The U.S. House of Representatives unanimously passed legislation that mirrors a bill introduced by U.S. Senators John Boozman (R-AR) and Mark Warner (D-VA) to ensure that veterans who suffer service-ending combat-related injuries are not taxed on the severance payment they receive from the Department of Defense (DOD).
The House bill, the Combat-Injured Veterans Tax Fairness Act of 2016 introduced by Rep. David Rouzer (R-NC), will direct DOD to identify veterans who have been separated from service for combat-related injuries and received a severance payment that was improperly taxed by the federal government in the same manner that the Boozman-Warner bill (S.2712), introduced in the Senate in March, does. It instructs DOD to determine how much the combat-wounded veterans are owed and allow veterans who have been improperly taxed to recover the withheld amounts.
“I applaud the House’s action to move the ball forward on this issue. We introduced the Combat-Injured Veterans Tax Fairness Act of 2016 to right a wrong at the Department of Defense. House passage of this bill puts us one step closer to ensuring that our nation’s wounded veterans receive the benefits they are rightfully due,” Boozman, a member of the Senate Veterans Affairs Committee said.
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 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.
Boozman said that along with the House’s action, there has been movement on this issue in the Senate as well. Pointing to the addition of language from the bill as an amendment to the Taxpayer Protection Act of 2016, which passed the Senate Finance Committee in April, Boozman said there is bipartisan support for the effort in the Senate.
“I remain committed to working with my colleagues to finish this effort. The fact that this is happening to the men and women who have sacrificed so much for our nation is unjust and needs to be corrected,” Boozman said.
The problem of improper taxation of the severance payments to combat-injured veterans 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, including 165 veterans in Arkansas.