SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Heroes Earnings Assistance and Relief Tax Act of 
2008’’. 
(b) REFERENCE.—Except as otherwise expressly pro-
vided, 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 consid-
ered to be made to a section or other provision of the In-
ternal 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—BENEFITS FOR MILITARY 
Sec. 101. Recovery rebate provided to military families. 
Sec. 102. Election to include combat pay as earned income for purposes of 
earned income tax credit. 
Sec. 103. Modification of mortgage revenue bonds for veterans. 
Sec. 104. Survivor and disability payments with respect to qualified military 
service. 
Sec. 105. Treatment of differential military pay as wages. 
Sec. 106. Special period of limitation when uniformed services retired pay is re-
duced as a result of award of disability compensation. 
Sec. 107. Distributions from retirement plans to individuals called to active 
duty. 
Sec. 108. Authority to disclose return information for certain veterans pro-
grams made permanent. 
Sec. 109. Contributions of military death gratuities to Roth IRAs and Edu-
cation Savings Accounts. 
Sec. 110. Suspension of 5-year period during service with the Peace Corps. 
Sec. 111. Credit for employer differential wage payments to employees who are 
active duty members of the uniformed services. 
Sec. 112. State payments to service members treated as qualified military bene-
fits. 
Sec. 113. Permanent exclusion of gain from sale of a principal residence by cer-
tain employees of the intelligence community. 
Sec. 114. Special disposition rules for unused benefits in health flexible spend-
ing arrangements of individuals called to active duty.
Sec. 115. Technical correction related to exclusion of certain property tax re-
bates and other benefits provided to volunteer firefighters and 
emergency medical responders. 
TITLE II—IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME 
Sec. 201. Treatment of uniformed service cash remuneration as earned income. 
Sec. 202. State annuities for certain veterans to be disregarded in determining 
supplemental security income benefits. 
Sec. 203. Exclusion of AmeriCorps benefits for purposes of determining supple-
mental security income eligibility and benefit amounts. 
Sec. 204. Effective date. 
TITLE III—REVENUE PROVISIONS 
Sec. 301. Revision of tax rules on expatriation. 
Sec. 302. Certain domestically controlled foreign persons performing services 
under contract with United States Government treated as 
American employers. 
Sec. 303. Increase in minimum penalty on failure to file a return of tax. 
TITLE IV—PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
MENTAL HEALTH BENEFITS 
Sec. 401. Parity in the application of certain limits to mental health benefits. 
TITLE I—BENEFITS FOR 
MILITARY 
SEC. 101. RECOVERY REBATE PROVIDED TO MILITARY 
FAMILIES. 
(a) IN GENERAL.—Subsection (h) of section 6428 
(relating to identification number requirement) is amend-
ed by adding at the end the following new paragraph: 
‘‘(3) SPECIAL
RULE
FOR
MEMBERS
OF
THE 
ARMED FORCES.—Paragraph (1) shall not apply to 
a joint return where at least 1 spouse was a member 
of the Armed Forces of the United States at any 
time during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in the amend-
ments made by section 101 of the Economic Stimulus Act 
of 2008. 
SEC. 102. ELECTION TO INCLUDE COMBAT PAY AS EARNED 
INCOME FOR PURPOSES OF EARNED INCOME 
TAX CREDIT. 
(a) IN GENERAL.—Clause (vi) of section 32(c)(2)(B) 
(defining earned income) is amended to read as follows: 
‘‘(vi) a taxpayer may elect to treat 
amounts excluded from gross income by 
reason of section 112 as earned income.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (4) of 
section 6428(e) is amended by striking ‘‘except that—’’ 
and all that follows through ‘‘(B) such term shall’’ and 
inserting ‘‘except that such term shall’’. 
(c) SUNSET NOT APPLICABLE.—Section 105 of the 
Working Families Tax Relief Act of 2004 (relating to ap-
plication of EGTRRA sunset to this title) shall not apply 
to section 104(b) of such Act. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2007. 
SEC. 103. MODIFICATION OF MORTGAGE REVENUE BONDS 
FOR VETERANS. 
(a) QUALIFIED MORTGAGE BONDS USED TO FI-
NANCE RESIDENCES FOR VETERANS WITHOUT REGARD
TO FIRST-TIME HOMEBUYER REQUIREMENT.—Subpara-
graph (D) of section 143(d)(2) (relating to exceptions) is 
amended by striking ‘‘and before January 1, 2008’’. 
(b) INCREASE IN BOND LIMITATION FOR ALASKA, 
OREGON, 
AND
WISCONSIN.—Clause (ii) of section 
143(l)(3)(B) (relating to State veterans limit) is amended 
by striking ‘‘$25,000,000’’ each place it appears and in-
serting ‘‘$100,000,000’’. 
(c) DEFINITION
OF QUALIFIED VETERAN.—Para-
graph (4) of section 143(l) (defining qualified veteran) is 
amended to read as follows: 
‘‘(4) QUALIFIED
VETERAN.—For purposes of 
this subsection, the term ‘qualified veteran’ means 
any veteran who— 
‘‘(A) served on active duty, and 
‘‘(B) applied for the financing before the 
date 25 years after the last date on which such 
veteran left active service.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after December 
31, 2007. 
(e) TRANSITION RULE.—In the case of any bond 
issued after December 31, 2007, and before the date of 
the enactment of this Act, subparagraph (B) of section 
143(l)(4) of the Internal Revenue Code of 1986, as
amended by this section, shall be applied by substituting 
‘‘30 years’’ for ‘‘25 years’’. 
SEC. 104. SURVIVOR AND DISABILITY PAYMENTS WITH RE-
SPECT TO QUALIFIED MILITARY SERVICE. 
(a) PLAN
QUALIFICATION
REQUIREMENT
FOR 
DEATH BENEFITS UNDER USERRA-QUALIFIED ACTIVE 
MILITARY SERVICE.—Subsection (a) of section 401 (relat-
ing to requirements for qualification) is amended by in-
serting after paragraph (36) the following new paragraph: 
‘‘(37) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—A trust shall not 
constitute a qualified trust unless the plan provides 
that, in the case of a participant who dies while per-
forming qualified military service (as defined in sec-
tion 414(u)), the survivors of the participant are en-
titled to any additional benefits (other than benefit 
accruals relating to the period of qualified military 
service) provided under the plan had the participant 
resumed and then terminated employment on ac-
count of death.’’. 
(b) TREATMENT IN THE CASE OF DEATH OR DIS-
ABILITY RESULTING FROM ACTIVE MILITARY SERVICE 
FOR BENEFIT ACCRUAL PURPOSES.—Subsection (u) of 
section 414 (relating to special rules relating to veterans’ 
reemployment rights under USERRA) is amended by re-