. Government Printing Office]


[DOCID: f:publ121.108]

[[Page 117 STAT. 1335]]

Public Law 108-121
108th Congress

                                 An Act


 
To amend title 10, United States Code, and the Internal Revenue Code of 
  1986 to increase the death gratuity payable with respect to deceased 
  members of the Armed Forces and to exclude such gratuity from gross 
income, to provide additional tax relief for members of the Armed Forces 
      and their families, and for other purposes. <<NOTE: Nov. 11, 
                         2003 -  [H.R. 3365]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Military Family 
Tax Relief Act of 2003.>> 

SECTION 1. <<NOTE: 26 USC 1 note.>> SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Military Family Tax 
Relief Act of 2003''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.

          TITLE I--IMPROVING TAX EQUITY FOR MILITARY PERSONNEL

Sec. 101. Exclusion of gain from sale of a principal residence by a 
           member of the uniformed services or the Foreign Service.
Sec. 102. Treatment of death gratuities payable with respect to deceased 
           members of the Armed Forces.
Sec. 103. Exclusion for amounts received under Department of Defense 
           homeowners assistance program.
Sec. 104. Expansion of combat zone filing rules to contingency 
           operations.
Sec. 105. Modification of membership requirement for exemption from tax 
           for certain veterans' organizations.
Sec. 106. Clarification of the treatment of certain dependent care 
           assistance programs.
Sec. 107. Clarification relating to exception from additional tax on 
           certain distributions from qualified tuition programs, etc., 
           on account of attendance at military academy.
Sec. 108. Suspension of tax-exempt status of terrorist organizations.
Sec. 109. Above-the-line deduction for overnight travel expenses of 
           National Guard and Reserve members.
Sec. 110. Tax relief and assistance for families of Space Shuttle 
           Columbia heroes.

                       TITLE II--REVENUE PROVISION

Sec. 201. Extension of customs user fees.

[[Page 117 STAT. 1336]]

          TITLE I--IMPROVING TAX EQUITY FOR MILITARY PERSONNEL

SEC. 101. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE BY A 
            MEMBER OF THE UNIFORMED SERVICES OR THE FOREIGN SERVICE.

    (a) In General.--Subsection (d) <<NOTE: 26 USC 121.>> of section 121 
(relating to exclusion of gain from sale of principal residence) is 
amended by redesignating paragraph (9) as paragraph (10) and by 
inserting after paragraph (8) the following new paragraph:
            ``(9) Members of uniformed services and foreign service.--
                    ``(A) In general.--At the election of an individual 
                with respect to a property, the running of the 5-year 
                period described in subsections (a) and (c)(1)(B) and 
                paragraph (7) of this subsection with respect to such 
                property shall be suspended during any period that such 
                individual or such individual's spouse is serving on 
                qualified official extended duty as a member of the 
                uniformed services or of the Foreign Service of the 
                United States.
                    ``(B) Maximum period of suspension.--The 5-year 
                period described in subsection (a) shall not be extended 
                more than 10 years by reason of subparagraph (A).
                    ``(C) Qualified official extended duty.--For 
                purposes of this paragraph--
                          ``(i) In general.--The term `qualified 
                      official extended duty' means any extended duty 
                      while serving at a duty station which is at least 
                      50 miles from such property or while residing 
                      under Government orders in Government quarters.
                          ``(ii) Uniformed services.--The term 
                      `uniformed services' has the meaning given such 
                      term by section 101(a)(5) of title 10, United 
                      States Code, as in effect on the date of the 
                      enactment of this paragraph.
                          ``(iii) Foreign service of the united 
                      states.--The term `member of the Foreign Service 
                      of the United States' has the meaning given the 
                      term `member of the Service' by paragraph (1), 
                      (2), (3), (4), or (5) of section 103 of the 
                      Foreign Service Act of 1980, as in effect on the 
                      date of the enactment of this paragraph.
                          ``(iv) Extended duty.--The term `extended 
                      duty' means any period of active duty pursuant to 
                      a call or order to such duty for a period in 
                      excess of 90 days or for an indefinite period.
                    ``(D) Special rules relating to election.--
                          ``(i) Election limited to 1 property at a 
                      time.--An election under subparagraph (A) with 
                      respect to any property may not be made if such an 
                      election is in effect with respect to any other 
                      property.
                          ``(ii) Revocation of election.--An election 
                      under subparagraph (A) may be revoked at any 
                      time.''.

