To amend the Internal Revenue Code of 1986 to exclude from gross income any enlistment, accession, reenlistment, retention, or incentive bonus paid to a member of the Armed Forces and to amend title 37, United States Code, to require the Secretary of Defense to continue to pay to a member of the Armed Forces who is retired or separated from the Armed Forces due to a combat-related injury certain bonuses that the member was entitled to before the retirement or separation and would continue to be entitled to if the member was not retired or separated.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Relief and Fulfilling Our 
Obligation to Patriotic Soldiers Act of 2007''.

SEC. 2. EXCLUSION FROM GROSS INCOME OF ENLISTMENT AND REENLISTMENT 
              BONUSES FOR MEMBERS OF THE ARMED FORCES.

    (a) In General.--Section 112 of the Internal Revenue Code of 1986 
(relating to certain combat zone compensation of members of the Armed 
Forces) is amended by redesignating subsections (c) and (d) as 
subsections (d) and (e), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Qualified Bonus.--Gross income does not include a qualified 
bonus.''.
    (b) Qualified Bonus Defined.--Subsection (d) of section 112 of such 
Code (relating to definitions), as redesignated by subsection (a), is 
amended by adding at the end the following new paragraph:
            ``(6) Qualified bonus.--
                    ``(A) In general.--The term `qualified bonus' means 
                an enlistment, accession, reenlistment, retention, 
                incentive, or other bonus paid by the Secretary 
                concerned to a member of the Armed Forces of the United 
                States in exchange for the agreement of the member to 
                accept a commission as an officer, extend an active 
                service commitment as an officer, enlist, reenlist, or 
                extend an enlistment as an enlisted member in an active 
                or reserve component, or enter into a reserve 
                affiliation agreement.
                    ``(B) Other definitions.--For purposes of 
                subparagraph (A), the terms `active service', `enlisted 
                member', `officer', and `Secretary concerned' have the 
                meanings given to such terms in section 101 of title 
                10, United States Code.''.
    (c) Conforming Amendments.--
            (1) Section 2201 of such Code is amended by striking 
        ``section 112(c)'' both places it appears and inserting 
        ``section 112(d)''.
            (2) The heading for section 112 of such Code is amended by 
        inserting ``and other'' before ``compensation''.
            (3) Section 3401(a)(1) of such Code is amended by inserting 
        ``and other'' before ``compensation''.
            (4) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 112 and inserting the following new item:

``Sec. 112. Certain combat zone and other compensation of members of 
                            the Armed Forces.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 3. CONTINUATION OF CERTAIN BONUS PAYMENTS TO MEMBERS OF THE ARMED 
              FORCES RETIRED OR SEPARATED DUE TO A COMBAT-RELATED 
              INJURY.

    (a) Payment Required.--Chapter 17 of title 37, United States Code, 
is amended by inserting after section 903 the following new section:
``Sec. 904. Continued payment of bonuses to members retired or 
              separated due to combat-related injuries
    ``(a) Payment Required.--In the case of a member of the armed 
forces who is retired or separated for disability under chapter 61 of 
title 10, due to a combat-related injury, the Secretary of Defense 
shall require the continued payment to the member of any bonus 
described in subsection (b) that the member--
            ``(1) was entitled to immediately before the retirement or 
        separation of the member; and
            ``(2) would continue to be entitled to if the member was 
        not retired or separated.
    ``(b) Covered Bonuses.--The bonuses referred to in subsection (a) 
are the following (numbers refer to the corresponding section in 
chapter 5 of this title):
            ``(1) 301b. Special pay for aviation career officers 
        extending period of active duty.
            ``(2) 301d. Multiyear retention bonus for medical officers 
        of the armed forces.
            ``(3) 301e. Multiyear retention bonus for dental officers 
        of the armed forces.
            ``(4) 302d. Accession bonus for registered nurses.
            ``(5) 302h. Accession bonus for dental officers.
            ``(6) 302j. Accession bonus for pharmacy officers.
            ``(7) 302k. Accession bonus for medical officers in 
        critically short wartime specialties.
            ``(8) 302l. Accession bonus for dental specialist officers 
        in critically short wartime specialties.
            ``(9) 308. Reenlistment bonus.
            ``(10) 308b. Reenlistment bonus for members of the Selected 
        Reserve.
            ``(11) 308c. Bonus for affiliation or enlistment in the 
        Selected Reserve.
            ``(12) 308g. Bonus for enlistment in elements of the Ready 
        Reserve other than the Selected Reserve.
            ``(13) 308h. Bonus for reenlistment, or voluntary extension 
        of enlistment in elements of the Ready Reserve other than the 
        Selected Reserve.
            ``(14) 308i. Prior service enlistment bonus.
            ``(15) 308j. Affiliation bonus for officers in the Selected 
        Reserve.
            ``(16) 309. Enlistment bonus.
            ``(17) 312. Special pay for nuclear-qualified officers 
        extending period of active duty.
            ``(18) 312b. Nuclear career accession bonus.
            ``(19) 312c. Nuclear career annual incentive bonus.
            ``(20) 315. Engineering and scientific career continuation 
        pay.
            ``(21) 316. Bonus for members with foreign language 
        proficiency.
            ``(22) 317. Special pay for officers in critical 
        acquisition positions extending period of active duty.
            ``(23) 318. Special pay for special warfare officers 
        extending period of active duty.
            ``(24) 319. Surface warfare officer continuation pay.
            ``(25) 321. Judge advocate continuation pay.
            ``(26) 322. 15-year career status bonus for members 
        entering service on or after August 1, 1986.
            ``(27) 323. Retention incentives for members qualified in 
        critical military skills or assigned to high priority units.
            ``(28) 324. Accession bonus for new officers in critical 
        skills.
            ``(29) 326. Incentive bonus for conversion to military 
        occupational specialty to ease personnel shortage.
            ``(30) 327. Incentive bonus for transfer between armed 
        forces.
            ``(31) 329. Incentive bonus for retired members and reserve 
        component members volunteering for high-demand, low-density 
        assignments.
            ``(32) 330. Accession bonus for officer candidates.
    ``(c) Time for Payment.--A bonus required to be paid to a member 
under this section shall be paid to the member in a lump sum not later 
than 30 days after the date of the retirement or separation of the 
member, notwithstanding any terms to the contrary in the agreement 
under which the bonus was originally authorized.
    ``(d) Combat-Related Injury Defined.--In this section, the term 
`combat-related injury' means an injury--
            ``(1) for which the member was awarded the Purple Heart; or
            ``(2) that was incurred (as determined under criteria 
        prescribed by the Secretary of Defense)--
                    ``(A) as a direct result of armed conflict;
                    ``(B) while engaged in hazardous service;
                    ``(C) in the performance of duty under conditions 
                simulating war; or
                    ``(D) through an instrumentality of war.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 17 of such title is amended by inserting after the item 
relating to section 903 the following new item:

``904. Continued payment of bonuses to members retired or separated due 
                            to combat-related injuries.''.

Summary: Tax Relief and Fulfilling Our Obligation to Patriotic Soldiers Act of 2007 - Amends the Internal Revenue Code to exclude from gross income payments made to members of the Armed Forces as enlistment and reenlistment bonuses.

Requires the Secretary of Defense to continue the payment to members of the Armed Forces who are retired or separated for disability due to a combat-related injury of certain bonuses to which such members were entitled immediately before retirement or separation and to which such members would continue to be entitled if they were not retired or separated.