H. R. 3365

One Hundred Eighth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday,

the seventh day of January, two thousand and three

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.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. 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.
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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) 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; 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.
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(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 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) 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 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)
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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 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 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 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 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).’’.
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(b) CONFORMING AMENDMENTS.— (1) Section 134(b)(3)(A), 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 amendments made by this section

shall apply to taxable years beginning after December 31, 2002.

(d) NO INFERENCE.—No 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 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—
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‘‘(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
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‘‘(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 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 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 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.’’.
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(c) EFFECTIVE DATE.—The 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) 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 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 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 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 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’’.
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(3) EFFECTIVE DATE.—The 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’’.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.