I 
110TH CONGRESS 
1ST SESSION H. R. 3997 
To amend the Internal Revenue Code of 1986 to provide earnings assistance 
and tax relief to members of the uniformed services, volunteer fire-
fighters, and Peace Corps volunteers, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 30, 2007 
Mr. RANGEL introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
earnings assistance and tax relief to members of the 
uniformed services, volunteer firefighters, and Peace 
Corps volunteers, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Heroes Earnings Assistance and Relief Tax Act of 
2007’’. 
(b) REFERENCE.—Except as otherwise expressly pro-
vided, whenever in this Act an amendment or repeal is 
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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 AND VOLUNTEER 
FIREFIGHTERS 
Sec. 101. Election to include combat pay as earned income for purposes of 
earned income tax credit. 
Sec. 102. Modification of mortgage revenue bonds for veterans. 
Sec. 103. Survivor and disability payments with respect to qualified military 
service. 
Sec. 104. Treatment of differential military pay as wages. 
Sec. 105. Exclusion from income for benefits provided to volunteer firefighters 
and emergency medical responders. 
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. Disclosure of return information relating to veterans programs 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. 
TITLE II—IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME 
Sec. 201. Treatment of uniformed service cash remuneration as earned income. 
Sec. 202. State annuities for blind 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. 
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TITLE I—BENEFITS FOR MILI-
TARY AND VOLUNTEER FIRE-
FIGHTERS 
SEC. 101. 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) 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. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years ending after De-
cember 31, 2007. 
SEC. 102. 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’’. 
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(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. 
SEC. 103. 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: 
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‘‘(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-
designating paragraphs (9) and (10) as paragraphs (10) 
and (11), respectively, and by inserting after paragraph 
(8) the following new paragraph: 
‘‘(9) TREATMENT IN THE CASE OF DEATH OR 
DISABILITY
RESULTING
FROM
ACTIVE
MILITARY 
SERVICE.— 
‘‘(A) IN
GENERAL.—For benefit accrual 
purposes, an employer sponsoring a retirement 
plan may treat an individual who dies or be-
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comes disabled (as defined under the terms of 
the plan) while performing qualified military 
service with respect to the employer maintain-
ing the plan as if the individual has resumed 
employment in accordance with the individual’s 
reemployment rights under chapter 43 of title 
38, United States Code, on the day preceding 
death or disability (as the case may be) and ter-
minated employment on the actual date of 
death or disability. In the case of any such 
treatment, and subject to subparagraphs (B) 
and (C), any full or partial compliance by such 
plan with respect to the benefit accrual require-
ments of paragraph (8) with respect to such in-
dividual shall be treated for purposes of para-
graph (1) as if such compliance were required 
under such chapter 43. 
‘‘(B) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A) shall apply only if 
all individuals performing qualified military 
service with respect to the employer maintain-
ing the plan (as determined under subsections 
(b), (c), (m), and (o)) who die or became dis-
abled as a result of performing qualified mili-
tary service prior to reemployment by the em-
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ployer are credited with service and benefits on 
reasonably equivalent terms. 
‘‘(C) DETERMINATION OF BENEFITS.—The 
amount of employee contributions and the 
amount of elective deferrals of an individual 
treated as reemployed under subparagraph (A) 
for purposes of applying paragraph (8)(C) shall 
be determined on the basis of the individual’s 
average actual employee contributions or elec-
tive deferrals for the lesser of— 
‘‘(i) the 12-month period of service 
with the employer immediately prior to 
qualified military service, or 
‘‘(ii) if service with the employer is 
less than such 12-month period, the actual 
length of continuous service with the em-
ployer.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 404(a)(2) is amended by striking 
‘‘and (31)’’ and inserting ‘‘(31), and (37)’’. 
(2) Section 403(b) is amended by adding at the 
end the following new paragraph: 
‘‘(14) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—This subsection 
shall not apply to an annuity contract unless such 
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contract 
meets 
the 
requirements 
of 
section 
401(a)(37).’’. 
