Tax Legislation To Aid U.S. Men And Women In The Armed Services Moves to the President's Desk for Signature
Today, U.S. Senator Maria Cantwell (D-WA) praised her Senate colleagues for unanimously approvingthe Heroes Earnings Assistance and Relief Tax Act of 2008 (The HEART Act), legislation that was crafted by theSenate Finance Committee under the leadership of ChairmanMax Baucus (D-MT). Cantwell, a member of the Finance Committee, was an original co - sponsor of The Heart Actthat will provide significant tax relief to American troops and their families. The HEART Act, which passed the House of Representatives by a vote of 403-0, and by unanimous consent in the Senate, helps members of the military when they receive combat pay, save for retirement, or purchase their own homes. The bill also includes tax help for employers of military reservists and for members of the National Guard who provide assistance to employees who are called to active duty. The bill now goes to President Bush for his signature.
The HEART Act is bipartisan legislation that will provide tax relief to the men and women in our nation's armed services and others volunteering service on behalf of the United States, including Peace Corps and AmeriCorps volunteers. The legislation would, among other things, guarantee that thousands of active duty military families qualify for the economic stimulus payments that the Democratic Congress approved earlier this year, and enhance their ability to receive other tax benefits that they deserve. The bill includes provisions that would:
* Enable active duty military personnel to qualify for economic stimulus payments. The HEART Act would clarify that active military who file a joint tax return would be eligible for the stimulus rebate payment even if the spouse does not have a Social Security number.
* Make permanent the ability to include combat pay as earned income for purposes of the Earned Income Tax Credit.
* Make permanent and modify qualified state-operated, tax-exempt mortgage revenue bond programs that provide mortgage financing so that our veterans will have greater access to homeownership.
* Modify retirement plan protections for reservists who have given their lives in service or who are disabled while serving our country to: 1) allow the day prior to the date of death to be treated as the date the employee returned to work for purposes of triggering payment of benefits under a qualified plan; and 2) permit an employer to make certain contributions to a qualified pension plan on behalf of an employee who is killed or becomes disabled in combat.
* Modify treatment of differential wages paid by an employer to an employee who becomes active duty military so that this "differential pay" is treated as wages for purposes of the federal income tax withholding rules and retirement plan purposes;
* Extend the period for filing tax refund credit claims arising from Department of Veterans Affairs (DVA) disability determinations so that retired military personnel are permitted to file claims for refunds one year after the date of the determination of a service-connected disability is made.
* Make permanent the special rules that permit active duty reservists to make penalty-free withdrawals from their retirement plans, and that allow a reservist two-years from the last day of the active duty period to contribute distributions to an IRA.
* Permit recipients of military death benefit gratuities to roll over the amounts received to tax-favored Roth IRA or an Education Savings Account.
* Provide a tax credit for small employers with respect to differential wage payments to employees who are on active military duty.
The HEART Act would also permanently allow the Social Security Administration to disclose tax return information to the Department of Veterans Affairs for purposes of determining eligibility for certain veteran's programs; clarify that certain tax rebates and benefits are excludible from income for volunteer firefighters; clarify the application of the "five-year requirement" to the sale of a principal residence by a Peace Corps volunteer; clarify that state payments to service members are treated as qualified military benefits; and provide for permanent exclusion of gain from the sale of a principal residence by certain employees of the intelligence community. In addition the bill would ensure fairer treatment of military families who depend on Supplemental Security Income payments by:
* Allowing most military cash allowances beyond basic pay to be treated as earned income for purposes of determining Supplemental Security Income (SSI) eligibility and benefit amounts for military families, and treat certain housing payments as in-kind support and maintenance;
* Disregarding state annuity payments paid to blind, disabled, and aged veterans when determining SSI eligibility and benefits; and
* Disregarding allowances paid to all Americorps volunteers for the purpose of determining SSI eligibility and benefit amounts.
The bill is fully paid for and will not increase the federal deficit. The bill makes certain that individuals who relinquish their U.S. citizenship or long-term U.S. residency pay the same Federal taxes for appreciation of assets, such as stocks or bonds that they would pay if they sold them as U.S. citizens or residents. The bill also would close a loophole in the tax code and end the practice of U.S. government contractors setting up shell companies in foreign jurisdictions to avoid paying payroll taxes.