In the Senate of the United States,
November 3, 2003.
Resolved, That the bill from the House of Representa-
tives (H.R. 3365) entitled ‘‘An Act to amend title 10, United
States Code, and the Internal Revenue Code of 1986 to in-
crease the death gratuity payable with respect to deceased
members of the Armed Forces and to exclude such gratuity
from gross income.’’, do pass with the following
AMENDMENTS:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE, ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Military Family Tax Relief Act of 2003’’.
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(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 consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
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 dis-
tributions from qualified tuition programs, etc. on account of at-
tendance 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 EQ-
UITY 
FOR 
MILITARY 
PER-
SONNEL
SEC. 101. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL
RESIDENCE BY A MEMBER OF THE UNI-
FORMED SERVICES OR THE FOREIGN SERV-
ICE.
(a) IN GENERAL.—Subsection (d) of section 121 (relat-
ing 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 run-
ning of the 5-year period described in subsections
(a) and (c)(1)(B) and paragraph (7) of this sub-
section with respect to such property shall be sus-
pended during any period that such individual
or such individual’s spouse is serving on quali-
fied official extended duty as a member of the
uniformed services or of the Foreign Service of
the United States.
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‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—
The 5-year period described in subsection (a)
shall not be extended more than 10 years by rea-
son of subparagraph (A).
‘‘(C) 
QUALIFIED
OFFICIAL
EXTENDED
DUTY.—For purposes 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 enact-
ment of this paragraph.
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of any law or rule of law (including res judicata),
such refund or credit may nevertheless be made or al-
lowed 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 subsection shall take effect as of September 11,
2001, and shall apply with respect to deaths occur-
ring 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 AD-
JUSTMENTS 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 pursuant
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to a provision of law enacted after September 9,
1986.’’.
(2) CONFORMING
AMENDMENT.—Subparagraph
(A) of section 134(b)(3) is amended by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs (B)
and (C)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply with respect to deaths
occurring after September 10, 2001.
SEC. 103. EXCLUSION FOR AMOUNTS RECEIVED UNDER DE-
PARTMENT OF DEFENSE HOMEOWNERS AS-
SISTANCE PROGRAM.
(a) IN GENERAL.—Section 132(a) (relating to the ex-
clusion 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 insert-
ing ‘‘, or’’, and by adding at the end the following new
paragraph:
‘‘(8) qualified military base realignment and clo-
sure fringe.’’.
(b) QUALIFIED MILITARY BASE REALIGNMENT AND
CLOSURE FRINGE.—Section 132 is amended by redesig-
nating subsection (n) as subsection (o) and by inserting
after subsection (m) the following new subsection:
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‘‘(n) QUALIFIED MILITARY BASE REALIGNMENT AND
CLOSURE FRINGE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified military
base realignment 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 ad-
verse effects on housing values as a result of a mili-
tary base realignment or closure.
‘‘(2) LIMITATION.—With respect to any property,
such term shall not include any payment referred to
in paragraph (1) to the extent that the sum of all of
such payments related to such property exceeds the
maximum amount described in clause (1) of sub-
section (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
CONTINGENCY OPERATIONS.
(a) IN GENERAL.—Section 7508(a) (relating to time
for performing certain acts postponed by reason of service
in combat zone) is amended—
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(1) by inserting ‘‘, or when deployed outside the
United States away from the individual’s permanent
duty station while participating in an operation des-
ignated 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 contin-
gency 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 operation’’ after ‘‘combat zone’’.
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(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 EXEMPTION FROM TAX FOR CERTAIN
VETERANS’ ORGANIZATIONS.
(a) IN
GENERAL.—Subparagraph (B) of section
501(c)(19) (relating to list of exempt organizations) is
amended by striking ‘‘or widowers’’ and inserting ‘‘, wid-
owers, ancestors, or lineal descendants’’.
(b) 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. 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 fol-
lowing new paragraph:
‘‘(4) CLARIFICATION
OF
CERTAIN
BENEFITS.—
For purposes of paragraph (1), such term includes
any dependent care assistance program (as in effect
on the date of the enactment of this paragraph) for
any individual described in paragraph (1)(A).’’.
(b) CONFORMING AMENDMENTS.—
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(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 Decem-
ber 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
ADDITIONAL TAX ON CERTAIN DISTRIBU-
TIONS FROM QUALIFIED TUITION PROGRAMS,
ETC. ON ACCOUNT OF ATTENDANCE AT MILI-
TARY ACADEMY.
