To amend the Internal Revenue Code of 1986 to improve tax equity for military personnel, and for other purposes.

February 11, 2003

Mr. SKELTON introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to improve tax equity for military personnel, and for other purposes.

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 `Armed and Foreign Services Tax Fairness Act of 2003'.

SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND FOREIGN SERVICE IN DETERMINING EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE.

(a) IN GENERAL- Subsection (d) of section 121 of the Internal Revenue Code of 1986 (relating to exclusion of gain from sale of principal residence) is amended by adding at the end the following new paragraph:

`(9) MEMBERS OF UNIFORMED SERVICES AND FOREIGN SERVICE-

`(A) IN GENERAL- At the election of an individual with respect to a property, the running of the 5-year period described in subsection (a) with respect to such property shall be suspended during any period that such individual or such individual's spouse is serving on qualified official extended duty as a member of the uniformed services or of the Foreign Service.

`(B) MAXIMUM PERIOD OF SUSPENSION- The 5-year period described in subsection (a) shall not be extended more than 5 years by reason of subparagraph (A).

`(C) QUALIFIED OFFICIAL EXTENDED DUTY- For purposes of this paragraph--

`(i) IN GENERAL- The term `qualified official extended duty' means any extended duty while serving at a duty station which is at least 50 miles from such property or while residing under Government orders in Government quarters.

`(ii) UNIFORMED SERVICES- The term `uniformed services' has the meaning given such term by section 101(a)(5) of title 10, United States Code, as in effect on the date of the enactment of this paragraph.

`(iii) FOREIGN SERVICE OF THE UNITED STATES- The term `member of the Foreign Service' has the meaning given the term `member of the Service' by paragraph (1), (2), (3), (4), or (5) of section 103 of the Foreign Service Act of 1980.

`(iv) EXTENDED DUTY- The term `extended duty' means any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

`(D) SPECIAL RULES RELATING TO ELECTION-

`(i) ELECTION LIMITED TO 1 PROPERTY AT A TIME- An election under subparagraph (A) with respect to any property may not be made if such an election is in effect with respect to any other property.

`(ii) REVOCATION OF ELECTION- An election under subparagraph (A) may be revoked at any time.'.

(b) EFFECTIVE DATE; SPECIAL RULE-

(1) EFFECTIVE DATE- The amendment made by this section shall take effect as if included in the amendments made by section 312 of the Taxpayer Relief Act of 1997.

(2) WAIVER OF LIMITATIONS- If refund or credit of any overpayment of tax resulting from the amendment 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