[114th Congress Public Law 292]
[From the U.S. Government Publishing Office]



[[Page 1499]]

            COMBAT-INJURED VETERANS TAX FAIRNESS ACT OF 2016

[[Page 130 STAT. 1500]]

Public Law 114-292
114th Congress

                                 An Act


 
 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. <<NOTE: Dec. 16, 2016 -  [H.R. 5015]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Combat-Injured 
Veterans Tax Fairness Act of 2016. 10 USC 1212 note.>> 
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Combat-Injured Veterans Tax Fairness 
Act of 2016''.
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) <<NOTE: Deadline.>>  In General.--Not later than 1 year after 
the date of the enactment of this Act, the Secretary of Defense shall--
            (1) identify--
                    (A) the severance payments--
                          (i) <<NOTE: Time period.>>  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

[[Page 130 STAT. 1501]]

                          (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 1 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--

[[Page 130 STAT. 1502]]

            (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.

    Approved December 16, 2016.

LEGISLATIVE HISTORY--H.R. 5015:
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CONGRESSIONAL RECORD, Vol. 162 (2016):
            Dec. 5, considered and passed House.
            Dec. 9, considered and passed Senate.

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