108TH CONGRESS

1ST SESSION H. R. 1664

AN ACT

To amend the Internal Revenue Code of 1986 to to

provide a special rule for members of the uniformed services in determining the exclusion ofgain from the sale of a principal residence and torestore the tax exempt status of death gratuitypayments to members of the uniformed services,and for other purposes.

108TH CONGRESS

1ST SESSION H. R. 1664

AN ACT

To amend the Internal Revenue Code of 1986 to provide

a special rule for members of the uniformed services

in determining the exclusion of gain from the sale of

a principal residence and to restore the tax exempt status

of death gratuity payments to members of the uniformed

services, and for other purposes.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; REFERENCES.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Armed Forces Tax Fairness Act of 2003’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986.

12 SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED

13 SERVICES AND FOREIGN SERVICE IN DETER14 MINING EXCLUSION OF GAIN FROM SALE OF

15 PRINCIPAL RESIDENCE.

16 (a) IN GENERAL.—Subsection (d) of section 121 of

17 the Internal Revenue Code of 1986 (relating to exclusion

18 of gain from sale of principal residence) is amended by

19 adding at the end the following new paragraph:

20 ‘‘(10) MEMBERS OF UNIFORMED SERVICES AND

21 FOREIGN SERVICE.—

22 ‘‘(A) IN GENERAL.—At the election of an

23 individual with respect to a property, the run24 ning of the 5-year period referred to in sub25 sections (a) and (c)(1)(B) and paragraph (7) of
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1 this subsection with respect to such property

2 shall be suspended during any period that such

3 individual or such individual’s spouse is serving

4 on qualified official extended duty as a member

5 of the uniformed services or of the Foreign

6 Service.

7 ‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—

8 Such 5-year period shall not be extended more

9 than 5 years by reason of subparagraph (A).

10 ‘‘(C) QUALIFIED OFFICIAL EXTENDED

11 DUTY.—For purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The term ‘quali13 fied official extended duty’ means any ex14 tended duty while serving at a duty station

15 which is at least 150 miles from such prop16 erty or while residing under Government

17 orders in Government quarters.

18 ‘‘(ii) UNIFORMED SERVICES.—The

19 term ‘uniformed services’ has the meaning

20 given such term by section 101(a)(5) of

21 title 10, United States Code, as in effect

22 on the date of the enactment of this para23 graph.

24 ‘‘(iii) FOREIGN SERVICE.—The term

25 ‘member of the Foreign Service’ has the
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1 meaning given the term ‘member of the

2 Service’ by paragraph (1), (2), (3), (4), or

3 (5) of section 103 of the Foreign Service

4 Act of 1980, as in effect on the date of the

5 enactment of this paragraph.

6 ‘‘(iv) EXTENDED DUTY.—The term

7 ‘extended duty’ means any period of active

8 duty pursuant to a call or order to such

9 duty for a period in excess of 180 days or

10 for an indefinite period.

11 ‘‘(D) SPECIAL RULES RELATING TO ELEC12 TION.—

13 ‘‘(i) ELECTION LIMITED TO 1 PROP14 ERTY AT A TIME.—An election under sub15 paragraph (A) with respect to any property

16 may not be made if such an election is in

17 effect with respect to any other property.

18 ‘‘(ii) REVOCATION OF ELECTION.—An

19 election under subparagraph (A) may be

20 revoked at any time.’’.

21 (b) EFFECTIVE DATE; SPECIAL RULE.—

22 (1) EFFECTIVE DATE.—The amendment made

23 by this section shall take effect as if included in the

24 amendments made by section 312 of the Taxpayer

25 Relief Act of 1997.
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1 (2) WAIVER OF LIMITATIONS.—If refund or

2 credit of any overpayment of tax resulting from the

3 amendment made by this section is prevented at any

4 time before the close of the 1-year period beginning

5 on the date of the enactment of this Act by the oper6 ation of any law or rule of law (including res judi7 cata), such refund or credit may nevertheless be

8 made or allowed if claim therefor is filed before the

9 close of such period.