(3) Section 457(g) is amended by adding at the 
end the following new paragraph: 
‘‘(4) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—A plan described 
in paragraph (1) shall not be treated as an eligible 
deferred compensation plan unless such plan meets 
the requirements of section 401(a)(37).’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply with respect to deaths and 
disabilities occurring on or after January 1, 2007. 
(2) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.— 
(A) IN
GENERAL.—If this subparagraph 
applies to any plan or contract amendment, 
such plan or contract shall be treated as being 
operated in accordance with the terms of the 
plan during the period described in subpara-
graph (B)(iii). 
(B) AMENDMENTS
TO
WHICH
SUBPARA-
GRAPH (A) APPLIES.— 
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(i) IN GENERAL.—Subparagraph (A) 
shall apply to any amendment to any plan 
or annuity contract which is made— 
(I) pursuant to the amendments 
made by subsection (a) or pursuant to 
any regulation issued by the Secretary 
of the Treasury under subsection (a), 
and 
(II) on or before the last day of 
the first plan year beginning on or 
after January 1, 2009. 
In the case of a governmental plan (as de-
fined in section 414(d) of the Internal Rev-
enue Code of 1986), this clause shall be 
applied by substituting ‘‘2011’’ for ‘‘2009’’ 
in subclause (II). 
(ii) 
CONDITIONS.—This 
paragraph 
shall not apply to any amendment unless— 
(I) the plan or contract is oper-
ated as if such plan or contract 
amendment were in effect for the pe-
riod described in clause (iii), and 
(II) such plan or contract amend-
ment applies retroactively for such pe-
riod. 
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(iii) PERIOD DESCRIBED.—The period 
described in this clause is the period— 
(I) beginning on the effective 
date specified by the plan, and 
(II) ending on the date described 
in clause (i)(II) (or, if earlier, the 
date the plan or contract amendment 
is adopted). 
SEC. 104. TREATMENT OF DIFFERENTIAL MILITARY PAY AS 
WAGES. 
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL 
WAGE PAYMENTS.— 
(1) IN
GENERAL.—Section 3401 (relating to 
definitions) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(h) DIFFERENTIAL WAGE PAYMENTS TO ACTIVE 
DUTY MEMBERS OF THE UNIFORMED SERVICES.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), any differential wage payment shall be treated 
as a payment of wages by the employer to the em-
ployee. 
‘‘(2) DIFFERENTIAL
WAGE
PAYMENT.—For 
purposes of paragraph (1), the term ‘differential 
wage payment’ means any payment which— 
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‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which 
the individual is performing service in the uni-
formed services (as defined in chapter 43 of 
title 38, United States Code) while on active 
duty for a period of more than 30 days, and 
‘‘(B) represents all or a portion of the 
wages the individual would have received from 
the employer if the individual were performing 
service for the employer.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to remuneration paid 
after December 31, 2007. 
(b) TREATMENT
OF DIFFERENTIAL WAGE PAY-
MENTS FOR RETIREMENT PLAN PURPOSES.— 
(1) PENSION PLANS.— 
(A) IN GENERAL.—Section 414(u) (relat-
ing to special rules relating to veterans’ reem-
ployment rights under USERRA) is amended 
by adding at the end the following new para-
graph: 
‘‘(11) TREATMENT
OF
DIFFERENTIAL
WAGE 
PAYMENTS.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, for purposes of applying this 
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title to a retirement plan to which this sub-
section applies— 
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an 
employee of the employer making the pay-
ment, 
‘‘(ii) the differential wage payment 
shall be treated as compensation, and 
‘‘(iii) the plan shall not be treated as 
failing to meet the requirements of any 
provision described in paragraph (1)(C) by 
reason of any contribution or benefit which 
is based on the differential wage payment. 
‘‘(B) 
SPECIAL
RULE
FOR
DISTRIBU-
TIONS.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraph (A)(i), for purposes of sec-
tion 401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii), 
403(b)(11)(A), or 457(d)(1)(A)(ii), an in-
dividual shall be treated as having been 
severed from employment during any pe-
riod the individual is performing service in 
the uniformed services described in section 
3401(h)(2)(A). 
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‘‘(ii) LIMITATION.—If an individual 
elects to receive a distribution by reason of 
clause (i), the plan shall provide that the 
individual may not make an elective defer-
ral or employee contribution during the 6- 
month period beginning on the date of the 
distribution. 
