Grassley:Tax Relief Bill Pays Tribute to U.S. Service Men and Women
WASHINGTON — Sen. Chuck Grassley, chairman of the Committee on Finance, today applauded committee approval of legislation he co-authored to ensure fair tax treatment for men and women serving in the U.S. military and foreign service.
“Our nation is relying on the military in unique ways,” Grassley said. “We face the challenge
of defeating terrorism at home and abroad. We remain vigilant over the renewed freedom we brought to Afghanistan. We’re preparing for possible war with Iraq. Our enlisted men and women are front and center for all of these tasks. The sad fact is that right now these folks don't get a fair shake under the federal tax code.”
The Armed Forces Tax Fairness Act of 2003, sponsored by Grassley and Sen. Max Baucus of Montana, ranking member of the Senate tax-writing committee, received unanimous committee approval today. The legislation would remedy specific tax problems for personnel in the uniformed services and foreign service, including the following.
In 1997, Congress changed the tax code to exclude gains from the sale of a person's home
from the capital gains tax, below certain thresholds. To qualify, an individual needs to live in the
home for at least two of the five years before the sale. Grassley said this works fine for most people, but it's not realistic for a lot of people serving in the military who are frequently transferred. The legislation passed today would establish a special rule for determining the gain that can be excluded with the sale of these homes.
Right now, if a member of the armed services dies on active duty, the federal government pays
the surviving spouse a death benefit of $6,000. Grassley said that only half of this benefit is now
excluded from taxable income. The tax bill passed today would exclude the entire $6,000 payment.
Many National Guard members and reservists travel for weekend drills and spend their own money for travel and lodging, Grassley said. As a practical matter, these expenses are generally nondeductible for one of two reasons: either the reservist is part of the 75 percent of the population that doesn't itemize, or the expenses don't exceed two percent of the reservist's adjusted gross income.
The bill passed today by the Finance Committee establishes an above-the-line deduction for
unreimbursed travel expenses so reservists aren't put in a position of having to subsidize their own training.
As of today, Iowa has 908 National Guard members and reservists on active duty out of a
total for the nation of 111,603. The Iowans come from units based out of Algona, Boone, Des
Moines, Estherville, Fredericksburg, Ft. Dodge, Iowa City, Johnston, Mason City, Pocahontas, and
Recent media reports describe the nation’s increased reliance on reservists and National Guard
members. According to The New York Times, two-thirds of the military police battalions -- an
increasingly important mission in an era of heightened terrorist threat -- are reservists.
Under current law, workers can exclude from their taxable income up to $5,000 of employer provided child-care expenses. A separate provision of the federal tax code excludes from income benefits provided to members of the uniformed services, but it's unclear whether child-care benefits were intended to be included in that provision. The military provides extensive child-care benefits. The tax bill passed by the Finance Committee today would clarify that child-care benefits provided to military personnel would be excluded from income.
The bill passed today also provides that military appointments would be treated as scholarships for the purposes of educational savings accounts. This means that families would not face a tax penalty for planning ahead for secondary education in the event that a child has the opportunity to serve at one of the military academies.
The bill’s cost is offset by an extension of IRS user fees on certain products, authorizing the
IRS to enter into agreements that provide for payment, and reforming the tax treatment of individuals who expatriate.
"This bill pays respect to the men and women making sacrifices and, in many cases, risking
their lives to protect and defend freedom," Grassley said. "The full Senate should pass the bill as soon as possible."
Grassley said he hopes the full Senate will take up the bill by the end of this month.
Last year, in the last Congress, the Finance Committee and then the full Senate passed a very
similar bill to the bill passed today. That bill, also co-authored by Grassley, underwent changes in the House of Representatives and never received final approval before Congress adjourned for the year.
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