10 SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS

11 INCOME OF DEATH GRATUITY PAYMENT.

12 (a) IN GENERAL.—Paragraph (3) of section 134(b)

13 (relating to qualified military benefit) is amended by add14 ing at the end the following new subparagraph:

15 ‘‘(C) EXCEPTION FOR DEATH GRATUITY

16 ADJUSTMENTS MADE BY LAW.—Subparagraph

17 (A) shall not apply to any adjustment to the

18 amount of death gratuity payable under chapter

19 75 of title 10, United States Code, which is

20 pursuant to a provision of law enacted before

21 December 31, 1991.’’.

22 (b) CONFORMING AMENDMENT.—Section

23 134(b)(3)(A) is amended by striking ‘‘subparagraph (B)’’

24 and inserting ‘‘subparagraphs (B) and (C)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to deaths occurring

3 after September 10, 2001.

4 SEC. 4. EXCLUSION FOR AMOUNTS RECEIVED UNDER DE5 PARTMENT OF DEFENSE HOMEOWNERS AS6 SISTANCE PROGRAM.

7 (a) IN GENERAL.—Subsection (a) of section 132 (re8 lating to certain fringe benefits) is amended by striking

9 ‘‘or’’ at the end of paragraph (6), by striking the period

10 at the end of paragraph (7) and inserting ‘‘, or’’ and by

11 adding at the end the following new paragraph:

12 ‘‘(8) qualified military base realignment and

13 closure fringe.’’.

14 (b) QUALIFIED MILITARY BASE REALIGNMENT AND

15 CLOSURE FRINGE.—Section 132 is amended by redesig16 nating subsection (n) as subsection (o) and by inserting

17 after subsection (m) the following new subsection:

18 ‘‘(n) QUALIFIED MILITARY BASE REALIGNMENT AND

19 CLOSURE FRINGE.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, the term ‘qualified military base realignment

22 and closure fringe’ means 1 or more payments under

23 the authority of section 1013 of the Demonstration

24 Cities and Metropolitan Development Act of 1966
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1 (42 U.S.C. 3374) (as in effect on the date of the en2 actment of this subsection).

3 ‘‘(2) LIMITATION.—With respect to any prop4 erty, such term shall not include any payment re5 ferred to in paragraph (1) to the extent that the

6 sum of all such payments related to such property

7 exceeds the amount described in clause (1) of sub8 section (c) of such section (as in effect on such

9 date).’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to payments made after the date

12 of the enactment of this Act.

13 SEC. 5. EXPANSION OF COMBAT ZONE FILING RULES TO

14 CONTINGENCY OPERATIONS.

15 (a) IN GENERAL.—Subsection (a) of section 7508

16 (relating to time for performing certain acts postponed by

17 reason of service in combat zone) is amended—

18 (1) by inserting ‘‘or when deployed outside the

19 United States away from the individual’s permanent

20 duty station while participating in an operation des21 ignated by the Secretary of Defense as a contin22 gency operation (as defined in section 101(a)(13) of

23 title 10, United States Code) or which became such

24 a contingency operation by operation of law’’ after

25 ‘‘section 112’’,
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1 (2) by inserting in the first sentence ‘‘or at any

2 time during the period of such contingency oper3 ation’’ after ‘‘for purposes of such section’’,

4 (3) by inserting ‘‘or operation’’ after ‘‘such an

5 area’’, and

6 (4) by inserting ‘‘or operation’’ after ‘‘such

7 area’’.

8 (b) CONFORMING AMENDMENTS.—

9 (1) Section 7508(d) is amended by inserting

10 ‘‘or contingency operation’’ after ‘‘area’’.

11 (2) The heading for section 7508 is amended by

12 inserting ‘‘OR CONTINGENCY OPERATION’’ after

13 ‘‘COMBAT ZONE’’.

14 (3) The item relating to section 7508 in the

15 table of sections for chapter 77 is amended by in16 serting ‘‘or contingency operation’’ after ‘‘combat

17 zone’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to any period for performing an

20 act which has not expired before the date of the enactment

21 of this Act.
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1 SEC. 6. MODIFICATION OF MEMBERSHIP REQUIREMENT

2 FOR EXEMPTION FROM TAX FOR CERTAIN

3 VETERANS’ ORGANIZATIONS.

4 (a) IN GENERAL.—Subparagraph (B) of section

5 501(c)(19) (relating to list of exempt organizations) is

6 amended by striking ‘‘or widowers’’ and inserting ‘‘, wid7 owers, ancestors, or lineal descendants’’.

