The House approved an amended version of a bill that delivers tax relief to members of the armed services, in addition to emergency volunteers.

H.R. 3997, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2007, was originally approved last month by the House on a 410-0 vote. The Senate passed a similar version of the bill last week. The House amended it, including a provision that allows reservists called to active duty to access their flexible spending accounts.

The HEART Act allows combat pay to be used as earned income for purposes of claiming the Earned Income Tax Credit. It makes permanent expiring Tax Code provisions that allow active duty reservists to make penalty-free withdrawals from their retirement plans, and let employers make contributions to retirement plans on behalf of an employee who has been disabled or killed in combat. It also includes tax benefits for other volunteers by clarifying that rebates of state and local taxes for volunteer firefighters and that reimbursements for expenses incurred in the line of duty by volunteer firefighters are not taxable.

"The HEART Act recognizes that America is forever indebted to the brave Marines, soldiers and sailors, as well as all of the other volunteers who are our first line of defense in times of emergencies," said House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., in a statement. "This bill honors the great sacrifice of the women and men who serve our country by keeping all American safe in times of international and national crisis."

The bill also makes permanent and modifies qualified mortgage bonds used to finance residences for veterans. It also modifies the Uniformed Services Employment and Reemployment Rights Act to allow the day prior to the day of death to be treated as the date the employee returned to work for purposes of triggering payment of benefits under a qualified plan.

The House voted 411-0 to pass the amended bill. It includes a number of revenue-raising measures to offset the tax incentives, including a provision that revises the tax rules on expatriation, an increase in the penalty for failure to file S corporation and partnership returns, an increase in the general penalty for failure to file a tax return to take inflation into account, increasing it to the lesser of $225 or 100 percent of the amount to be shown on the return. The bill also increases penalties for failing to file information returns, increasing them to $100 per information return.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access