The Senate has approved a bill offering more than $1.2 billion in tax relief to veterans and military families.
It will now be submitted to President Bush for signing. H.R. 6081, the Heroes Earning Assistance and Relief Tax Act, won passage after the House approved it earlier in the week. The HEART Act includes tax cuts for members of the military who are receiving combat pay, saving for retirement or purchasing homes. It also helps civilian employers of military men and women keep jobs available for soldiers who are called to active duty.
"America's military men and women give so much and so freely for their country, and the Tax Code can do more to reflect America's gratitude for their sacrifice," said Senate Finance Committee Chairman Max Baucus (pictured), D-Mont.
The legislation provides a permanent allowance for soldiers to count their non-taxable combat pay when figuring their eligibility for the earned income tax credit. It also offers the ability for active duty troops to withdraw money from retirement plans, and an allowance of two years to replace the funds without facing a tax penalty. The bill clarifies that members of the 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.
In addition, it extends a provision that gives retired veterans more time to claim a tax refund on some types of disability benefit payments. The IRS will have the authority to treat gifts of thanks from states to veterans - such as payments of excess state revenue - as nontaxable gifts.
Small businesses will be able to benefit from a tax cut when they continue paying some salary to members of the National Guard and Reserve who are called to duty. The bill also puts an end to cumbersome rules for reporting of income when companies continue paying some salary to members of the National Guard and Reserve who are called to duty. This makes it easier for reservists to file their taxes and simpler for employers to keep contributing to those employees' retirement plans.
The HEART Act is offset in part with a provision to ensure defense contractors are not sidestepping their tax obligations by going offshore. Other offsets include a provision that 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 increases the penalty for people who fail to file their tax returns and allows the Social Security Administration and the Veterans Administration to work together to verify low-income status when distributing veterans' benefits.
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