8 (b) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 the date of the enactment of this Act.

11 SEC. 7. CLARIFICATION OF THE TREATMENT OF CERTAIN

12 DEPENDENT CARE ASSISTANCE PROGRAMS.

13 (a) IN GENERAL.—Subsection (b) of section 134 (de14 fining qualified military benefit) is amended by adding at

15 the end the following new paragraph:

16 ‘‘(4) CLARIFICATION OF CERTAIN BENEFITS.—

17 For purposes of paragraph (1), such term includes

18 any dependent care assistance program (as in effect

19 on the date of the enactment of this paragraph) for

20 any individual described in paragraph (1)(A).’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1) Section 134(b)(3)(A) (as amended by sec23 tion 102) is further amended by inserting ‘‘and

24 paragraph (4)’’ after ‘‘subparagraphs (B) and (C)’’.

25 (2) Section 3121(a)(18) is amended by striking

26 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’.
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1 (3) Section 3306(b)(13) is amended by striking

2 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’.

3 (4) Section 3401(a)(18) is amended by striking

4 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 2002.

8 SEC. 8. CLARIFICATION RELATING TO EXCEPTION FROM

9 ADDITIONAL TAX ON CERTAIN DISTRIBU10 TIONS FROM QUALIFIED TUITION PRO11 GRAMS, ETC., ON ACCOUNT OF ATTENDANCE

12 AT MILITARY ACADEMY.

13 (a) IN GENERAL.—Subparagraph (B) of section

14 530(d)(4) (relating to exceptions from additional tax for

15 distributions not used for educational purposes) is amend16 ed by striking ‘‘or’’ at the end of clause (iii), by redesig17 nating clause (iv) as clause (v), and by inserting after

18 clause (iii) the following new clause:

19 ‘‘(iv) made on account of the attend20 ance of the designated beneficiary at the

21 United States Military Academy, the

22 United States Naval Academy, the United

23 States Air Force Academy, the United

24 States Coast Guard Academy, or the

25 United States Merchant Marine Academy,
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1 to the extent that the amount of the pay2 ment or distribution does not exceed the

3 costs of advanced education (as defined by

4 section 2005(e)(3) of title 10, United

5 States Code, as in effect on the date of the

6 enactment of this section) attributable to

7 such attendance, or’’.

8 (b) EFFECTIVE DATE.—The amendment made by

9 this section shall take effect for taxable years beginning

10 after December 31, 2002.

11 SEC. 9. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT

12 TRAVEL EXPENSES OF NATIONAL GUARD

13 AND RESERVE MEMBERS.

14 (a) DEDUCTION ALLOWED.—Section 162 (relating to

15 certain trade or business expenses) is amended by redesig16 nating subsection (p) as subsection (q) and inserting after

17 subsection (o) the following new subsection:

18 ‘‘(p) TREATMENT OF EXPENSES OF MEMBERS OF

19 RESERVE COMPONENT OF ARMED FORCES OF THE

20 UNITED STATES.—For purposes of subsection (a)(2), in

21 the case of an individual who performs services as a mem22 ber of a reserve component of the Armed Forces of the

23 United States at any time during the taxable year, such

24 individual shall be deemed to be away from home in the

25 pursuit of a trade or business for any period during which
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1 such individual is away from home in connection with such

2 services.’’.

