H. R. 6081 
One Hundred Tenth Congress 
of the 
United States of America 
AT THE SECOND SESSION 
Begun and held at the City of Washington on Thursday, 
the third day of January, two thousand and eight 
An Act 
To amend the Internal Revenue Code of 1986 to provide benefits for military 
personnel, and for other purposes. 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the ‘‘Heroes 
Earnings Assistance and Relief Tax Act of 2008’’. 
(b) REFERENCE.—Except as otherwise expressly provided, when-
ever 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 considered to be made to a section or other 
provision of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for this Act 
is as follows: 
Sec. 1. Short title, etc. 
TITLE I—BENEFITS FOR MILITARY 
Sec. 101. Recovery rebate provided to military families. 
Sec. 102. Election to include combat pay as earned income for purposes of earned 
income tax credit. 
Sec. 103. Modification of mortgage revenue bonds for veterans. 
Sec. 104. Survivor and disability payments with respect to qualified military serv-
ice. 
Sec. 105. Treatment of differential military pay as wages. 
Sec. 106. Special period of limitation when uniformed services retired pay is re-
duced as a result of award of disability compensation. 
Sec. 107. Distributions from retirement plans to individuals called to active duty. 
Sec. 108. Authority to disclose return information for certain veterans programs 
made permanent. 
Sec. 109. Contributions of military death gratuities to Roth IRAs and Education 
Savings Accounts. 
Sec. 110. Suspension of 5-year period during service with the Peace Corps. 
Sec. 111. Credit for employer differential wage payments to employees who are ac-
tive duty members of the uniformed services. 
Sec. 112. State payments to service members treated as qualified military benefits. 
Sec. 113. Permanent exclusion of gain from sale of a principal residence by certain 
employees of the intelligence community. 
Sec. 114. Special disposition rules for unused benefits in health flexible spending 
arrangements of individuals called to active duty. 
Sec. 115. Technical correction related to exclusion of certain property tax rebates 
and other benefits provided to volunteer firefighters and emergency 
medical responders. 
TITLE II—IMPROVEMENTS IN SUPPLEMENTAL SECURITY INCOME 
Sec. 201. Treatment of uniformed service cash remuneration as earned income. 
Sec. 202. State annuities for certain veterans to be disregarded in determining sup-
plemental security income benefits. 
Sec. 203. Exclusion of AmeriCorps benefits for purposes of determining supple-
mental security income eligibility and benefit amounts.
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Sec. 204. Effective date. 
TITLE III—REVENUE PROVISIONS 
Sec. 301. Revision of tax rules on expatriation. 
Sec. 302. Certain domestically controlled foreign persons performing services under 
contract with United States Government treated as American employ-
ers. 
Sec. 303. Increase in minimum penalty on failure to file a return of tax. 
TITLE IV—PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
HEALTH BENEFITS 
Sec. 401. Parity in the application of certain limits to mental health benefits. 
TITLE I—BENEFITS FOR MILITARY 
SEC. 101. RECOVERY REBATE PROVIDED TO MILITARY FAMILIES. 
(a) IN GENERAL.—Subsection (h) of section 6428 (relating to 
identification number requirement) is amended by adding at the 
end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR MEMBERS OF THE ARMED FORCES.— 
Paragraph (1) shall not apply to a joint return where at least 
1 spouse was a member of the Armed Forces of the United 
States at any time during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in the amendments made by section 
101 of the Economic Stimulus Act of 2008. 
SEC. 102. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME 
FOR PURPOSES OF EARNED INCOME TAX CREDIT. 
(a) IN GENERAL.—Clause (vi) of section 32(c)(2)(B) (defining 
earned income) is amended to read as follows: 
‘‘(vi) a taxpayer may elect to treat amounts 
excluded from gross income by reason of section 112 
as earned income.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (4) of section 6428(e) 
is amended by striking ‘‘except that—’’ and all that follows through 
‘‘(B) such term shall’’ and inserting ‘‘except that such term shall’’. 
(c) SUNSET NOT APPLICABLE.—Section 105 of the Working Fami-
lies Tax Relief Act of 2004 (relating to application of EGTRRA 
sunset to this title) shall not apply to section 104(b) of such Act. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years ending after December 31, 2007. 
SEC. 103. MODIFICATION OF MORTGAGE REVENUE BONDS FOR VET-
ERANS. 
(a) QUALIFIED MORTGAGE BONDS USED TO FINANCE RESIDENCES 
FOR
VETERANS
WITHOUT
REGARD
TO
FIRST-TIME
HOMEBUYER 
REQUIREMENT.—Subparagraph (D) of section 143(d)(2) (relating to 
exceptions) is amended by striking ‘‘and before January 1, 2008’’. 
(b) INCREASE IN BOND LIMITATION FOR ALASKA, OREGON, AND 
WISCONSIN.—Clause (ii) of section 143(l)(3)(B) (relating to State 
veterans limit) is amended by striking ‘‘$25,000,000’’ each place 
it appears and inserting ‘‘$100,000,000’’. 
(c) DEFINITION OF QUALIFIED VETERAN.—Paragraph (4) of sec-
tion 143(l) (defining qualified veteran) is amended to read as follows: 
‘‘(4) QUALIFIED VETERAN.—For purposes of this subsection, 
the term ‘qualified veteran’ means any veteran who— 
‘‘(A) served on active duty, and
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‘‘(B) applied for the financing before the date 25 years 
after the last date on which such veteran left active 
service.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to bonds issued after December 31, 2007. 
