On June 17, 2008 President Bush signed the Heroes Earnings Assistance and Relief Tax (HEART) Act (HR 6081). The new law provides tax cuts for members of the military who are receiving combat pay, saving for retirement or purchasing their own homes. It will also ease rules for military families hoping to qualify for the earned income tax credit, make penalty-free withdrawals from their pension plans, and access unspent amounts held in their health flexible spending arrangements. Below a summary of the legislation from
the Library of Congress. To learn more about the bill, including voting records, news and blog coverage, check out
Open Congress.org.
Heroes Earning Assistance and Relief Tax Act of 2008 -Amends the Internal Revenue Code to provide tax benefits and incentives for military personnel.
Title I: Benefits for Military - (Sec 101) Exempts married taxpayers who file a joint tax return from the identification requirement for the 2008 recovery tax rebate if at least one of the filers is a current member of the Armed Forces.
(Sec. 102) Makes permanent the election to treat combat zone compensation as earned income for purposes of the earned income tax credit.
(Sec. 103) Makes permanent the exemption from the first-time homebuyer rule for veterans using mortgage revenue bonds to purchase a residence. Increases the issuance limits on mortgage revenue bonds for veterans in Alaska, Oregon, and Wisconsin to $100 million after 2009. Revises the definition of "qualified veteran" for mortgage bond financing eligibility purposes to eliminate the pre-1977 active duty requirement and to reduce the eligibility period to 25 years.
(Sec. 104) Requires tax-qualified pension plans to entitle survivors of plan participants who die while on active military duty to additional benefits and benefit accruals provided under such plans for participants who resume and then terminate employment due to death.
(Sec. 105) Treats differential wage payments to an employee as a payment of wages for income tax purposes. Defines "differential wage payment" as any employer payment to an individual serving on active duty in the uniformed services for more than 30 days that represents wages such individual would have received if such individual were performing services for the employer.
Treats an individual receiving differential wage payments as an employee and treats such payments as compensation for retirement plan purposes.
(Sec. 106) Allows members of the uniformed services whose retired pay in any taxable year is reduced due to an award of disability compensation by the Department of Veterans Affairs (VA) an extension of the three-year limitation period for filing tax refund claims until one year after the date of a disability determination. Limits the period for which such refund claims may be filed to taxable years beginning more than five years before the date of a disability determination.
(Sec. 107) Makes permanent the penalty exemption for premature withdrawals from retirement plans for individuals called or ordered to active military duty on or after December 31, 2007.
(Sec. 108) Makes permanent the authority of the Social Security Administration (SSA) to disclose tax return information to the VA for purposes of making veterans benefit determinations.
(Sec. 109) Allows a tax-free rollover of any military death gratuity and any group life insurance payment to a survivor's Roth individual retirement account (Roth IRA) or to an education savings account.
(Sec. 110) Allows an active Peace Corps volunteer an election to suspend the running of the five-year period for determining ownership and use of a principal residence for purposes of the tax exclusion of the gain from the sale of such a residence.
(Sec. 111) Allows certain small business employers a tax credit for up to 20% of the differential wage payments made for the benefit of active duty members of the Armed Forces.
(Sec. 112) Allows an exclusion from gross income for bonus payments made by a state or political subdivision to current or former members of the uniformed services (or dependents) for service in a combat zone.
(Sec. 113) Makes permanent the exclusion from the gross income of certain employees of the intelligence community of gain from the sale of their principal residences without regard to otherwise applicable five-year residential use and holding requirements.
(Sec. 114) Allows a tax-free distribution of unused benefits in a health flexible spending arrangement to any member of an Armed Forces reserve component who is ordered or called to active duty.
(Sec. 115) Exempts certain state and local payments to and benefits for volunteer firefighters and emergency medical responders from federal employment and unemployment taxes.
Title II: Improvements in Supplemental Security Income –
(Sec. 201) Amends title XVI (Supplemental Security Income for the Aged, Blind, and Disabled) of the Social Security Act to treat cash remuneration paid to a member of the uniformed services as earned income and certain housing payments to such members as in-kind support and maintenance for supplemental security income (SSI) program purposes.
(Sec. 202) Excludes state annuity payments to blind, disabled, or aged veterans for purposes of SSI benefit determinations.
(Sec. 203) Excludes any cash or in-kind benefit paid to an AmeriCorps participant from SSI income eligibility and benefit determinations.
Title III: Revenue Provisions –
(Sec. 301) Sets forth additional rules for the tax treatment of high-income individuals who relinquish U.S. citizenship or residency to avoid U.S. taxation (expatriates). Treats all property of expatriates as sold for fair market value on the day before the expatriation date and includes gain (over $600,000) or loss from such sale in their gross income. Allows expatriates to elect to defer payment of any tax resulting from expatriation if adequate security for payment of such tax is given.
Requires 30% withholding of tax for certain items of deferred compensation payable to expatriates.
Imposes a separate tax on gifts and bequests from expatriates exceeding $10,000, payable by the recipient of such gift or bequest.
(Sec. 302) Treats certain foreign subsidiaries of U.S. companies performing services under a contract with the U.S. government as U.S. employers for purposes of Social Security and Medicare employment taxes.
(Sec. 303) Increases the minimum penalty for failure to file an individual income tax return to $135 or 100% of the amount required to be shown on such return.
Title IV: Parity in the Application of Certain Limits to Mental Health Benefits - Amends the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the Public Health Service Act to extend through 2008 parity requirements applicable to mental health benefits offered by group health plans
According to Web CPA, earlier today a judge ruled against the IRS in support of the Freedom of Information Act. The ruling will basically force the IRS to stop defying previous orders and turn over statistical information to outside researchers. Below is a quote from the article, but you can read the full version at
Judge Orders IRS to Turn Over Agency Statistics on Web CPA.
“The case dates back to 1976 when graduate student Susan Long prevailed in an FOIA lawsuit against the IRS, and the agency had to begin providing her with audit and examination data. After the court order, Long used the IRS data to report on the IRS's performance for nearly 30 years.
However, in 2004, the agency stopped complying and refused to provide the information, claiming that the data would violate taxpayer privacy. Long, now a professor at Syracuse University and co-director of its Transactional Records Clearing House, filed suit in 2006. She has obtained a court order from Judge Marsha Pechman of the U.S. District Court for the Western District of Washington, who ruled that the 1976 court order remains enforceable.
The ruling requires the IRS to turn over thousands of pages of agency statistics to TRAC, to produce data electronically and stop redacting the information, and to produce samples of other requested statistical information. Judge Pechman further denied the IRS's requests that the consent decree be modified, holding that the IRS was not in a position to request relief because it had violated her orders.
Long estimates that the IRS will initially have to turn over approximately 100,000 pages of statistical tables and probably 10,000 pages per month thereafter. The data will concern tax audits, including comprehensive details on the audits of individuals, detailed reason for tax audits, how priorities have changed over time, how much time the IRS is spending on audits, and official priorities on large corporate audits, tax shelters and pass-through entities, providing a detailed picture of IRS policies and practices.