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Bill Seeking to Recover $78 Million for 13,800 Combat Injured Veterans Passes the House

Released 12/6/16 | Tags: Congressional Legislation

NVLSP applauds passage of legislation, Hopes Senate will consider S.2712 this session

FOR IMMEDIATE RELEASE – December 6, 2016

WASHINGTON. – The National Veterans Legal Services Program (NVLSP) applauds the passage of H.R. 5015, the Combat-Injured Veterans Tax Fairness Act of 2016 last night in Congress. Sponsored by Congressman David Rouzer (R-NC), the bill ensures veterans who suffered service-ending combat-related injuries are not being wrongfully taxed on their severance packages from the Department of Defense (DoD).

“Supporting this legislation is common sense. Our government wrongfully withheld $78 million from thousands of disabled combat veterans over a period of several decades,” said Tom Moore, attorney and manager of the Lawyers Serving Warriors® project at NVLSP. Moore discovered the problem.

“We are thrilled to see this important legislation passed by the House of Representatives and hope it will quickly pass the Senate and be signed into law. Yesterday's vote means that thousands of our nation’s disabled veterans are one step closer to receiving a remedy to fix this egregious oversight,” said Moore.

Congressman Rouzer said, “Our soldiers, sailors, airmen and Marines risk their lives every day to protect our freedoms, our values and our republic. The revelation that there are thousands of veterans who did not receive their full disability severance pay is unacceptable.  This legislation is a common-sense solution to ensure that these veterans who had their severance payment wrongfully taxed will receive every penny that they are rightfully owed.  These veterans deserve no less for their service and sacrifice to our nation.”

Under federal law, veterans who suffer combat-related injuries and who are separated from the military are not supposed to be taxed on the one-time lump sum disability severance payment they receive.  However, due to an accounting error, more than $78 million is owed to an estimated 14,000 veterans.  H.R. 5015 corrects this problem by instructing the Department of Defense to identify those who were wrongfully taxed so that they can be reimbursed.

This problem was originally identified by the National Veterans Legal Services Program (NVLSP), an independent, nonprofit veterans service organization that has served active duty military personnel and veterans since 1980.  NVLSP estimates that over 13,800 veterans potentially have been denied full severance pay as a result of wrongful taxation.

NVLSP noted that the government knew about this problem for decades yet continued to take this money from thousands of disabled combat veterans. After exploring all legal options, NVLSP concluded that the only viable path to recovery of these misappropriated payments was through legislation. 

Co-sponsors of H.R. 5015 include: U.S. Representatives Rob Bishop (R-UT), Diane Black (R-TN), Marsha Blackburn (R-TN), Charles Boustany, Jr (R-LA), Bradley Byrne (R-AL), Ken Calvert (R-CA), Steve Chabot (R-OH), Tom Cole (R-OK), Barbara Comstock (R-VA), Kevin Cramer (R-ND), Ron Desantis (R-FL), Sean Duffy (R-WI), Bill Flores (R-TX), Bob Gibbs (R-OH), Vicky Hartzler (R-MO), Duncan Hunter (R-CA), Darrell Issa (R-CA), Walter B. Jones, Jr. (R-NC),David Joyce (R-OH), Stephen Knight (R-CA), Doug Lamalfa (R-CA),  Robert Latta (R-OH), Martha McSally (R-AZ), Dan Newhouse (R-WA), Stephen Palazzo (R-MS), Robert Pittenger (R-NC), Mike Pompeo (R-KS), Bill Posey (R-FL), John Ratcliffe (R-TX), David P. Roe (R-TN), Elise Stefanik (R-NY), Chris Stewart (R-UT), and Bruce Westerman (R-AR).

Companion legislation in the Senate is S.2712.

BACKGROUND ON THE NEED FOR THE LEGISLATION:
One-time lump sum disability severance payments to active duty service members have been excluded from taxable income since a 1991 court ruling. This exclusion has been codified into the Department of Defense’s Financial Management Regulation, and also clarified in regulations used by the service branches. Due to limitations in its accounting system, the Defense Finance and Accounting Service (DFAS) knowingly took $78 million in “tax payments” from combat disabled service members. To recoup wrongfully withheld funds, veterans could have filed an amended tax return with the Internal Revenue Service, but most of the thousands of veterans affected are outside of the three-year period in which they can file an amended tax return. Only legislation passed by Congress and signed into law by the President can correct this injustice.

MEDIA CONTACTS
For Congressman Rouzer’s Office: Danielle Adams, 202-225-2731, Danielle.Adams@mail.house.gov
For NVLSP: Ami Neiberger-Miller, 703-887-4877, ami@steppingstoneLLC.com 

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