I 

108TH CONGRESS 

1ST SESSION H. R. 1664

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. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 8, 2003

Mr. THOMAS introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL

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.

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’’. 
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

7 SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED 

8 SERVICES AND FOREIGN SERVICE IN DETER9 MINING EXCLUSION OF GAIN FROM SALE OF 

10 PRINCIPAL RESIDENCE. 

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

12 the Internal Revenue Code of 1986 (relating to exclusion 

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

14 adding at the end the following new paragraph: 

15 ‘‘(10) MEMBERS OF UNIFORMED SERVICES AND

16 FOREIGN SERVICE.—

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

18 individual with respect to a property, the run19 ning of the 5-year period referred to in sub20 sections (a) and (c)(1)(B) and paragraph (7) of 

21 this subsection with respect to such property 

22 shall be suspended during any period that such 

23 individual or such individual’s spouse is serving 

24 on qualified official extended duty as a member 
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1 of the uniformed services or of the Foreign 

2 Service. 

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

4 Such 5-year period shall not be extended more 

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

6 ‘‘(C) QUALIFIED OFFICIAL EXTENDED

7 DUTY.—For purposes of this paragraph— 

8 ‘‘(i) IN GENERAL.—The term ‘quali9 fied official extended duty’ means any ex10 tended duty while serving at a duty station 

11 which is at least 150 miles from such prop12 erty or while residing under Government 

13 orders in Government quarters. 

14 ‘‘(ii) UNIFORMED SERVICES.—The 

15 term ‘uniformed services’ has the meaning 

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

17 title 10, United States Code, as in effect 

18 on the date of the enactment of this para19 graph. 

20 ‘‘(iii) FOREIGN SERVICE.—The term 

21 ‘member of the Foreign Service’ has the 

22 meaning given the term ‘member of the 

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

24 (5) of section 103 of the Foreign Service 
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1 Act of 1980, as in effect on the date of the 

2 enactment of this paragraph. 

3 ‘‘(iv) EXTENDED DUTY.—The term 

4 ‘extended duty’ means any period of active 

5 duty pursuant to a call or order to such 

6 duty for a period in excess of 180 days or 

7 for an indefinite period. 

8 ‘‘(D) SPECIAL RULES RELATING TO ELEC9 TION.—

10 ‘‘(i) ELECTION LIMITED TO 1 PROP11 ERTY AT A TIME.—An election under sub12 paragraph (A) with respect to any property 

13 may not be made if such an election is in 

14 effect with respect to any other property. 

15 ‘‘(ii) REVOCATION OF ELECTION.—An 

16 election under subparagraph (A) may be 

17 revoked at any time.’’. 

18 (b) EFFECTIVE DATE; SPECIAL RULE.—

19 (1) EFFECTIVE DATE.—The amendment made 

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

21 amendments made by section 312 of the Taxpayer 

22 Relief Act of 1997. 

23 (2) WAIVER OF LIMITATIONS.—If refund or 

24 credit of any overpayment of tax resulting from the 

25 amendment made by this section is prevented at any 
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1 time before the close of the 1-year period beginning 

2 on the date of the enactment of this Act by the oper3 ation of any law or rule of law (including res judi4 cata), such refund or credit may nevertheless be 

5 made or allowed if claim therefor is filed before the 

6 close of such period. 

7 SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS 

8 INCOME OF DEATH GRATUITY PAYMENT. 

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

10 (relating to qualified military benefit) is amended by add11 ing at the end the following new subparagraph: 

12 ‘‘(C) EXCEPTION FOR DEATH GRATUITY

13 ADJUSTMENTS MADE BY LAW.—Subparagraph 

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

15 amount of death gratuity payable under chapter 

16 75 of title 10, United States Code, which is 

17 pursuant to a provision of law enacted before 

18 December 31, 1991.’’. 

19 (b) CONFORMING AMENDMENT.—Section 

20 134(b)(3)(A) is amended by striking ‘‘subparagraph (B)’’ 

21 and inserting ‘‘subparagraphs (B) and (C)’’. 

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

23 this section shall apply with respect to deaths occurring 

24 after September 10, 2001.
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1 SEC. 4. EXCLUSION FOR AMOUNTS RECEIVED UNDER DE2 PARTMENT OF DEFENSE HOMEOWNERS AS3 SISTANCE PROGRAM. 

4 (a) IN GENERAL.—Subsection (a) of section 132 (re5 lating to certain fringe benefits) is amended by striking 

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

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

8 adding at the end the following new paragraph: 

9 ‘‘(8) qualified military base realignment and 

10 closure fringe.’’. 