‘‘(C) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A)(iii) shall apply only 
if all employees of an employer (as determined 
under subsections (b), (c), (m), and (o)) per-
forming service in the uniformed services de-
scribed in section 3401(h)(2)(A) are entitled to 
receive differential wage payments on reason-
ably equivalent terms and, if eligible to partici-
pate in a retirement plan maintained by the 
employer, to make contributions based on the 
payments on reasonably equivalent terms. For 
purposes of applying this subparagraph, the 
provisions of paragraphs (3), (4), and (5) of 
section 410(b) shall apply. 
‘‘(D) DIFFERENTIAL
WAGE
PAYMENT.— 
For purposes of this paragraph, the term ‘dif-
ferential wage payment’ has the meaning given 
such term by section 3401(h)(2).’’. 
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(B) 
CONFORMING
AMENDMENT.—The 
heading for section 414(u) is amended by in-
serting ‘‘AND TO DIFFERENTIAL WAGE PAY-
MENTS
TO
MEMBERS
ON
ACTIVE
DUTY’’ 
after ‘‘USERRA’’. 
(2) DIFFERENTIAL WAGE PAYMENTS TREATED 
AS
COMPENSATION
FOR
INDIVIDUAL
RETIREMENT 
PLANS.—Section 219(f)(1) (defining compensation) 
is amended by adding at the end the following new 
sentence: ‘‘The term compensation includes any dif-
ferential wage payment (as defined in section 
3401(h)(2)).’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to years beginning 
after December 31, 2007. 
(c) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.— 
(1) IN GENERAL.—If this subsection applies to 
any plan or annuity contract amendment, such plan 
or contract shall be treated as being operated in ac-
cordance with the terms of the plan or contract dur-
ing the period described in paragraph (2)(B)(i). 
(2) AMENDMENTS
TO
WHICH
SECTION
AP-
PLIES.— 
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(A) IN
GENERAL.—This subsection shall 
apply to any amendment to any plan or annuity 
contract which is made— 
(i) pursuant to any amendment made 
by subsection (b)(1), and 
(ii) on or before the last day of the 
first plan year beginning on or after Janu-
ary 1, 2009. 
In the case of a governmental plan (as defined 
in section 414(d) of the Internal Revenue Code 
of 1986), this subparagraph shall be applied by 
substituting ‘‘2011’’ for ‘‘2009’’ in clause (ii). 
(B) CONDITIONS.—This subsection shall 
not apply to any plan or annuity contract 
amendment unless— 
(i) during the period beginning on the 
date the amendment described in subpara-
graph (A)(i) takes effect and ending on the 
date described in subparagraph (A)(ii) (or, 
if earlier, the date the plan or contract 
amendment is adopted), the plan or con-
tract is operated as if such plan or con-
tract amendment were in effect, and 
(ii) such plan or contract amendment 
applies retroactively for such period. 
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SEC. 105. EXCLUSION FROM INCOME FOR BENEFITS PRO-
VIDED TO VOLUNTEER FIREFIGHTERS AND 
EMERGENCY MEDICAL RESPONDERS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to items specifically excluded from gross 
income) is amended by inserting after section 139A the 
following new section: 
‘‘SEC. 139B. BENEFITS PROVIDED TO VOLUNTEER FIRE-
FIGHTERS AND EMERGENCY MEDICAL RE-
SPONDERS. 
‘‘(a) IN GENERAL.—In the case of any member of 
a qualified volunteer emergency response organization, 
gross income shall not include— 
‘‘(1) any qualified State and local tax benefit, 
and 
‘‘(2) any qualified payment. 
‘‘(b) DENIAL OF DOUBLE BENEFITS.—In the case 
of any member of a qualified volunteer emergency re-
sponse organization— 
‘‘(1) the deduction under 164 shall be deter-
mined with regard to any qualified State and local 
tax benefit, and 
‘‘(2) expenses paid or incurred by the taxpayer 
in connection with the performance of services as 
such a member shall be taken into account under 
section 170 only to the extent such expenses exceed 
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the amount of any qualified payment excluded from 
gross income under subsection (a). 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED STATE AND LOCAL TAX BEN-
EFIT.—The term ‘qualified state and local tax ben-
efit’ means any reduction or rebate of a tax de-
scribed in paragraph (1), (2), or (3) of section 
164(a) provided by a State or political division 
thereof on account of services performed as a mem-
ber of a qualified volunteer emergency response or-
ganization. 
