IIB 
108TH CONGRESS 
1ST SESSION H. R. 1664
IN THE SENATE OF THE UNITED STATES 
APRIL 10, 2003
Received; read twice and referred to the Committee on Finance 
AN ACT 
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.
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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
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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
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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.
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(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’’,
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(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.
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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)’’.
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(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,
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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
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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.’’.
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(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.—
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(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
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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.
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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: 
JEFF TRANDAHL, 
Clerk.