    (b) Effective Date; <<NOTE: 26 USC 121 note.>> Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall take effect as if included in the amendments made by 
        section 312 of the Taxpayer Relief Act of 1997.

[[Page 117 STAT. 1337]]

            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendments made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by the 
        operation of any law or rule of law (including res judicata), 
        such refund or credit may nevertheless be made or allowed if 
        claim therefor is filed before the close of such period.

SEC. 102. TREATMENT OF DEATH GRATUITIES PAYABLE WITH RESPECT TO DECEASED 
            MEMBERS OF THE ARMED FORCES.

    (a) Increase in Amount of Death Gratuity.--
            (1) In general.--Section 1478(a) of title 10, United States 
        Code, is amended by striking ``$6,000'' and inserting 
        ``$12,000''.
            (2) Effective date.--The <<NOTE: Applicability. 10 USC 1478 
        note.>> amendment made by this subsection shall take effect as 
        of September 11, 2001, and shall apply with respect to deaths 
        occurring on or after that date.

    (b) Exclusion From Gross Income.--
            (1) In general.--Subsection (b)(3) <<NOTE: 26 USC 134.>> of 
        section 134 (relating to certain military benefits) is amended 
        by adding at the end the following new subparagraph:
                    ``(C) Exception for death gratuity adjustments made 
                by law.--Subparagraph (A) shall not apply to any 
                adjustment to the amount of death gratuity payable under 
                chapter 75 of title 10, United States Code, which is 
                pursuant to a provision of law enacted after September 
                9, 1986.''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        134(b)(3) is amended by striking ``subparagraph (B)'' and 
        inserting ``subparagraphs (B) and (C)''.
            (3) Effective date.--The <<NOTE: Applicability. 26 USC 134 
        note.>> amendments made by this subsection shall apply with 
        respect to deaths occurring after September 10, 2001.

SEC. 103. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF DEFENSE 
            HOMEOWNERS ASSISTANCE PROGRAM.

    (a) In General.--Section 132(a) (relating to the exclusion from 
gross income of certain fringe benefits) is amended by striking ``or'' 
at the end of paragraph (6), by striking the period at the end of 
paragraph (7) and inserting ``, or'', and by adding at the end the 
following new paragraph:
            ``(8) qualified military base realignment and closure 
        fringe.''.

    (b) Qualified Military Base Realignment and Closure Fringe.--Section 
132 is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Qualified Military Base Realignment and Closure Fringe.--For 
purposes of this section--
            ``(1) In general.--The term `qualified military base 
        realignment and closure fringe' means 1 or more payments under 
        the authority of section 1013 of the Demonstration Cities and 
        Metropolitan Development Act of 1966 (42 U.S.C. 3374) (as in 
        effect on the date of the enactment of this subsection) to 
        offset the adverse effects on housing values as a result of a 
        military base realignment or closure.
            ``(2) Limitation.--With respect to any property, such term 
        shall not include any payment referred to in paragraph (1)

[[Page 117 STAT. 1338]]

        to the extent that the sum of all of such payments related to 
        such property exceeds the maximum amount described in clause (1) 
        of subsection (c) of such section (as in effect on such 
        date).''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 132 
note.>> amendments made by this section shall apply to payments made 
after the date of the enactment of this Act.

SEC. 104. EXPANSION OF COMBAT ZONE FILING RULES TO CONTINGENCY 
            OPERATIONS.

    (a) In General.--Section <<NOTE: 26 USC 7508.>> 7508(a) (relating to 
time for performing certain acts postponed by reason of service in 
combat zone) is amended--
            (1) by inserting ``, or when deployed outside the United 
        States away from the individual's permanent duty station while 
        participating in an operation designated by the Secretary of 
        Defense as a contingency operation (as defined in section 
        101(a)(13) of title 10, United States Code) or which became such 
        a contingency operation by operation of law'' after ``section 
        112'',
            (2) by inserting in the first sentence ``or at any time 
        during the period of such contingency operation'' after ``for 
        purposes of such section'',
            (3) by inserting ``or operation'' after ``such an area'', 
        and
            (4) by inserting ``or operation'' after ``such area''.

    (b) Conforming Amendments.--
            (1) Section 7508(d) is amended by inserting ``or contingency 
        operation'' after ``area''.
            (2) The heading for section 7508 is amended by inserting 
        ``or contingency operation'' after ``combat zone''.
            (3) The item relating to section 7508 in the table of 
        sections for chapter 77 is amended by inserting ``or contingency 
        operation'' after ``combat zone''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 7508 
note.>> amendments made by this section shall apply to any period for 
performing an act which has not expired before the date of the enactment 
of this Act.