‘‘(2) QUALIFIED PAYMENT.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
payment’ means any payment (whether reim-
bursement or otherwise) provided by a State or 
political division thereof on account of the per-
formance of services as a member of a qualified 
volunteer emergency response organization. 
‘‘(B) APPLICABLE DOLLAR LIMITATION.— 
The amount determined under subparagraph 
(A) for any taxable year shall not exceed $30 
multiplied by the number of months during 
such year that the taxpayer performs such serv-
ices. 
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‘‘(3) QUALIFIED VOLUNTEER EMERGENCY RE-
SPONSE ORGANIZATION.—The term ‘qualified volun-
teer emergency response organization’ means any 
volunteer organization— 
‘‘(A) which is organized and operated to 
provide firefighting or emergency medical serv-
ices for persons in the State or political subdivi-
sion, as the case may be, and 
‘‘(B) which is required (by written agree-
ment) by the State or political subdivision to 
furnish firefighting or emergency medical serv-
ices in such State or political subdivision.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such part is amended by inserting after the item relat-
ing to section 139A the following new item: 
‘‘Sec. 139B. Benefits provided to volunteer firefighters and emergency medical 
responders.’’. 
(c) 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. SPECIAL PERIOD OF LIMITATION WHEN UNI-
FORMED SERVICES RETIRED PAY IS RE-
DUCED AS A RESULT OF AWARD OF DIS-
ABILITY COMPENSATION. 
(a) IN GENERAL.—Subsection (d) of section 6511 
(relating to special rules applicable to income taxes) is 
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amended by adding at the end the following new para-
graph: 
‘‘(8) SPECIAL RULES WHEN UNIFORMED SERV-
ICES RETIRED PAY IS REDUCED AS A RESULT OF 
AWARD OF DISABILITY COMPENSATION.— 
‘‘(A) PERIOD OF LIMITATION ON FILING 
CLAIM.—If the claim for credit or refund re-
lates to an overpayment of tax imposed by sub-
title A on account of— 
‘‘(i) the reduction of uniformed serv-
ices retired pay computed under section 
1406 or 1407 of title 10, United States 
Code, or 
‘‘(ii) the waiver of such pay under sec-
tion 5305 of title 38 of such Code, 
as a result of an award of compensation under 
title 38 of such Code pursuant to a determina-
tion by the Secretary of Veterans Affairs, the 3- 
year period of limitation prescribed in sub-
section (a) shall be extended, for purposes of 
permitting a credit or refund based upon the 
amount of such reduction or waiver, until the 
end of the 1-year period beginning on the date 
of such determination. 
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‘‘(B) LIMITATION TO 5 TAXABLE YEARS.— 
Subparagraph (A) shall not apply with respect 
to any taxable year which began more than 5 
years before the date of such determination.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to claims for credit or refund 
filed after the date of the enactment of this Act. 
(c) TRANSITION RULES.—In the case of a determina-
tion described in paragraph (8) of section 6511(d) of the 
Internal Revenue Code of 1986 (as added by this section) 
which is made by the Secretary of Veterans Affairs after 
December 31, 2000, and before the date of the enactment 
of this Act, such paragraph— 
(1) shall not apply with respect to any taxable 
year which began before January 1, 2001, and 
(2) shall be applied by substituting for ‘‘the 
date of such determination’’ in subparagraph (A) 
thereof. 
SEC. 107. DISTRIBUTIONS FROM RETIREMENT PLANS TO 
INDIVIDUALS CALLED TO ACTIVE DUTY. 
(a) IN GENERAL.—Clause (iv) of section 72(t)(2)(G) 
is amended by striking ‘‘, and before December 31, 2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to individuals ordered or called to 
active duty on or after December 31, 2007. 
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