II 

110TH CONGRESS 

1ST SESSION S. 326 

To amend the Internal Revenue Code of 1986 to provide a special period 

of limitation when uniformed services retirement pay is reduced as result 

of award of disability compensation. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 17, 2007 

Mrs. LINCOLN (for herself, Mr. THOMAS, Mr. BINGAMAN, Mr. DURBIN, Ms. 

MIKULSKI, Mr. AKAKA, Mr. PRYOR, Ms. KLOBUCHAR, Mr. ENZI, Mr. 

HARKIN, Mr. ROCKEFELLER, and Mr. KERRY) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a special period of limitation when uniformed services 

retirement pay is reduced as result of award of disability 

compensation. 

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. 

4 This Act may be cited as the ‘‘Disabled Veterans Tax 

5 Fairness Act of 2007’’. 


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1 SEC. 2. SPECIAL PERIOD OF LIMITATION WHEN UNI2 FORMED SERVICES RETIRED PAY IS RE3 DUCED AS A RESULT OF AWARD OF DIS4 ABILITY COMPENSATION. 

5 (a) IN GENERAL.—Subsection (d) of section 6511 

6 (relating to special rules applicable to income taxes) is 

7 amended by adding at the end the following new para8 graph: 

9 ‘‘(8) SPECIAL RULES WHEN UNIFORMED SERV10 ICES RETIRED PAY IS REDUCED AS A RESULT OF

11 AWARD OF DISABILITY COMPENSATION.— 

12 ‘‘(A) PERIOD OF LIMITATION ON FILING

13 CLAIM.—If the claim for credit or refund re14 lates to an overpayment of tax imposed by sub15 title A on account of— 

16 ‘‘(i) the reduction of uniformed serv17 ices retired pay computed under section 

18 1406 or 1407 of title 10, United States 

19 Code, or 

20 ‘‘(ii) the waiver of such pay under sec21 tion 5305 of title 38 of such Code, 

22 as a result of an award of compensation under 

23 title 38 of such Code pursuant to a determina24 tion by the Secretary of Veterans Affairs, the 3- 

25 year period of limitation prescribed in sub26 section (a) shall be extended, for purposes of 


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1 permitting a credit or refund based upon the 

2 amount of such reduction or waiver, until the 

3 end of the 1-year period beginning on the date 

4 of such determination. 

5 ‘‘(B) LIMITATION TO 5 TAXABLE YEARS.— 

6 Subparagraph (A) shall not apply with respect 

7 to any taxable year which began more than 5 

8 years before the date of such determination.’’. 

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

10 subsection (a) shall apply to claims for credit or refund 

11 filed after the date of the enactment of this Act. 

12 (c) TRANSITION RULES.—In the case of a determina13 tion described in paragraph (8) of section 6511(d) of the 

14 Internal Revenue Code of 1986 (as added by this section) 

15 which is made by the Secretary of Veterans Affairs after 

16 December 31, 2000, and before the date of the enactment 

17 of this Act, such paragraph— 

18 (1) shall not apply with respect to any taxable 

19 year which began before January 1, 2001, and 

20 (2) shall be applied by substituting ‘‘the date of 

21 the enactment of the Disabled Veterans Tax Fair22 ness Act of 2007’’ for ‘‘the date of such determina23 tion’’ in subparagraph (A) thereof. 

Æ 


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