II 
114TH CONGRESS 
2D SESSION 
H. R. 5015 
IN THE SENATE OF THE UNITED STATES 
DECEMBER 6, 2016 
Received 
AN ACT 
To restore amounts improperly withheld for tax purposes 
from severance payments to individuals who retired or 
separated from service in the Armed Forces for combat- 
related injuries, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Combat-Injured Vet-
erans Tax Fairness Act of 2016’’. 
SEC. 2. FINDINGS. 
Congress makes the following findings: 
(1) Approximately 10,000 to 11,000 individuals 
are retired from service in the Armed Forces for 
medical reasons each year. 
(2) Some of such individuals are separated from 
service in the Armed Forces for combat-related inju-
ries (as defined in section 104(b)(3) of the Internal 
Revenue Code of 1986). 
(3) Congress has recognized the tremendous 
personal sacrifice of veterans with combat-related in-
juries by, among other things, specifically excluding 
from taxable income severance pay received for com-
bat-related injuries. 
(4) Since 1991, the Secretary of Defense has 
improperly withheld taxes from severance pay for 
wounded veterans, thus denying them their due com-
pensation and a significant benefit intended by Con-
gress. 
(5) Many veterans owed redress are beyond the 
statutory period to file an amended tax return be-
cause they were not or are not aware that taxes were 
improperly withheld. 
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SEC. 3. RESTORATION OF AMOUNTS IMPROPERLY WITH-
HELD FOR TAX PURPOSES FROM SEVERANCE 
PAYMENTS TO VETERANS WITH COMBAT-RE-
LATED INJURIES. 
(a) IN GENERAL.—Not later than 1 year after the 
date of the enactment of this Act, the Secretary of Defense 
shall— 
(1) identify— 
(A) the severance payments— 
(i) that the Secretary paid after Janu-
ary 17, 1991; 
(ii) that the Secretary computed 
under section 1212 of title 10, United 
States Code; 
(iii) that were not considered gross in-
come pursuant to section 104(a)(4) of the 
Internal Revenue Code of 1986; and 
(iv) from which the Secretary withheld 
amounts for tax purposes; and 
(B) the individuals to whom such sever-
ance payments were made; and 
(2) with respect to each person identified under 
paragraph (1)(B), provide— 
(A) notice of— 
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(i) the amount of severance payments 
in paragraph (1)(A) which were improperly 
withheld for tax purposes; and 
(ii) such other information determined 
to be necessary by the Secretary of the 
Treasury to carry out the purposes of this 
section; and 
(B) instructions for filing amended tax re-
turns to recover the amounts improperly with-
held for tax purposes. 
(b) EXTENSION OF LIMITATION ON TIME FOR CRED-
IT OR REFUND.— 
(1) PERIOD FOR FILING CLAIM.—If a claim for 
credit or refund under section 6511(a) of the Inter-
nal Revenue Code of 1986 relates to a specified 
overpayment, the 3-year period of limitation pre-
scribed by such subsection shall not expire before 
the date which is 1 year after the date the informa-
tion return described in subsection (a)(2) is pro-
vided. The allowable amount of credit or refund of 
a specified overpayment shall be determined without 
regard to the amount of tax paid within the period 
provided in section 6511(b)(2). 
(2) SPECIFIED OVERPAYMENT.—For purposes 
of paragraph (1), the term ‘‘specified overpayment’’ 
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means an overpayment attributable to a severance 
payment described in subsection (a)(1). 
SEC. 4. REQUIREMENT THAT SECRETARY OF DEFENSE EN-
SURE AMOUNTS ARE NOT WITHHELD FOR 
TAX 
PURPOSES 
FROM 
SEVERANCE 
PAY-
MENTS NOT CONSIDERED GROSS INCOME. 
The Secretary of Defense shall take such actions as 
may be necessary to ensure that amounts are not withheld 
for tax purposes from severance payments made by the 
Secretary to individuals when such payments are not con-
sidered gross income pursuant to section 104(a)(4) of the 
Internal Revenue Code of 1986. 
SEC. 5. REPORT TO CONGRESS. 
(a) IN GENERAL.—After completing the identifica-
tion required by section 3(a) and not later than 1 year 
after the date of the enactment of this Act, the Secretary 
of Defense shall submit to the appropriate committees of 
Congress a report on the actions taken by the Secretary 
to carry out this Act. 
(b) CONTENTS.—The report submitted under sub-
section (a) shall include the following: 
(1) The number of individuals identified under 
section 3(a)(1)(B). 
(2) Of all the severance payments described in 
section 3(a)(1)(A), the aggregate amount that the 
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Secretary withheld for tax purposes from such pay-
ments. 
(3) A description of the actions the Secretary 
plans to take to carry out section 4. 
(c) APPROPRIATE COMMITTEES OF CONGRESS DE-
FINED.—In this section, the term ‘‘appropriate commit-
tees of Congress’’ means— 
(1) the Committee on Armed Services, the 
Committee on Veterans’ Affairs, and the Committee 
on Finance of the Senate; and 
(2) the Committee on Armed Services, the 
Committee on Veterans’ Affairs, and the Committee 
on Ways and Means of the House of Representa-
tives. 
Passed the House of Representatives December 5, 
2016. 
Attest: 
KAREN L. HAAS, 
Clerk. 
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