S.Amdt. 4157

SA 4157. Mr. BOOZMAN submitted an amendment intended to be proposed
by him to the bill S. 2943, to authorize appropriations for fiscal year
2017 for military activities of the Department of Defense, for military
construction, and for defense activities of the Department of Energy,
to prescribe military personnel strengths for such fiscal year, and for
other purposes; which was ordered to lie on the table; as follows:

At the appropriate place in title X, insert the following:

SEC. ___. RECOVERY OF CERTAIN IMPROPERLY WITHHELD SEVERANCE
PAYMENTS.

(a) Short Title; Findings.--
(1) Short title.--This section may be cited as the
``Combat-Injured Veterans Tax Fairness Act of 2016''.
(2) Findings.--Congress makes the following findings:
(A) Approximately 10,000 to 11,000 individuals are retired
from service in the Armed Forces for medical reasons each
year.
(B) Some of such individuals are separated from service in
the Armed Forces for combat-related injuries (as defined in
section 104(b)(3) of the Internal Revenue Code of 1986).
(C) Congress has recognized the tremendous personal
sacrifice of veterans with combat-related injuries by, among
other things, specifically excluding from taxable income
severance pay received for combat-related injuries.

[[Page S3199]]

(D) Since 1991, the Secretary of Defense has improperly
withheld taxes from severance pay for wounded veterans, thus
denying them their due compensation and a significant benefit
intended by Congress.
(E) Many veterans owed redress are beyond the statutory
period to file an amended tax return because they were not or
are not aware that taxes were improperly withheld.
(b) Restoration of Amounts Improperly Withheld for Tax
Purposes From Severance Payments to Veterans With Combat-
related Injuries.--
(1) In general.--Not later than one year after the date of
the enactment of this Act, the Secretary of Defense shall--
(A) identify--
(i) the severance payments--

(I) that the Secretary paid after January 17, 1991;
(II) that the Secretary computed under section 1212 of
title 10, United States Code;
(III) that were excluded from gross income pursuant to
section 104(a)(4) of the Internal Revenue Code of 1986; and
(IV) from which the Secretary withheld amounts for Federal
income tax purposes; and

(ii) the individuals to whom such severance payments were
made; and
(B) with respect to each person identified under
subparagraph (A)(ii), provide--
(i) notice of--

(I) the amount of severance payments in subparagraph (A)(i)
which were improperly withheld for tax purposes; and
(II) such other information determined to be necessary by
the Secretary of Treasury to carry out the purposes of this
section; and

(ii) instructions for filing amended tax returns to recover
the amounts improperly withheld for tax purposes.
(2) Extension of limitation on time for credit or refund.--
(A) Period for filing claim.--If a claim for credit or
refund under section 6511(a) of the Internal Revenue Code of
1986 relates to a specified overpayment, the 3-year period of
limitation prescribed by such subsection shall not expire
before the date which is 1 year after the date the notice
described in paragraph (1)(B) is provided. The allowable
amount of credit or refund of a specified overpayment shall
be determined without regard to the amount of tax paid within
the period provided in section 6511(b)(2).
(B) Specified overpayment.--For purposes of subparagraph
(A), the term ``specified overpayment'' means an overpayment
attributable to a severance payment described in paragraph
(1)(A).
(c) Requirement That Secretary of Defense Ensure Amounts
Are Not Withheld for Tax Purposes From Severance Payments Not
Considered Gross Income.--The Secretary of Defense shall take
such actions as may be necessary to ensure that amounts are
not withheld for tax purposes from severance payments made by
the Secretary to individuals when such payments are not
considered gross income pursuant to section 104(a)(4) of the
Internal Revenue Code of 1986.
(d) Report to Congress.--
(1) In general.--After completing the identification
required by subsection (b)(1) and not later than one year
after the date of the enactment of this Act, the Secretary of
Defense shall submit to the appropriate committees of
Congress a report on the actions taken by the Secretary to
carry out this section.
(2) Contents.--The report submitted under paragraph (1)
shall include the following:
(A) The number of individuals identified under subsection
(b)(1)(A)(ii).
(B) Of all the severance payments described in subsection
(b)(1)(A)(i), the aggregate amount that the Secretary
withheld for tax purposes from such payments.
(C) A description of the actions the Secretary plans to
take to carry out subsection (c).
(3) Appropriate committees of congress defined.--In this
section, the term ``appropriate committees of Congress''
means--
(A) the Committee on Armed Services, the Committee on
Veterans' Affairs, and the Committee on Finance of the
Senate; and
(B) the Committee on Armed Services, the Committee on
Veterans' Affairs, and the Committee on Ways and Means of the
House of Representatives.
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