11 (b) QUALIFIED MILITARY BASE REALIGNMENT AND

12 CLOSURE FRINGE.—Section 132 is amended by redesig13 nating subsection (n) as subsection (o) and by inserting 

14 after subsection (m) the following new subsection: 

15 ‘‘(n) QUALIFIED MILITARY BASE REALIGNMENT AND

16 CLOSURE FRINGE.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘qualified military base realignment 

19 and closure fringe’ means 1 or more payments under 

20 the authority of section 1013 of the Demonstration 

21 Cities and Metropolitan Development Act of 1966 

22 (42 U.S.C. 3374) (as in effect on the date of the en23 actment of this subsection). 

24 ‘‘(2) LIMITATION.—With respect to any prop25 erty, such term shall not include any payment re26 ferred to in paragraph (1) to the extent that the 
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1 sum of all such payments related to such property 

2 exceeds the amount described in clause (1) of sub3 section (c) of such section (as in effect on such 

4 date).’’. 

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

6 this section shall apply to payments made after the date 

7 of the enactment of this Act. 

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

9 CONTINGENCY OPERATIONS. 

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

11 (relating to time for performing certain acts postponed by 

12 reason of service in combat zone) is amended—

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

14 United States away from the individual’s permanent 

15 duty station while participating in an operation des16 ignated by the Secretary of Defense as a contin17 gency operation (as defined in section 101(a)(13) of 

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

19 a contingency operation by operation of law’’ after 

20 ‘‘section 112’’, 

21 (2) by inserting in the first sentence ‘‘or at any 

22 time during the period of such contingency oper23 ation’’ after ‘‘for purposes of such section’’, 

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

25 area’’, and 
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1 (4) by inserting ‘‘or operation’’ after ‘‘such 

2 area’’. 

3 (b) CONFORMING AMENDMENTS.—

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

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

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

7 inserting ‘‘OR CONTINGENCY OPERATION’’ after 

8 ‘‘COMBAT ZONE’’. 

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

10 table of sections for chapter 77 is amended by in11 serting ‘‘or contingency operation’’ after ‘‘combat 

12 zone’’. 

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

14 this section shall apply to any period for performing an 

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

16 of this Act. 

17 SEC. 6. MODIFICATION OF MEMBERSHIP REQUIREMENT 

18 FOR EXEMPTION FROM TAX FOR CERTAIN 

19 VETERANS’ ORGANIZATIONS. 

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

21 501(c)(19) (relating to list of exempt organizations) is 

22 amended by striking ‘‘or widowers’’ and inserting ‘‘, wid23 owers, ancestors, or lineal descendants’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 7. CLARIFICATION OF THE TREATMENT OF CERTAIN 

5 DEPENDENT CARE ASSISTANCE PROGRAMS. 

6 (a) IN GENERAL.—Subsection (b) of section 134 (de7 fining qualified military benefit) is amended by adding at 

8 the end the following new paragraph: 

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

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

11 any dependent care assistance program (as in effect 

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

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

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 134(b)(3)(A) (as amended by sec16 tion 102) is further amended by inserting ‘‘and 

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

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

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

20 (3) Section 3306(b)(13) is amended by striking 

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

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

23 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2002. 

4 SEC. 8. CLARIFICATION RELATING TO EXCEPTION FROM 

5 ADDITIONAL TAX ON CERTAIN DISTRIBU6 TIONS FROM QUALIFIED TUITION PRO7 GRAMS, ETC., ON ACCOUNT OF ATTENDANCE 

8 AT MILITARY ACADEMY. 

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

10 530(d)(4) (relating to exceptions from additional tax for 

11 distributions not used for educational purposes) is amend12 ed by striking ‘‘or’’ at the end of clause (iii), by redesig13 nating clause (iv) as clause (v), and by inserting after 

14 clause (iii) the following new clause: 

15 ‘‘(iv) made on account of the attend16 ance of the designated beneficiary at the 

17 United States Military Academy, the 

18 United States Naval Academy, the United 

19 States Air Force Academy, the United 

20 States Coast Guard Academy, or the 

21 United States Merchant Marine Academy, 

22 to the extent that the amount of the pay23 ment or distribution does not exceed the 

24 costs of advanced education (as defined by 

25 section 2005(e)(3) of title 10, United
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1 States Code, as in effect on the date of the 

2 enactment of this section) attributable to 

3 such attendance, or’’. 

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

5 this section shall take effect for taxable years beginning 

6 after December 31, 2002. 