(a) IN
GENERAL.—Subparagraph (B) of section
530(d)(4) (relating to exceptions from additional tax for
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HR 3365 EAS
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 attend-
ance 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 ad-
vanced 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 Decem-
ber 31, 2002.
SEC. 108. SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS.
(a) IN GENERAL.—Section 501 (relating to exemption
from tax on corporations, certain trusts, etc.) is amended
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by redesignating subsection (p) as subsection (q) and by in-
serting after subsection (o) the following new subsection:
‘‘(p) SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS.—
‘‘(1) IN
GENERAL.—The exemption from tax
under subsection (a) with respect to any organization
described in paragraph (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 para-
graph (3).
‘‘(2) TERRORIST ORGANIZATIONS.—An organiza-
tion is described in this paragraph if such organiza-
tion 
is 
designated 
or 
otherwise 
individually
identified—
‘‘(A) under section 212(a)(3)(B)(vi)(II) or
219 of the Immigration and Nationality Act as
a terrorist organization or foreign terrorist orga-
nization,
‘‘(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 section 5 of the United
Nations Participation Act of 1945 for the pur-
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HR 3365 EAS
pose 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 pur-
suant 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 ter-
rorism (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 organization described in paragraph (2), the pe-
riod 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 organi-
zation, or
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‘‘(ii) the date of the enactment of this
subsection, and
‘‘(B) ends on the first date that all designa-
tions and identifications described in paragraph
(2) with respect to such organization are re-
scinded pursuant to the law or Executive order
under which such designation or identification
was made.
‘‘(4) DENIAL
OF
DEDUCTION.—No deduction
shall be allowed under any provision of this title, in-
cluding sections 170, 545(b)(2), 556(b)(2), 642(c),
2055, 2106(a)(2), and 2522, with respect to any con-
tribution 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 DEDUC-
TION.—Notwithstanding section 7428 or any other
provision of law, no organization or other person may
challenge a suspension under paragraph (1), a des-
ignation 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.
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‘‘(6) ERRONEOUS DESIGNATION.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the tax exemption of any organi-
zation described in paragraph (2) is sus-
pended under paragraph (1),
‘‘(ii) each designation and identifica-
tion 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
‘‘(iii) the erroneous designations and
identifications result in an overpayment of
income tax for any taxable year by such or-
ganization,
credit or refund (with interest) with respect to
such overpayment shall be made.
‘‘(B) WAIVER OF LIMITATIONS.—If the cred-
it 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 pe-
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riod beginning on the date of the last determina-
tion described in subparagraph (A)(ii).
‘‘(7) NOTICE OF SUSPENSIONS.—If the tax ex-
emption 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 sus-
pension and of the fact that contributions to such or-
ganization 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 MEMBERS.
(a) DEDUCTION ALLOWED.—Section 162 (relating to
certain trade or business expenses) is amended by redesig-
nating subsection (p) as subsection (q) and inserting after
subsection (o) the following new subsection:
‘‘(p) TREATMENT OF EXPENSES OF MEMBERS OF RE-
SERVE COMPONENT 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 re-
serve component of the Armed Forces of the United States
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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 TAX-
PAYER 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 subpara-
graph:
‘‘(E) CERTAIN EXPENSES OF MEMBERS OF
RESERVE COMPONENTS OF THE ARMED FORCES
OF
THE
UNITED
STATES.—The deductions al-
lowed by section 162 which consist 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 tax-
payer in connection with the performance of
services by such taxpayer as a member of a re-
serve 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, ex-
cept that paragraph (3)(B) shall be applied by using
the date of the death of the astronaut rather than Sep-
tember 11, 2001.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 5(b)(1) is amended by inserting
‘‘, astronauts,’’ after ‘‘Forces’’.
(B) Section 6013(f)(2)(B) is amended by
inserting ‘‘, astronauts,’’ after ‘‘Forces’’.
(3) CLERICAL AMENDMENTS.—
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(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 ‘‘, astro-
nauts,’’ after ‘‘Forces’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply with respect to any as-
tronaut 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 subsection shall apply to amounts paid after
December 31, 2002, with respect to deaths occurring
after such date.
(c) ESTATE TAX RELIEF.—
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(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 para-
graph:
‘‘(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’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection 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 Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is
amended by striking ‘‘March 31, 2004’’ and inserting
‘‘March 1, 2005’’.
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Amend the title so as to read: ‘‘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 addi-
tional tax relief for members of the Armed Forces and
their families, and for other purposes.’’.
Attest:
Secretary.