3 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX4 PAYER ELECTS TO ITEMIZE.—Paragraph (2) of section

5 62(a) (relating to certain trade and business deductions

6 of employees) is amended by adding at the end the fol7 lowing new subparagraph:

8 ‘‘(E) CERTAIN EXPENSES OF MEMBERS OF

9 RESERVE COMPONENTS OF THE ARMED FORCES

10 OF THE UNITED STATES.—The deductions al11 lowed by section 162 which consist of expenses,

12 determined at a rate not in excess of the rates

13 for travel expenses (including per diem in lieu

14 of subsistence) authorized for employees of

15 agencies under subchapter I of chapter 57 of

16 title 5, United States Code, and not in excess

17 of $1,500, paid or incurred by the taxpayer in

18 connection with the performance of services by

19 such taxpayer as a member of a reserve compo20 nent of the Armed Forces of the United States

21 for any period during which such individual is

22 more than 100 miles away from home in con23 nection with such services.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to amounts paid or incurred in tax3 able years beginning after December 31, 2002.

4 SEC. 10. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF

5 ASTRONAUTS WHO LOSE THEIR LIVES ON A

6 SPACE MISSION.

7 (a) INCOME TAX RELIEF.—

8 (1) IN GENERAL.—Subsection (d) of section

9 692 (relating to income taxes of members of Armed

10 Forces and victims of certain terrorist attacks on

11 death) is amended by adding at the end the fol12 lowing new paragraph:

13 ‘‘(5) RELIEF WITH RESPECT TO ASTRO14 NAUTS.—The provisions of this subsection shall

15 apply to any astronaut whose death occurs while on

16 a space mission, except that paragraph (3)(B) shall

17 be applied by using the date of the death of the as18 tronaut rather than September 11, 2001.’’.

19 (2) CONFORMING AMENDMENTS.—

20 (A) Section 5(b)(1) is amended by insert21 ing ‘‘, astronauts,’’ after ‘‘Forces’’.

22 (B) Section 6013(f)(2)(B) is amended by

23 inserting ‘‘, astronauts,’’ after ‘‘Forces’’.

24 (3) CLERICAL AMENDMENTS.—
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1 (A) The heading of section 692 is amended

2 by inserting ‘‘, ASTRONAUTS,’’ after

3 ‘‘FORCES’’.

4 (B) The item relating to section 692 in the

5 table of sections for part II of subchapter J of

6 chapter 1 is amended by inserting ‘‘, astro7 nauts,’’ after ‘‘Forces’’.

8 (4) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply with respect to any as10 tronaut whose death occurs after December 31,

11 2002.

12 (b) DEATH BENEFIT RELIEF.—

13 (1) IN GENERAL.—Subsection (i) of section 101

14 (relating to certain death benefits) is amended by

15 adding at the end the following new paragraph:

16 ‘‘(4) RELIEF WITH RESPECT TO ASTRO17 NAUTS.—The provisions of this subsection shall

18 apply to any astronaut whose death occurs while on

19 a space mission.’’.

20 (2) CLERICAL AMENDMENT.—The heading for

21 subsection (i) of section 101 is amended by inserting

22 ‘‘OR ASTRONAUTS’’ after ‘‘VICTIMS’’.

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to amounts paid after
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1 December 31, 2002, with respect to deaths occurring

2 after such date.

3 (c) ESTATE TAX RELIEF.—

4 (1) IN GENERAL.—Subsection (b) of section

5 2201 (defining qualified decedent) is amended by

6 striking ‘‘and’’ at the end of paragraph (1)(B), by

7 striking the period at the end of paragraph (2) and

8 inserting ‘‘, and’’, and by adding at the end the fol9 lowing new paragraph:

10 ‘‘(3) any astronaut whose death occurs while on

11 a space mission.’’.

12 (2) CLERICAL AMENDMENTS.—

13 (A) The heading of section 2201 is amend14 ed by inserting ‘‘, DEATHS OF ASTRO15 NAUTS,’’ after ‘‘FORCES’’.

16 (B) The item relating to section 2201 in

17 the table of sections for subchapter C of chap18 ter 11 is amended by inserting ‘‘, deaths of as19 tronauts,’’ after ‘‘Forces’’.

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection shall apply to estates of decedents

22 dying after December 31, 2002.
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1 SEC. 11. PROTECTION OF SOCIAL SECURITY.

2 The amounts transferred to any trust fund under

3 title II of the Social Security Act shall be determined as

4 if this Act (other than this section) had not been enacted.

Passed the House of Representatives April 9, 2003.

Attest:

Clerk.