    [United States Statutes at Large, Volume 117, 108th Congress, 1st Session]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    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 1336]]
    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 1337]]
    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 1338]]
    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 1339]]
    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 1340]]
    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 1341]]
    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 1342]]
    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 1343]]
    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.