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Bill to Protect Combat-Injured Veterans’ Severance Payments Passes Senate Finance Committee

Released 4/21/16 | Tags: Congressional Legislation

Since 1991, DoD has improperly withheld taxes from severance payments of up to 14,000 veterans separated from service due to combat injury


WASHINGTON – Legislation to ensure that veterans who suffer service-ending combat-related injuries are not improperly taxed on the severance payment they receive from the Department of Defense (DoD) has passed the Senate Finance Committee.

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 from DoD. Unfortunately, taxes on combat-related disability severance payments have nonetheless been withheld from qualifying veterans for a number of years, in part due to the limitations of DoD’s automated payment system. Veterans are typically unaware that their benefits were improperly reduced as a result of DoD’s actions.

To correct this problem, last month Sens. Mark Warner (D-VA) and John Boozman (R-AR) introduced S. 2712, Combat-Injured Veterans Tax Fairness Act of 2016. The legislation instructs DoD to identify veterans who have been separated from service for combat-related injuries and had taxes withheld from their severance payments. It requires DoD to determine how much the veterans are owed and, in conjunction with the Treasury Department, allow veterans who have been improperly taxed to recover the withheld amounts.

The bill language was added as an amendment to the Taxpayer Protection Act of 2016, which passed the Senate Finance Committee on Wednesday evening. The amendment was sponsored by Finance Committee members Sen. Warner, Sen. Michael Bennet (D-CO), and Sen. Richard Burr (R-NC).

“The intent of Congress, federal law and Department of Defense policy are all very clear: Service members separated as a result of combat-related injuries are not to have their severance pay taxed,” said Sen. Warner. “It’s pretty unbelievable that Congress has to act in order to ensure that the law is followed and that veterans who have already sacrificed so much are able to recover every penny they’re owed, but I’m pleased that my colleagues on the Senate Finance Committee agreed that we need to make this right.”

“Senator Warner and I introduced this bill to right a wrong at the Department of Defense. It is apparent that some combat-injured veterans have been deprived of their full severance upon separation by DOD despite federal law prohibiting this action. It is unjust and needs to be corrected. I am pleased that the Finance Committee cleared our bill today as that puts us one step closer to ensuring that our nation’s wounded veterans receive the benefits they are rightfully due,” Sen. Boozman said.

“Our military men and women sacrifice so much in service to our country. It is unconscionable that after a combat-related injury ends their military service they would have to pay taxes on their severance pay,” said Sen. Bennet. “This bill makes a commonsense change to ensure this never happens again and also allows veterans to recover the taxes that were improperly taken from them.”

“The Defense Department has for years mistakenly withheld taxes from the benefit payments of our wounded service members,” Sen. Burr said. “Knowing that our most deserving, combat-wounded veterans did not receive their full benefits promised to them is an insult to those who have made great sacrifices for our country. Let’s get this legislation passed as soon as possible so we can make this right.”

The 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.

"We're pleased that this bill is one step closer to becoming law. This bill will right an inexcusable wrong for thousands of veterans who served their country and were discharged for combat-related disabilities," said Tom Moore, attorney and manager of the Lawyers Serving Warriors project at NVLSP.

"Our government essentially stole around $78 million dollars from more than 13,800 veterans by wrongfully taxing their disability severance pay. We are very grateful for the committee's support and hope this legislation passes quickly."

Moore worked on the issue with the pro-bono assistance of Frederick Eames, a partner at law firm Hunton & Williams.

NVLSP estimates that over 13,800 veterans potentially have been denied full severance pay as a result of wrongful taxation, including 720 veterans in Virginia. 

Read the original news release issued about this problem that was issued when the legislation was introduced: http://www.nvlsp.org/news-room/press-releases/government-wrongfully-deducts-78-million-from-payments-to-veterans-legislation-introduced

About the National Veterans Legal Services Program
The National Veterans Legal Services Program (NVLSP) is an independent, nonprofit veterans service organization that has served active duty military personnel and veterans since 1980. NVLSP strives to ensure that our nation honors its commitment to its 22 million veterans and active duty personnel by ensuring they have the federal benefits they have earned through their service to our country. NVSLP offers training for attorneys and other advocates, connects veterans and active duty personnel with pro bono legal help when seeking disability benefits, publishes the nation's definitive guide on veteran benefits, and represents and litigates for veterans and their families before the VA, military discharge review agencies and federal courts. For more information go to www.nvlsp.org.

For Senator Burr’s Office: Rebecca Glover Watkins, 202.228.1616
For Senator Bennet’s Office: Philip Clelland, 202.224.5852, Philip_Clelland@bennet.senate.gov
For Senator Boozman's Office: Patrick Creamer, 202.224-4843, patrick_Creamer@boozman.senate.gov
For Senator Warner’s Office: Rachel Cohen, 202 228 6884, Rachel_Cohen@warner.senate.gov  
For NVLSP: Ami Neiberger-Miller, 703.887.4877, ami@steppingstoneLLC.com


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