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

8 TRAVEL EXPENSES OF NATIONAL GUARD 

9 AND RESERVE MEMBERS. 

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

11 certain trade or business expenses) is amended by redesig12 nating subsection (p) as subsection (q) and inserting after 

13 subsection (o) the following new subsection: 

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

15 RESERVE COMPONENT OF ARMED FORCES OF THE

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

17 the case of an individual who performs services as a mem18 ber of a reserve component of the Armed Forces of the 

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

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

21 pursuit of a trade or business for any period during which 

22 such individual is away from home in connection with such 

23 services.’’. 

24 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX25 PAYER ELECTS TO ITEMIZE.—Paragraph (2) of section 
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1 62(a) (relating to certain trade and business deductions 

2 of employees) is amended by adding at the end the fol3 lowing new subparagraph: 

4 ‘‘(E) CERTAIN EXPENSES OF MEMBERS OF

5 RESERVE COMPONENTS OF THE ARMED FORCES

6 OF THE UNITED STATES.—The deductions al7 lowed by section 162 which consist of expenses, 

8 determined at a rate not in excess of the rates 

9 for travel expenses (including per diem in lieu 

10 of subsistence) authorized for employees of 

11 agencies under subchapter I of chapter 57 of 

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

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

14 connection with the performance of services by 

15 such taxpayer as a member of a reserve compo16 nent of the Armed Forces of the United States 

17 for any period during which such individual is 

18 more than 100 miles away from home in con19 nection with such services.’’. 

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

21 this section shall apply to amounts paid or incurred in tax22 able years beginning after December 31, 2002. 
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1 SEC. 10. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF 

2 ASTRONAUTS WHO LOSE THEIR LIVES ON A 

3 SPACE MISSION. 

4 (a) INCOME TAX RELIEF.—

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

6 692 (relating to income taxes of members of Armed 

7 Forces and victims of certain terrorist attacks on 

8 death) is amended by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(5) RELIEF WITH RESPECT TO ASTRO11 NAUTS.—The provisions of this subsection shall 

12 apply to any astronaut whose death occurs while on 

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

14 be applied by using the date of the death of the as15 tronaut rather than September 11, 2001.’’. 

16 (2) CONFORMING AMENDMENTS.—

17 (A) Section 5(b)(1) is amended by insert18 ing ‘‘, astronauts,’’ after ‘‘Forces’’. 

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

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

21 (3) CLERICAL AMENDMENTS.—

22 (A) The heading of section 692 is amended 

23 by inserting ‘‘, ASTRONAUTS,’’ after 

24 ‘‘FORCES’’. 

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

26 table of sections for part II of subchapter J of 
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1 chapter 1 is amended by inserting ‘‘, astro2 nauts,’’ after ‘‘Forces’’. 

3 (4) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply with respect to any as5 tronaut whose death occurs after December 31, 

6 2002. 

7 (b) DEATH BENEFIT RELIEF.—

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

9 (relating to certain death benefits) is amended by 

10 adding at the end the following new paragraph: 

11 ‘‘(4) RELIEF WITH RESPECT TO ASTRO12 NAUTS.—The provisions of this subsection shall 

13 apply to any astronaut whose death occurs while on 

14 a space mission.’’. 

15 (2) CLERICAL AMENDMENT.—The heading for 

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

17 ‘‘OR ASTRONAUTS’’ after ‘‘VICTIMS’’. 

18 (3) EFFECTIVE DATE.—The amendments made 

19 by this subsection shall apply to amounts paid after 

20 December 31, 2002, with respect to deaths occurring 

21 after such date. 

22 (c) ESTATE TAX RELIEF.—

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

24 2201 (defining qualified decedent) is amended by 

25 striking ‘‘and’’ at the end of paragraph (1)(B), by 
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1 striking the period at the end of paragraph (2) and 

2 inserting ‘‘, and’’, and by adding at the end the fol3 lowing new paragraph: 

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

5 a space mission.’’. 

6 (2) CLERICAL AMENDMENTS.—

7 (A) The heading of section 2201 is amend8 ed by inserting ‘‘, DEATHS OF ASTRO9 NAUTS,’’ after ‘‘FORCES’’. 

10 (B) The item relating to section 2201 in 

11 the table of sections for subchapter C of chap12 ter 11 is amended by inserting ‘‘, deaths of as13 tronauts,’’ after ‘‘Forces’’. 

14 (3) EFFECTIVE DATE.—The amendments made 

15 by this subsection shall apply to estates of decedents 

16 dying after December 31, 2002. 

17 SEC. 11. PROTECTION OF SOCIAL SECURITY. 

18 The amounts transferred to any trust fund under 

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

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

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