SEC. 105. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR EXEMPTION FROM TAX 
            FOR CERTAIN VETERANS' ORGANIZATIONS.

    (a) In General.--Subparagraph (B) of section 501(c)(19) (relating to 
list of exempt organizations) is amended by striking ``or widowers'' and 
inserting ``, widowers, ancestors, or lineal descendants''.
    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 501 
note.>> amendments made by this section shall apply to taxable years 
beginning after the date of the enactment of this Act.

SEC. 106. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT CARE 
            ASSISTANCE PROGRAMS.

    (a) In General.--Section 134(b) (defining qualified military 
benefit) is amended by adding at the end the following new paragraph:
            ``(4) Clarification of certain benefits.--For purposes of 
        paragraph (1), such term includes any dependent care assistance 
        program (as in effect on the date of the enactment of this 
        paragraph) for any individual described in paragraph (1)(A).''.

[[Page 117 STAT. 1339]]

    (b) Conforming Amendments.--
            (1) Section 134(b)(3)(A), <<NOTE: 26 USC 134.>> as amended 
        by section 102, is amended by inserting ``and paragraph (4)'' 
        after ``subparagraphs (B) and (C)''.
            (2) Section 3121(a)(18) is amended by striking ``or 129'' 
        and inserting ``, 129, or 134(b)(4)''.
            (3) Section 3306(b)(13) is amended by striking ``or 129'' 
        and inserting ``, 129, or 134(b)(4)''.
            (4) Section 3401(a)(18) is amended by striking ``or 129'' 
        and inserting ``, 129, or 134(b)(4)''.

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 134 
note.>> amendments made by this section shall apply to taxable years 
beginning after December 31, 2002.

    (d) No Inference.--No <<NOTE: 26 USC 134 note.>> inference may be 
drawn from the amendments made by this section with respect to the tax 
treatment of any amounts under the program described in section 
134(b)(4) of the Internal Revenue Code of 1986 (as added by this 
section) for any taxable year beginning before January 1, 2003.

SEC. 107. CLARIFICATION RELATING TO EXCEPTION FROM ADDITIONAL TAX ON 
            CERTAIN DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS, ETC., 
            ON ACCOUNT OF ATTENDANCE AT MILITARY ACADEMY.

    (a) In General.--Subparagraph (B) of section 530(d)(4) (relating to 
exceptions from additional tax for distributions not used for 
educational purposes) is amended by striking ``or'' at the end of clause 
(iii), by redesignating clause (iv) as clause (v), and by inserting 
after clause (iii) the following new clause:
                          ``(iv) made on account of the attendance of 
                      the designated beneficiary at the United States 
                      Military Academy, the United States Naval Academy, 
                      the United States Air Force Academy, the United 
                      States Coast Guard Academy, or the United States 
                      Merchant Marine Academy, to the extent that the 
                      amount of the payment or distribution does not 
                      exceed the costs of advanced education (as defined 
                      by section 2005(e)(3) of title 10, United States 
                      Code, as in effect on the date of the enactment of 
                      this section) attributable to such attendance, 
                      or''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 530 
note.>> amendments made by this section shall apply to taxable years 
beginning after December 31, 2002.

SEC. 108. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST ORGANIZATIONS.

    (a) In General.--Section 501 (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Suspension of Tax-Exempt Status of Terrorist Organizations.--
            ``(1) In general.--The exemption from tax under subsection 
        (a) with respect to any organization described in paragraph (2), 
        and the eligibility of any organization described in paragraph 
        (2) to apply for recognition of exemption under subsection (a), 
        shall be suspended during the period described in paragraph (3).
            ``(2) Terrorist organizations.--An organization is described 
        in this paragraph if such organization is designated or 
        otherwise individually identified--

[[Page 117 STAT. 1340]]

