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Public Law No: 114-292 (12/16/2016)

Combat-Injured Veterans Tax Fairness Act of 2016

(Sec. 3) This bill directs the Department of Defense (DOD), within one year after enactment of this bill, to identify:

  • certain disability severance payments that were not considered gross income to veterans with combat-related injuries paid after January 17, 1991, from which DOD withheld amounts for tax purposes, and
  • the individuals to whom such severance payments were made.

DOD shall provide each such veteran with: (1) notice of the amount of improperly withheld severance payments, and (2) instructions for filing amended tax returns to recover such amount.

The period for filing a related claim with the Internal Revenue Service for a credit or refund is extended beyond the three-year limitation to the date that is one year after DOD provides the veteran with the information required by this bill.

(Sec. 4) DOD shall ensure that amounts are not withheld for tax purposes from DOD severance payments to individuals when such payments are not considered gross income.

(Sec. 5) DOD shall report on: (1) the number of identified individuals, (2) the aggregate amount of payments withheld for tax purposes from such severance payments, and (3) a description of how DOD shall ensure that the withheld amounts will not be considered gross income to the affected individuals.