I 
108TH CONGRESS 
1ST SESSION H. R. 1307
To amend the Internal Revenue Code of 1986 to provide a special rule 
for members of the uniformed services in determining the exclusion 
of gain from the sale of a principal residence and to restore the tax 
exempt status of death gratuity payments to members of the uniformed 
services, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 18, 2003
Mr. THOMAS 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 
a special rule for members of the uniformed services 
in determining the exclusion of gain from the sale of 
a principal residence and to restore the tax exempt status 
of death gratuity payments to members of the uniformed 
services, 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; REFERENCES. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Armed Forces Tax Fairness Act of 2003’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment 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 provi-
sion of the Internal Revenue Code of 1986. 
SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED 
SERVICES IN DETERMINING EXCLUSION OF 
GAIN FROM SALE OF PRINCIPAL RESIDENCE. 
(a) IN GENERAL.—Subsection (d) of section 121 (re-
lating to exclusion of gain from sale of principal residence) 
is amended by adding at the end the following new para-
graph: 
‘‘(10) MEMBERS OF UNIFORMED SERVICES.—
‘‘(A) IN GENERAL.—At the election of an 
individual with respect to a property, the run-
ning of the 5-year period referred to in sub-
sections (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.
‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—
Such 5-year period shall not be extended more 
than 5 years by reason of subparagraph (A). 
‘‘(C) QUALIFIED
OFFICIAL
EXTENDED 
DUTY.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘quali-
fied official extended duty’ means any ex-
tended duty while serving at a duty station 
which is at least 150 miles from such prop-
erty 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 para-
graph. 
‘‘(iii) 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 180 days or 
for an indefinite period. 
‘‘(D) SPECIAL RULES RELATING TO ELEC-
TION.—
‘‘(i) ELECTION LIMITED TO 1 PROP-
ERTY AT A TIME.—An election under sub-
paragraph (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 amendment made 
by this section shall take effect as if included in the 
amendments made by section 312 of the Taxpayer 
Relief Act of 1997. 
(2) WAIVER
OF
LIMITATIONS.—If refund or 
credit of any overpayment of tax resulting from the 
amendment 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 oper-
ation of any law or rule of law (including res judi-
cata), such refund or credit may nevertheless be 
made or allowed if claim therefor is filed before the 
close of such period.
SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS 
INCOME OF DEATH GRATUITY PAYMENT. 
(a) IN GENERAL.—Paragraph (3) of section 134(b) 
(relating to qualified military benefit) is amended by add-
ing 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 
pursuant to a provision of law enacted before 
December 31, 1991.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
134(b)(3)(A) is amended by striking ‘‘subparagraph (B)’’ 
and inserting ‘‘subparagraphs (B) and (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to deaths occurring 
after September 10, 2001. 
SEC. 4. EXCLUSION FOR AMOUNTS RECEIVED UNDER DE-
PARTMENT OF DEFENSE HOMEOWNERS AS-
SISTANCE PROGRAM. 
(a) IN GENERAL.—Subsection (a) of section 132 (re-
lating to 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 redesig-
nating subsection (n) as subsection (o) and by inserting 
after subsection (m) the following new subsection: 
‘‘(n) QUALIFIED MILITARY BASE REALIGNMENT AND 
CLOSURE FRINGE.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, 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 en-
actment of this subsection). 
‘‘(2) LIMITATION.—With respect to any prop-
erty, such term shall not include any payment re-
ferred to in paragraph (1) to the extent that the 
sum of all such payments related to such property 
exceeds the 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.
(3) The item relating to section 7508 in the 
table of sections for chapter 77 is amended by in-
serting ‘‘or contingency operation’’ 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. 6. 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. 7. CLARIFICATION OF THE TREATMENT OF CERTAIN 
DEPENDENT CARE ASSISTANCE PROGRAMS. 
(a) IN GENERAL.—Subsection (b) of section 134 (de-
fining qualified military benefit) is amended by adding at 
the end the following 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.—
(1) Section 134(b)(3)(A) (as amended by sec-
tion 102) is further 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. 
SEC. 8. CLARIFICATION RELATING TO EXCEPTION FROM 
ADDITIONAL TAX ON CERTAIN DISTRIBU-
TIONS 
FROM 
QUALIFIED 
TUITION 
PRO-
GRAMS, 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 amend-
ed by striking ‘‘or’’ at the end of clause (iii), by redesig-
nating 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 pay-
ment 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 amendment made by 
this section shall take effect for taxable years beginning 
after December 31, 2002. 
SEC. 9. 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 
RESERVE 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 mem-
ber 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 
services.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ELECTS TO ITEMIZE.—Paragraph (2) of section 
62(a) (relating to certain trade and business deductions 
of employees) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(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, 
not in excess of $1,500, paid or incurred by the 
taxpayer 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.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2002. 
SEC. 10. PROTECTION OF SOCIAL SECURITY. 
The amounts transferred to any trust fund under 
title II of the Social Security Act shall be determined as 
if this Act (other than this section) had not been enacted.
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