Senate Passes Military Tax Relief Bill

On December 12, 2007, by unanimous consent, the Senate approved the Defenders of Freedom Tax Relief Bill of 2007 (Sen 1593). Among the dozen tax breaks included in the legislation are a permanent allowance for military personnel to elect to count their nontaxable combat pay when calculating eligibility for the earned income credit, a tax credit for small businesses employing National Guard and reservists, a permanent extension of penalty-free IRS withdrawals for reservists, and up to $100,000 to be contributed to a Roth IRA and/or Coverdell ESA with respect to military personnel killed in combat. The legislation is paid for, with the pay-fors including a provision increasing the tax on expatriates and a provision increasing the failure to file penalty. The legislation differs from House-approved legislation (HR 3997). The Administration has not yet taken a position on the Senate legislation.