                    ``(A) under section 212(a)(3)(B)(vi)(II) or 219 of 
                the Immigration and Nationality Act as a terrorist 
                organization or foreign terrorist organization,
                    ``(B) in or pursuant to an Executive order which is 
                related to terrorism and issued under the authority of 
                the International Emergency Economic Powers Act or 
                section 5 of the United Nations Participation Act of 
                1945 for the purpose of imposing on such organization an 
                economic or other sanction, or
                    ``(C) in or pursuant to an Executive order issued 
                under the authority of any Federal law if--
                          ``(i) the organization is designated or 
                      otherwise individually identified in or pursuant 
                      to such Executive order as supporting or engaging 
                      in terrorist activity (as defined in section 
                      212(a)(3)(B) of the Immigration and Nationality 
                      Act) or supporting terrorism (as defined in 
                      section 140(d)(2) of the Foreign Relations 
                      Authorization Act, Fiscal Years 1988 and 1989); 
                      and
                          ``(ii) such Executive order refers to this 
                      subsection.
            ``(3) Period of suspension.--With respect to any 
        organization described in paragraph (2), the period of 
        suspension--
                    ``(A) begins on the later of--
                          ``(i) the date of the first publication of a 
                      designation or identification described in 
                      paragraph (2) with respect to such organization, 
                      or
                          ``(ii) the date of the enactment of this 
                      subsection, and
                    ``(B) ends on the first date that all designations 
                and identifications described in paragraph (2) with 
                respect to such organization are rescinded pursuant to 
                the law or Executive order under which such designation 
                or identification was made.
            ``(4) Denial of deduction.--No deduction shall be allowed 
        under any provision of this title, including sections 170, 
        545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), and 2522, with 
        respect to any contribution to an organization described in 
        paragraph (2) during the period described in paragraph (3).
            ``(5) Denial of administrative or judicial challenge of 
        suspension or denial of deduction.--Notwithstanding section 7428 
        or any other provision of law, no organization or other person 
        may challenge a suspension under paragraph (1), a designation or 
        identification described in paragraph (2), the period of 
        suspension described in paragraph (3), or a denial of a 
        deduction under paragraph (4) in any administrative or judicial 
        proceeding relating to the Federal tax liability of such 
        organization or other person.
            ``(6) Erroneous designation.--
                    ``(A) In general.--If--
                          ``(i) the tax exemption of any organization 
                      described in paragraph (2) is suspended under 
                      paragraph (1),
                          ``(ii) each designation and identification 
                      described in paragraph (2) which has been made 
                      with respect to such organization is determined to 
                      be erroneous pursuant to the law or Executive 
                      order under which such designation or 
                      identification was made, and

[[Page 117 STAT. 1341]]

                          ``(iii) the erroneous designations and 
                      identifications result in an overpayment of income 
                      tax for any taxable year by such organization,
                credit or refund (with interest) with respect to such 
                overpayment shall be made.
                    ``(B) Waiver of limitations.--If the credit or 
                refund of any overpayment of tax described in 
                subparagraph (A)(iii) is prevented at any time by the 
                operation of any law or rule of law (including res 
                judicata), such credit or refund may nevertheless be 
                allowed or made if the claim therefor is filed before 
                the close of the 1-year period beginning on the date of 
                the last determination described in subparagraph 
                (A)(ii).
            ``(7) Notice of suspensions.--If <<NOTE: Publication.>> the 
        tax exemption of any organization is suspended under this 
        subsection, the Internal Revenue Service shall update the 
        listings of tax-exempt organizations and shall publish 
        appropriate notice to taxpayers of such suspension and of the 
        fact that contributions to such organization are not deductible 
        during the period of such suspension.''.

    (b) Effective Date.--The <<NOTE: Applicability. 26 USC 501 
note.>> amendments made by this section shall apply to designations made 
before, on, or after the date of the enactment of this Act.

SEC. 109. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT TRAVEL EXPENSES OF 
            NATIONAL GUARD AND RESERVE MEMBERS.

    (a) Deduction Allowed.--Section <<NOTE: 26 USC 162.>> 162 (relating 
to certain trade or business expenses) is amended by redesignating 
subsection (p) as subsection (q) and inserting after subsection (o) the 
following new subsection:

    ``(p) Treatment of Expenses of Members of Reserve Component of Armed 
Forces of the United States.--For purposes of subsection (a)(2), in the 
case of an individual who performs services as a member of a reserve 
component of the Armed Forces of the United States at any time during 
the taxable year, such individual shall be deemed to be away from home 
in the pursuit of a trade or business for any period during which such 
individual is away from home in connection with such service.''.
    (b) Deduction Allowed Whether or Not Taxpayer Elects To Itemize.--
Section 62(a)(2) (relating to certain trade and business deductions of 
employees) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Certain expenses of members of reserve 
                components of the armed forces of the united states.--
                The deductions allowed by section 162 which consist of 
                expenses, determined at a rate not in excess of the 
                rates for travel expenses (including per diem in lieu of 
                subsistence) authorized for employees of agencies under 
                subchapter I of chapter 57 of title 5, United States 
                Code, paid or incurred by the taxpayer in connection 
                with the performance of services by such taxpayer as a 
                member of a reserve component of the Armed Forces of the 
                United States for any period during which such 
                individual is more than 100 miles away from home in 
                connection with such services.''.

