Proposed Federal Income Tax Exclusion for Civilians Serving in Combat Zones

[Hacker]

Have you guys seen this? Its in Congress now. They're trying to make our combat zone income tax-exempt. Cool. Write your congressman. We don't have a big lobbying firm working for us, so we gotta do it ourselves... Pass this on to the rest of our contractor buds working over here.

(I tried including the .pdf file as an attachment, but in case it doesn't work, PM me and I can email it to you.)

Stay safe,

Hacker

[Hacker]

Oops. Just noticed: this could/should have gone in as a reply to the thread "Tax Question"... Sorry. Mod, can you move it?
Thanks,
Hack

[Hacker]

I'm talking about H.R. 294. The official title is a bill "To amend the Internal Revenue Code of 1986 to extend to civilian employees of the Department of Defense serving in combat zones the tax treatment allowed to members of the Armed Forces serving in combat zones."

Here's the web page with the text of the bill:
http://www.govtrack.us/data/us/bills.text/109/h294.pdf

And here's the summary from Congressional Research Service:
http://www.sfachap16.org/jan/1-5.pdf

The bill was introduced Jan. 20, 2005, and was updated Jan. 10, 2006, so its still alive...

Stay Safe,

[zdfg]

WOW! Cool. Now if they would just make it retroactive for the past 3 years I could afford to take that job as a pornstar that I've always wanted ;)

[RickyRecon]

WOW! Cool. Now if they would just make it retroactive for the past 3 years I could afford to take that job as a pornstar that I've always wanted ;)

I would need "enhancement surgery" first.

And on topic, I sent an email to my state representatives and I suggest every contractor do the same! It cant hurt!

[medic101]

It seems like somewhere in the tax code that applies to exemption for active duty members there was a cap on the amount of tax free earnings. I want to say it stated up to O-3 pay or something to that effect.

From the` Bill
‘‘(A) SERVICE IN COMBAT ZONE.—Gross
income does not include so much of compensa-
tion as does not exceed the maximum enlisted
amount received for active service as a civilian
employee of the Department of Defense serving
in support of the Armed Forces of the United
States for any month during any part of which
such employee

I wonder if this is referring to that particular clause? If anyone knows please post with information. I will try and find the cap clause and post it here.

Be safe

[medic101]

From the IRS Q&A Section on Military:

Q-2: I am a member of the U.S. Armed Forces performing services in a combat zone. Is any part of my military pay for serving in this area excluded from gross income?

A-2: Yes, if you serve in a combat zone as an enlisted person or as a warrant officer (including commissioned warrant officers) for any part of a month, all your military pay received for military service that month is excluded from gross income. For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

For 2002, the most an officer could earn tax-free each month was $5,532.90 ($5,382.90, the highest monthly enlisted pay, plus $150 hostile fire or imminent danger pay). The Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11) raised the imminent danger pay to $225 per month through September 2003. The 2004 National Defense Authorization Act extended this higher rate through December 2004. For 2003, the monthly combat pay exclusion for officers totals $5,957.70. For 2004, it totals $6,315.90. Amounts excluded from gross income are not subject to federal income tax.

If this is how I read the purposed bill, the cap would be $75,790.92 per year. The only way this would help contractors is if it eliminated the 330 day requirment. The dollar amount would be slightly less than the $80,000 exemption we already have. Hopefully someone out there has more info.

Stay safe

[BKK]

I read through this whole proposed bill, and it did not seem like it was a cut and dry case for civilian contractors. They made comparisions to non-DoD contractors, and military personnel, and even kinda whined at how much money contractors are making in Iraq. To me it sounds like an extra perk for GS military civilian workers. After reading this whole thing it seems like they would like to give these GS workers some tax breaks, but know that it is a complicated issue with other other civilian contractors working in the same areas.

The first sentence states "HR 294 proposes to extend the combat zone income tax exclusion to DoD civilian employees on active service in a combat zone." So what if you are working a DoS contract in a combat zone?

Anyone else got a spin on this. It still seems murky.