Baucus Comments on Passage of the Armed Forces Tax Fairness Act
"Today we're passing this important bill for the men and women who are servingour country. This bill is for the family of Private First Class Stryder Stoutenburg, aMissoula, Montana native who gave his life for his country in the current conflict in Iraq.And it's for every other service member who has made sacrifices for our country.
I want the men and women in uniform to know that we are behind them. Thenurse at the military hospital in Kuwait. The tank driver fighting his way to the front linein Nasiriyah. The pilot doing reconnaissance over Baghdad. We support them every stepof the way."
-- Floor Statement Follows --
FLOOR STATEMENT OF SENATOR MAX BAUCUS
REGARDING THE ARMED FORCES TAX FAIRNESS ACT
March 27, 2003
Mr. President, I rise today in support of the Armed Forces Tax Fairness Act of2003. On February 5, 2003, the Finance Committee favorably reported the bill byunanimous voice vote.
As the conflict in Iraq continues, our thoughts are with the men and women whoare leading America's response and serving our country. Whether it be the Marinesdeployed in Iraq, the National Guard supporting our troops, or the Foreign ServiceOfficers serving in dangerous diplomatic posts.
I think in particular of the many men and women in Montana. These men andwomen have been called to service to defend our nation. In fact, on September the 11th of2002, the members of the 120th Fighter Wing of the Montana Air National Guard werecalled on to secure the skies of the no- fly zone over Iraq.
For these dedicated public servants, we are considering the Armed Forces TaxFairness Act. This bill will not only correct inequities in the current tax code that ourmilitary men and women are subject to, but it will also provide incentives for ourdedicated forces to continue their service to America.
These are the men and women who put their lives on the line for our freedom on adaily basis. We need to ensure that the tax laws we pass do not negatively impact them.It is with these principles in mind that I have moved forward with the introductionof this military tax package and that the Finance Committee favorably reported the bill.
I would now like to describe the provisions included in this critical piece oflegislation:
Death Gratuity Payments. Why is this provision so important? Under currentlaw, death gratuity benefits are excludable from income only to the extent that they wereas of September 9, 1986. In 1986, the death gratuity benefit was $3,000.
In 1991, the benefit was increased to $6,000, but the tax code was never adjustedto exclude the additional $3,000 from income. Because of this oversight, the U.S.government has been taxing families for the death of a family member who died incombat.
Just two weeks ago, one of our soldiers from Montana, Private First Class StryderStoutenburg, was killed during a Blackhawk helicopter crash. A native of Missoula,Private First Class Stoutenburg was only 18.
His mother will receive the death benefit payment, but will be taxed on half of it.She has already lost so much. It is unfair to also take away part of the small compensationshe is receiving.
Exclusion of Gain on The Sale of a Principal Residence. In 1997, Congresspassed legislation revising the taxation of capital gains on the sale of a person's principalresidence.
The new law provides that up to $250,000 B or $500,000 for a married couple Bis excluded on the sale of a principal residence if the individual has lived in the house forat least two of the previous five years.
However, when enacted, Congress failed to provide a special rule for military andforeign service personnel who are required to move either within the U.S. or abroad.Our proposal would permit service personnel and members of the foreign serviceto suspend the five- year period while away on assignment. That means that those yearswould not count toward either the two years or the five year periods.
Senators McCain, Graham, and Lincoln proposed a bill in the last session tocorrect this.
Exclusion of Amounts Received Under Military Housing AssistanceProgram. The Department of Defense provides payments to members of the ArmedServices to offset diminution in housing values due to military base realignment orclosure.
For example, if a house near a base was worth $140,000 prior to the base closureand $100,000 after the base closure, DOD may provide the owner with a payment tooffset some, but not all, of the $40,000 diminution in value. Under current law, thoseamounts are taxable as compensation.
We should ensure that those men and women losing value in their homes due to afederal government decision are not adversely affected financially.The proposal would provide that payments for lost value are not includible intoincome.
Expand Combat Zone Filing Rules To Include Contingency Operations.
Under current law, military personnel in a combat zone are afforded an extended periodfor filing tax returns.
However, this does not apply to contingency operations. This proposal wouldextend the same benefits to military personnel assigned to contingency operations.
It cannot be easy trying to figure out our complicated tax system while you areoverseas and protecting our nation's freedom. Those men and women who are sent touphold democracy and freedom in other countries are confronted with the same filingcomplications as combat zone personnel.
Contingency operations are just as demanding as combat zone deployment,although not always in the same manner. For example, in our current war on terrorism,this proposal would help members of our Special Forces in the Philippines supportingOperation Enduring Freedom who are just as focused on accomplishing their criticalmission as our troops in the Iraqi combat zone.
