To amend the Internal Revenue Code of 1986 to provide income and employment tax relief for military and civilian victims of terroristic or military action.

December 13, 2001

Mr. SMITH of New Jersey introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide income and employment tax relief for military and civilian victims of terroristic or military action.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Military and Civilian Victims Payroll Tax Relief Act of 2001'.

SEC. 2. INCOME AND EMPLOYMENT TAXES OF MEMBERS OF THE ARMED FORCES AND VICTIMS OF TERRORISTIC OR MILITARY ACTIONS.

(a) INDIVIDUALS DYING AS A RESULT OF TERRORISTIC OR MILITARY ACTIONS- Section 692 of the Internal Revenue Code of 1986 (relating to income taxes of members of Armed Forces on death) amended by adding at the end the following new subsection:

`(d) INDIVIDUALS DYING AS A RESULT OF TERRORISTIC OR MILITARY ACTIONS-

`(1) IN GENERAL- In the case of any individual who dies as a result of wounds, injury, or illness incurred as a result of terroristic or military action (other than a death to which subsection (a) or (c) applies), any tax imposed by this subtitle shall not apply--

`(A) with respect to the taxable year in which falls the date of such individual's death, and

`(B) with respect to any prior taxable year in the period beginning with the last taxable year ending before the taxable year in which the wounds, injury, or illness were incurred.

`(2) EXCEPTIONS-

`(A) TAXATION OF CERTAIN BENEFITS- Subject to such rules as the Secretary may prescribe, paragraph (1) shall not apply to the amount of any tax imposed by this subtitle which would be computed by only taking into account the items of income, gain, or other amounts attributable to--

`(i) amounts payable in the taxable year by reason of the death of an individual described in paragraph (1) which would have been payable in such taxable year if the death had occurred by reason of an event other than an event described in paragraph (1), or

`(ii) amounts payable in the taxable year which would not have been payable in such taxable year but for an action taken after the date of the applicable terrorist attack.

`(B) NO RELIEF FOR PERPETRATORS- Paragraph (1) shall not apply with respect to any individual identified by the Attorney General to have been a participant or conspirator in any event described in paragraph (1) or a representative of such individual.

`(3) TERRORISTIC OR MILITARY ACTION- For purposes of this subsection, the term `terroristic or military action' has the meaning given to such term by subsection (c)(2). Such term includes the terrorist attacks against the United States on April 19, 1995, September 11, 2001, and the terrorist attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002.'.

(b) REFUND OF OTHER TAXES PAID- Section 692 of such Code, as amended by subsection (a), is amended by adding at the end the following new subsection:

`(e) REFUND OF EMPLOYMENT TAXES PAID- In determining the amount of tax under this section to be credited or refunded as an overpayment with respect to any individual for any period, such amount shall be increased by an amount equal to the amount of taxes imposed and collected under chapter 21 and sections 3201(a), 3211(a)(1), and 3221(a) with respect to such individual for such period.'.

(c) CONFORMING AMENDMENTS-

(1) Section 5(b)(1) is amended by inserting `and victims of certain terrorist attacks' before `on death'.

(2) Section 6013(f)(2)(B) is amended by inserting `and victims of certain terrorist attacks' before `on death'.

(d) CLERICAL AMENDMENTS-

(1) The heading of section 692 is amended to read as follows:

`SEC. 692. INCOME AND EMPLOYMENT TAXES OF MEMBERS OF ARMED FORCES AND VICTIMS OF TERRORIST ATTACKS ON DEATH.'.

(2) The item relating to section 692 in the table of sections for part II of subchapter J of chapter 1 is amended to read as follows:

`Sec. 692. Income and employment taxes of members of Armed Forces and victims of terrorist attacks on death.'.

(e) EFFECTIVE DATE; WAIVER OF LIMITATIONS-

(1) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending before, on, or after September 11, 2001.

(2) WAIVER OF LIMITATIONS- If refund or credit of any overpayment of tax resulting from the amendments made by this section is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.

END