I 
108TH CONGRESS 
1ST SESSION H. R. 1664
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 
APRIL 8, 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 AND FOREIGN SERVICE IN DETER-
MINING EXCLUSION OF GAIN FROM SALE OF 
PRINCIPAL RESIDENCE. 
(a) IN GENERAL.—Subsection (d) of section 121 of 
the Internal Revenue Code of 1986 (relating to exclusion 
of gain from sale of principal residence) is amended by 
adding at the end the following new paragraph: 
‘‘(10) 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 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 or of the Foreign 
Service. 
‘‘(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) FOREIGN
SERVICE.—The term 
‘member of the Foreign Service’ 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 
enactment of this paragraph. 
‘‘(iv) 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. 
SEC. 5. EXPANSION OF COMBAT ZONE FILING RULES TO 
CONTINGENCY OPERATIONS. 
(a) IN GENERAL.—Subsection (a) of section 7508 
(relating to time for performing certain acts postponed by 
reason of service in combat zone) is amended—
(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 contin-
gency operation (as defined in section 101(a)(13) of 
title 10, United States Code) or which became such 
a contingency 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 oper-
ation’’ 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 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’’.