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 home-
owners assistance program.
Sec. 104. Expansion of combat zone filing rules to contingency operations.
Sec. 105. Modification of membership requirement for exemption from tax for cer-
tain veterans’ organizations.
Sec. 106. Clarification of the treatment of certain dependent care assistance pro-
grams.
Sec. 107. Clarification relating to exception from additional tax on certain distribu-
tions 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 RESI-
DENCE 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 pur-
poses 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 sec-
tion 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 sub-
section 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 pursu-
ant 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 sub-
section shall apply with respect to deaths occurring after Sep-
tember 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 realign-
ment 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 CONTIN-
GENCY OPERATIONS.
(a) IN GENERAL.—Section 7508(a) (relating to time for per-
forming 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 oper-
ation’’ 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 EXEMP-
TION FROM TAX FOR CERTAIN VETERANS’ ORGANIZA-
TIONS.
(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 enact-
ment 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 para-
graph:
‘‘(4) CLARIFICATION OF CERTAIN BENEFITS.—For purposes
of paragraph (1), such term includes any dependent care assist-
ance 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 ADDI-
TIONAL TAX ON CERTAIN DISTRIBUTIONS FROM QUALI-
FIED 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 sub-
section (a) with respect to any organization described in para-
graph (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 sec-
tion 5 of the United Nations Participation Act of 1945
for the purpose of imposing on such organization an eco-
nomic 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 organiza-
tion 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 identifica-
tion 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 para-
graph (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 over-
payment 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 MEM-
BERS.
(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 COMPO-
NENT 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 con-
sist 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 ‘‘, astro-
nauts,’’ 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 sub-
section 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 sub-
section 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 sub-
section 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 Rec-
onciliation 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.