[[Page 117 STAT. 1342]]

    (c) Effective Date.--The <<NOTE: Applicability. 26 USC 62 
note.>> amendments made by this section shall apply to amounts paid or 
incurred in taxable years beginning after December 31, 2002.

SEC. 110. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF SPACE SHUTTLE 
            COLUMBIA HEROES.

    (a) Income Tax Relief.--
            (1) In general.--Subsection (d) <<NOTE: 26 USC 692.>> of 
        section 692 (relating to income taxes of members of Armed Forces 
        and victims of certain terrorist attacks on death) is amended by 
        adding at the end the following new paragraph:
            ``(5) Relief with respect to astronauts.--
        The <<NOTE: Applicability.>> provisions of this subsection shall 
        apply to any astronaut whose death occurs in the line of duty, 
        except that paragraph (3)(B) shall be applied by using the date 
        of the death of the astronaut rather than September 11, 2001.''.
            (2) Conforming amendments.--
                    (A) Section 5(b)(1) is amended by inserting ``, 
                astronauts,'' after ``Forces''.
                    (B) Section 6013(f)(2)(B) is amended by inserting 
                ``, astronauts,'' after ``Forces''.
            (3) Clerical amendments.--
                    (A) The heading of section 692 is amended by 
                inserting ``, astronauts,'' after ``forces''.
                    (B) The item relating to section 692 in the table of 
                sections for part II of subchapter J of chapter 1 is 
                amended by inserting ``, astronauts,'' after ``Forces''.
            (4) Effective date.--The <<NOTE: Applicability. 26 USC 5 
        note.>> amendments made by this subsection shall apply with 
        respect to any astronaut whose death occurs after December 31, 
        2002.

    (b) Death Benefit Relief.--
            (1) In general.--Subsection (i) of section 101 (relating to 
        certain death benefits) is amended by adding at the end the 
        following new paragraph:
            ``(4) Relief with respect to astronauts.--
        The <<NOTE: Applicability.>> provisions of this subsection shall 
        apply to any astronaut whose death occurs in the line of 
        duty.''.
            (2) Clerical amendment.--The heading for subsection (i) of 
        section 101 is amended by inserting ``or Astronauts'' after 
        ``Victims''.
            (3) Effective date.--The <<NOTE: Applicability. 26 USC 101 
        note.>> amendments made by this subsection shall apply to 
        amounts paid after December 31, 2002, with respect to deaths 
        occurring after such date.

    (c) Estate Tax Relief.--
            (1) In general.--Section 2201(b) (defining qualified 
        decedent) is amended by striking ``and'' at the end of paragraph 
        (1)(B), by striking the period at the end of paragraph (2) and 
        inserting ``, and'', and by adding at the end the following new 
        paragraph:
            ``(3) any astronaut whose death occurs in the line of 
        duty.''.
            (2) Clerical amendments.--
                    (A) The heading of section 2201 is amended by 
                inserting ``, deaths of astronauts,'' after ``forces''.
                    (B) The item relating to section 2201 in the table 
                of sections for subchapter C of chapter 11 is amended by 
                inserting ``, deaths of astronauts,'' after ``Forces''.

[[Page 117 STAT. 1343]]

            (3) Effective date.--The <<NOTE: Applicability. 26 USC 2201 
        note.>> amendments made by this subsection shall apply to 
        estates of decedents dying after December 31, 2002.

                       TITLE II--REVENUE PROVISION

SEC. 201. EXTENSION OF CUSTOMS USER FEES.

    Section 13031(j)(3) of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended by striking 
``March 31, 2004'' and inserting ``March 1, 2005''.

    Approved November 11, 2003.

LEGISLATIVE HISTORY--H.R. 3365:
---------------------------------------------------------------------------

CONGRESSIONAL RECORD, Vol. 149 (2003):
            Oct. 29, considered and passed House.
            Nov. 3, considered and passed Senate, amended.
            Nov. 4, further amended in Senate.
            Nov. 5, House concurred in Senate amendments.

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