II 

114TH CONGRESS 

2D SESSION H. R. 5015 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 6, 2016 

Received 

AN ACT 

To restore amounts improperly withheld for tax purposes 

from severance payments to individuals who retired or 

separated from service in the Armed Forces for combatrelated injuries, 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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Combat-Injured Vet3 erans Tax Fairness Act of 2016’’. 

4 SEC. 2. FINDINGS. 

5 Congress makes the following findings: 

6 (1) Approximately 10,000 to 11,000 individuals 

7 are retired from service in the Armed Forces for 

8 medical reasons each year. 

9 (2) Some of such individuals are separated from 

10 service in the Armed Forces for combat-related inju11 ries (as defined in section 104(b)(3) of the Internal 

12 Revenue Code of 1986). 

13 (3) Congress has recognized the tremendous 

14 personal sacrifice of veterans with combat-related in15 juries by, among other things, specifically excluding 

16 from taxable income severance pay received for com17 bat-related injuries. 

18 (4) Since 1991, the Secretary of Defense has 

19 improperly withheld taxes from severance pay for 

20 wounded veterans, thus denying them their due com21 pensation and a significant benefit intended by Con22 gress. 

23 (5) Many veterans owed redress are beyond the 

24 statutory period to file an amended tax return be25 cause they were not or are not aware that taxes were 

26 improperly withheld. 


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1 SEC. 3. RESTORATION OF AMOUNTS IMPROPERLY WITH2 HELD FOR TAX PURPOSES FROM SEVERANCE 

3 PAYMENTS TO VETERANS WITH COMBAT-RE4 LATED INJURIES. 

5 (a) IN GENERAL.—Not later than 1 year after the 

6 date of the enactment of this Act, the Secretary of Defense 

7 shall— 

8 (1) identify— 

9 (A) the severance payments— 

10 (i) that the Secretary paid after Janu11 ary 17, 1991; 

12 (ii) that the Secretary computed 

13 under section 1212 of title 10, United 

14 States Code; 

15 (iii) that were not considered gross in16 come pursuant to section 104(a)(4) of the 

17 Internal Revenue Code of 1986; and 

18 (iv) from which the Secretary withheld 

19 amounts for tax purposes; and 

20 (B) the individuals to whom such sever21 ance payments were made; and 

22 (2) with respect to each person identified under 

23 paragraph (1)(B), provide— 

24 (A) notice of— 


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1 (i) the amount of severance payments 

2 in paragraph (1)(A) which were improperly 

3 withheld for tax purposes; and 

4 (ii) such other information determined 

5 to be necessary by the Secretary of the 

6 Treasury to carry out the purposes of this 

7 section; and 

8 (B) instructions for filing amended tax re9 turns to recover the amounts improperly with10 held for tax purposes. 

11 (b) EXTENSION OF LIMITATION ON TIME FOR CRED12 IT OR REFUND.— 

13 (1) PERIOD FOR FILING CLAIM.—If a claim for 

14 credit or refund under section 6511(a) of the Inter15 nal Revenue Code of 1986 relates to a specified 

16 overpayment, the 3-year period of limitation pre17 scribed by such subsection shall not expire before 

18 the date which is 1 year after the date the informa19 tion return described in subsection (a)(2) is pro20 vided. The allowable amount of credit or refund of 

21 a specified overpayment shall be determined without 

22 regard to the amount of tax paid within the period 

23 provided in section 6511(b)(2). 

24 (2) SPECIFIED OVERPAYMENT.—For purposes 

25 of paragraph (1), the term ‘‘specified overpayment’’ 


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1 means an overpayment attributable to a severance 

2 payment described in subsection (a)(1). 

3 SEC. 4. REQUIREMENT THAT SECRETARY OF DEFENSE EN4 SURE AMOUNTS ARE NOT WITHHELD FOR 

5 TAX PURPOSES FROM SEVERANCE PAY6 MENTS NOT CONSIDERED GROSS INCOME. 

7 The Secretary of Defense shall take such actions as 

8 may be necessary to ensure that amounts are not withheld 

9 for tax purposes from severance payments made by the 

10 Secretary to individuals when such payments are not con11 sidered gross income pursuant to section 104(a)(4) of the 

12 Internal Revenue Code of 1986. 

13 SEC. 5. REPORT TO CONGRESS. 

14 (a) IN GENERAL.—After completing the identifica15 tion required by section 3(a) and not later than 1 year 

16 after the date of the enactment of this Act, the Secretary 

17 of Defense shall submit to the appropriate committees of 

18 Congress a report on the actions taken by the Secretary 

19 to carry out this Act. 

20 (b) CONTENTS.—The report submitted under sub21 section (a) shall include the following: 

22 (1) The number of individuals identified under 

23 section 3(a)(1)(B). 

24 (2) Of all the severance payments described in 

25 section 3(a)(1)(A), the aggregate amount that the 


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1 Secretary withheld for tax purposes from such pay2 ments. 

3 (3) A description of the actions the Secretary 

4 plans to take to carry out section 4. 

5 (c) APPROPRIATE COMMITTEES OF CONGRESS DE6 FINED.—In this section, the term ‘‘appropriate commit7 tees of Congress’’ means— 

8 (1) the Committee on Armed Services, the 

9 Committee on Veterans’ Affairs, and the Committee 

10 on Finance of the Senate; and 

11 (2) the Committee on Armed Services, the 

12 Committee on Veterans’ Affairs, and the Committee 

13 on Ways and Means of the House of Representa14 tives. 

Passed the House of Representatives December 5, 

2016. 

Attest: KAREN L. HAAS, 

Clerk. 


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