S. 326

Disabled Veterans Tax Fairness Act of 2007

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II

110th CONGRESS

1st Session

S. 326

IN THE SENATE OF THE UNITED STATES

January 17, 2007

Mrs. Lincoln (for herself, Mr. Thomas, Mr. Bingaman, Mr. Durbin, Ms. Mikulski, Mr. Akaka, Mr. Pryor, Ms. Klobuchar, Mr. Enzi, Mr. Harkin, Mr. Rockefeller, and Mr. Kerry) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide a special period of limitation when uniformed services retirement pay is reduced as result of award of disability compensation.

1.

Short title

This Act may be cited as the Disabled Veterans Tax Fairness Act of 2007.

2.

Special period of limitation when uniformed services retired pay is reduced as a result of award of disability compensation

(a)

In general

Subsection (d) of section 6511 (relating to special rules applicable to income taxes) is amended by adding at the end the following new paragraph:

(8)

Special rules when uniformed services retired pay is reduced as a result of award of disability compensation

(A)

Period of limitation on filing claim

If the claim for credit or refund relates to an overpayment of tax imposed by subtitle A on account of—

(i)

the reduction of uniformed services retired pay computed under section 1406 or 1407 of title 10, United States Code, or

(ii)

the waiver of such pay under section 5305 of title 38 of such Code,

as a result of an award of compensation under title 38 of such Code pursuant to a determination by the Secretary of Veterans Affairs, the 3-year period of limitation prescribed in subsection (a) shall be extended, for purposes of permitting a credit or refund based upon the amount of such reduction or waiver, until the end of the 1-year period beginning on the date of such determination.
(B)

Limitation to 5 taxable years

Subparagraph (A) shall not apply with respect to any taxable year which began more than 5 years before the date of such determination.

.

(b)

Effective date

The amendment made by subsection (a) shall apply to claims for credit or refund filed after the date of the enactment of this Act.

(c)

Transition rules

In the case of a determination described in paragraph (8) of section 6511(d) of the Internal Revenue Code of 1986 (as added by this section) which is made by the Secretary of Veterans Affairs after December 31, 2000, and before the date of the enactment of this Act, such paragraph—

(1)

shall not apply with respect to any taxable year which began before January 1, 2001, and

(2)

shall be applied by substituting the date of the enactment of the Disabled Veterans Tax Fairness Act of 2007 for the date of such determination in subparagraph (A) thereof.