108TH CONGRESS
1ST SESSION
H. R. 1664
AN ACT
To amend the Internal Revenue Code of 1986 to to
provide a special rule for members of the uni-
formed 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’’.
(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,
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, and 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 reserve compo-
nent of the Armed Forces of the United States
for any period during which such individual is
more than 100 miles away from home in con-
nection 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. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF
ASTRONAUTS WHO LOSE THEIR LIVES ON A
SPACE MISSION.
(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 fol-
lowing new paragraph:
‘‘(5) RELIEF
WITH
RESPECT
TO
ASTRO-
NAUTS.—The provisions of this subsection shall
apply to any astronaut whose death occurs while on
a space mission, except that paragraph (3)(B) shall
be applied by using the date of the death of the as-
tronaut rather than September 11, 2001.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 5(b)(1) is amended by insert-
ing ‘‘, astronauts,’’ after ‘‘Forces’’.
(B) Section 6013(f)(2)(B) is amended by
inserting ‘‘, astronauts,’’ after ‘‘Forces’’.
(3) CLERICAL AMENDMENTS.—
(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
ASTRO-
NAUTS.—The provisions of this subsection shall
apply to any astronaut whose death occurs while on
a space mission.’’.
(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.—
(1) IN
GENERAL.—Subsection (b) of section
2201 (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 fol-
lowing new paragraph:
‘‘(3) any astronaut whose death occurs while on
a space mission.’’.
(2) CLERICAL AMENDMENTS.—
(A) The heading of section 2201 is amend-
ed by inserting ‘‘, DEATHS
OF
ASTRO-
NAUTS,’’ after ‘‘FORCES’’.
(B) The item relating to section 2201 in
the table of sections for subchapter C of chap-
ter 11 is amended by inserting ‘‘, deaths of as-
tronauts,’’ after ‘‘Forces’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to estates of decedents
dying after December 31, 2002.
SEC. 11. 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.
Passed the House of Representatives April 9, 2003.
Attest:
Clerk.