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Congress to Examine Tax Exemptions for Bosnia Duty

By Master Sgt. Stephen Barrett, USA
American Forces Press Service

WASHINGTON, Feb. 21, 1996 – Congress will soon consider tax proposals to exempt the income of service members deployed on the Bosnia peacekeeping mission.

The proposals -- four House bills and one in the Senate -- seem to have bipartisan support in Congress, said Air Force Lt. Col. David Pronchick, the armed forces tax counsel. He said the House Ways and Means Committee will begin considering the first bill in late February.

Currently, service members on contingency or peacekeeping missions are not eligible for tax exemptions. Only military pay earned in combat zones is exempt from federal income tax. Pronchick said there have been only three declared combat zones in the law's history -- Korea, Vietnam and the Persian Gulf.

"For deployed service members in Bosnia to receive tax benefits, the law must be changed," said Pronchick. "This change could take the form of a broad policy change or a one-time change encompassing the current mission."

House Resolution 2776 proposes a permanent change and allows tax benefits for certain contingency operations, Pronchick said. The resolution allows the president to issue an executive order authorizing tax benefits and specifying the eligible operations areas and effective date for tax benefits. Another part of the bill increases the officer tax exemption to $2,400 per month -- up from $500 authorized since 1966. All enlisted and warrant officer pay earned in combat zones would remain tax exempt.

House Resolutions 2778, 2837 and 2879 and Senate Bill 1553 authorize President Clinton specifically to grant tax exemptions to certain deployed personnel. Pronchick said because the mission exposes U.S. service members to warring factions and related hazards, the bills would provide benefits as if they were in a combat zone. However, the proposals differ in details ranging from when tax benefits would begin to where they consider the "operations area."

"We know people are trying to figure their taxes now. We ask they be patient," said Pronchick. "The good thing about this is, for many, it won't affect tax preparation until 1997."

Those assigned to Joint Endeavor areas before Jan. 1 can claim exemptions for the 1995 tax year if Congress passes a new statute and the president signs an executive order.

For those who remain in the deployed operations area on or after March 1, the Internal Revenue Service is granting up to an eight-month filing extension. This allows deployed service members the chance to modify their returns with the tax exemptions. However, the 1995 extension does not apply for those who depart Joint Endeavor before March 1.

Besides extensions, the IRS is also suspending penalty assessments, halting the IRS examinations and placing balance due accounts on hold for all serving in these operations. Internal Revenue officials said service members within the United States assessed penalties may call (800) 829-1040 to correct the problem. Service members overseas may write to: 

Internal Revenue Service

Customer Service Division

950 L'Enfant Plaza

Washington, DC 20024.

Although exempt from penalties, service members who owe taxes for 1995 will face interest payments on that debt.  Pronchick said IRS has no right to waive interest payments.  The current rate for late payment is 9 percent. Pronchick added because state tax laws differ, service  members should check with unit tax officers or state tax

boards on state tax exemptions.

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