Above-The Line -Deduction For Overnight Travel Expenses of NationalGuard and Reserve Members. Some reservists who travel one weekend per month andtwo weeks in the summer for reserve duty incur significant travel and lodging expenses.
For the most part, these expenses are not reimbursed. Under current law, theseare deductible as itemized deductions but must exceed 2% of adjusted gross income.
For lower income reservists, this deduction does not provide a benefit, becausethey do not itemize. For higher income reservists, the 2% floor limits the amount of thebenefit of the deductions.
In my home state of Montana, we have approximately 3,500 reservists - 800 ofwhom travel each month across the state for their training. These 800 reservists paytravel and lodging expenses out of their own pocket.
Montana ranks 48th in the nation for per capita personal income. So, that $200expense for reserve duty every month means a lot to the Montana reservist. Yet, theycontinue selflessly to provide their services to our country at their own expense. Forthose reservists who travel out of state for their training, this expense is even higher.
This proposal would provide an above the line deduction for overnight travelcosts and would be available for all reservists and members of the National Guard.
Expansion of Membership For Veterans= Organizations. Currently, qualifiedveterans' organizations under section 501(c)(19) of the tax code both tax-exempt andcontributions to the organization are tax-deductible.
In order to qualify under 501(c)(19), the organization must meet several tests,including 75% of the members must be current or former military, and substantially all ofthe other members must be either spouses, widows, or widowers of current or formermilitary.
The proposal would permit lineal descendants and ancestors to qualify for the"substantially all" test.
It is important that our veterans' organizations continue the good work that theydo. But, as the organizations age, they are in dange r of losing their tax-exempt status.This bill helps ensure the vitality of these organizations.
Clarification of Treatment of Child Care Subsidies. I want to ensure thatparents in the military can continue their dedicated service once they enter parenthood,with the knowledge that their children are being well taken care of.
The military provides extensive childcare benefits to its employees. Employees atDoD-owned facilities provide childcare services while other areas with non-DoD ownedfacilities contract out their childcare.
When Congress passed the Tax Reform Act of 1986, we included a provisionstating that qualified military benefits are excluded from income. It is not absolutelyclear whether childcare provisions are covered under this provision.
The proposal would clarify that any childcare benefit provided to militarypersonnel would be excludible from income.
Service Academy Appointments Treated as Section 529 Scholarships. Thisbill permits penalty-free withdrawals from Coverdell education savings accounts andqualified tuition programs made on account of the attendance of the account holder orbeneficiary at any of the Service Academies. The amount of the funds that can bewithdrawn penalty-free is limited to the costs of adva nced education in that calendar year.
Suspension of Tax-Exempt Status of Terrorist Organizations. Under currentlaw there is no procedure for the IRS to suspend the tax-exempt status of an organization.This proposal would suspend the tax-exempt status of an organization for anyperiod during which the organization is designated or identified- by Executive Order- as aterrorist organization.
Tax Relief for Families of Space Shuttle Columbia Heroes. Current lawprovides for income tax, estate tax and death benefit relief to soldiers who are killed in acombat zone, victims of the September 11th attacks, the Oklahoma City bombing victims,and the victims of the anthrax attacks.
The crew of the Space Shuttle Columbia was heroic in every sense of the word.We have a duty to those who lost their lives for the advancement of science andincreasing our knowledge of the world we live in. This legislation makes all of the abovebenefits available to the families of the Columbia crew.
Revenue Offsets. In addition, this bill includes three revenue offsets. First, weimprove the collection of unpaid taxes from people who have renounced their Americancitizenship in order to avoid U.S. taxes.
Second, we extend certain IRS user fees.
Third, we restore the ability of the IRS to permit partial-pay installmentagreements with taxpayers.
The Military bill passed by the Senate Finance Committee fixes some of theinequities in our tax code and, more importantly, acknowledges the men and women whoare making sacrifices and risking their lives to defend us all.
I thank all of the members who have contributed to the development of the bill.
Senators Levin and Warner of the Armed Services Committee.
Senator Landrieu for the childcare provision.
Senator Johnson for the contingency operation provision.
Senator Dewine for the above-the- line deduction.
Senator Harkin for the Veterans and Expatriation provisions.
I especially thank the Chairman of the Finance Committee, Senator Grassley, whohas once again been a partner in the development of important bipartisan tax legislation.Mr. President, it is important that we continue to show members of the armedforces our support and solidarity during this time of conflict. The War on Terrorism andthe conflict with Iraq ha ve brought to light the essential role the armed services play inupholding freedom throughout the world.
I hope to see this military tax equity bill passed by the Senate today, and signedinto law by the President swiftly.
I yield the floor.
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