(e) TRANSITION RULE.—In the case of any bond issued after 
December 31, 2007, and before the date of the enactment of this 
Act, subparagraph (B) of section 143(l)(4) of the Internal Revenue 
Code of 1986, as amended by this section, shall be applied by 
substituting ‘‘30 years’’ for ‘‘25 years’’. 
SEC. 104. SURVIVOR AND DISABILITY PAYMENTS WITH RESPECT TO 
QUALIFIED MILITARY SERVICE. 
(a) PLAN QUALIFICATION REQUIREMENT FOR DEATH BENEFITS 
UNDER USERRA-QUALIFIED ACTIVE MILITARY SERVICE.—Subsection 
(a) of section 401 (relating to requirements for qualification) is 
amended by inserting after paragraph (36) the following new para-
graph: 
‘‘(37) DEATH
BENEFITS
UNDER
USERRA-QUALIFIED
ACTIVE 
MILITARY
SERVICE.—A trust shall not constitute a qualified 
trust unless the plan provides that, in the case of a participant 
who dies while performing qualified military service (as defined 
in section 414(u)), the survivors of the participant are entitled 
to any additional benefits (other than benefit accruals relating 
to the period of qualified military service) provided under the 
plan had the participant resumed and then terminated employ-
ment on account of death.’’. 
(b) TREATMENT
IN
THE
CASE
OF
DEATH
OR
DISABILITY 
RESULTING FROM ACTIVE MILITARY SERVICE FOR BENEFIT ACCRUAL 
PURPOSES.—Subsection (u) of section 414 (relating to special rules 
relating to veterans’ reemployment rights under USERRA) is 
amended by redesignating paragraphs (9) and (10) as paragraphs 
(10) and (11), respectively, and by inserting after paragraph (8) 
the following new paragraph: 
‘‘(9) TREATMENT
IN
THE
CASE
OF
DEATH
OR
DISABILITY 
RESULTING FROM ACTIVE MILITARY SERVICE.— 
‘‘(A) IN
GENERAL.—For benefit accrual purposes, an 
employer sponsoring a retirement plan may treat an indi-
vidual who dies or becomes disabled (as defined under 
the terms of the plan) while performing qualified military 
service with respect to the employer maintaining the plan 
as if the individual has resumed employment in accordance 
with the individual’s reemployment rights under chapter 
43 of title 38, United States Code, on the day preceding 
death or disability (as the case may be) and terminated 
employment on the actual date of death or disability. In 
the case of any such treatment, and subject to subpara-
graphs (B) and (C), any full or partial compliance by such 
plan with respect to the benefit accrual requirements of 
paragraph (8) with respect to such individual shall be 
treated for purposes of paragraph (1) as if such compliance 
were required under such chapter 43. 
‘‘(B) 
NONDISCRIMINATION
REQUIREMENT.—Subpara-
graph (A) shall apply only if all individuals performing 
qualified military service with respect to the employer 
maintaining the plan (as determined under subsections 
(b), (c), (m), and (o)) who die or became disabled as a
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result of performing qualified military service prior to 
reemployment by the employer are credited with service 
and benefits on reasonably equivalent terms. 
‘‘(C) DETERMINATION
OF
BENEFITS.—The amount of 
employee contributions and the amount of elective deferrals 
of an individual treated as reemployed under subparagraph 
(A) for purposes of applying paragraph (8)(C) shall be deter-
mined on the basis of the individual’s average actual 
employee contributions or elective deferrals for the lesser 
of— 
‘‘(i) the 12-month period of service with the 
employer immediately prior to qualified military 
service, or 
‘‘(ii) if service with the employer is less than such 
12-month period, the actual length of continuous 
service with the employer.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 404(a)(2) is amended by striking ‘‘and (31)’’ 
and inserting ‘‘(31), and (37)’’. 
(2) Section 403(b) is amended by adding at the end the 
following new paragraph: 
‘‘(14) DEATH
BENEFITS
UNDER
USERRA-QUALIFIED
ACTIVE 
MILITARY
SERVICE.—This subsection shall not apply to an 
annuity contract unless such contract meets the requirements 
of section 401(a)(37).’’. 
(3) Section 457(g) is amended by adding at the end the 
following new paragraph: 
‘‘(4) DEATH BENEFITS UNDER USERRA-QUALIFIED ACTIVE MILI-
TARY SERVICE.—A plan described in paragraph (1) shall not 
be treated as an eligible deferred compensation plan unless 
such plan meets the requirements of section 401(a)(37).’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply with respect to deaths and disabilities occurring 
on or after January 1, 2007. 
(2) PROVISIONS RELATING TO PLAN AMENDMENTS.— 
(A) IN GENERAL.—If this subparagraph applies to any 
plan or contract amendment, such plan or contract shall 
be treated as being operated in accordance with the terms 
of the plan during the period described in subparagraph 
(B)(iii). 
(B) 
AMENDMENTS
TO
WHICH
SUBPARAGRAPH
(A) 
APPLIES.— 
(i) IN GENERAL.—Subparagraph (A) shall apply to 
any amendment to any plan or annuity contract which 
is made— 
(I) pursuant to the amendments made by sub-
section (a) or pursuant to any regulation issued 
by the Secretary of the Treasury under subsection 
(a), and 
(II) on or before the last day of the first plan 
year beginning on or after January 1, 2010. 
In the case of a governmental plan (as defined in 
section 414(d) of the Internal Revenue Code of 1986), 
this clause shall be applied by substituting ‘‘2012’’ for 
‘‘2010’’ in subclause (II).