This bill ensures that combat-injured Coast Guard members receive the same tax fairness on their severance payments as other military veterans by clarifying which Secretaries are responsible for correcting past improper tax withholdings.
Donald Davis
Representative
NC-1
The Coast Guard Combat-Injured Tax Fairness Act ensures that Coast Guard members with combat-related injuries receive the same tax fairness on their severance payments as other military branches. This legislation clarifies which Secretaries are responsible for correcting improperly withheld taxes from past payments. It also sets deadlines for identifying past errors and immediately stopping future improper tax withholdings.
Coast Guard Tax Fairness Act Mandates Refund for Combat-Injured Veterans with Improperly Withheld Severance
If you’re in the Coast Guard and were injured in combat, this bill is a big deal for your wallet. The Coast Guard Combat-Injured Tax Fairness Act is designed to fix a long-standing administrative oversight that caused severance pay for combat-injured Coast Guard members to be improperly taxed. Essentially, it ensures that the tax fairness rules already applied to veterans in the Army, Navy, Air Force, and Marines now clearly and officially apply to the Coast Guard, too. This isn't about creating a new benefit; it's about correcting a mistake and making sure everyone who served and was injured in combat is treated equally under the tax code. The bill specifically updates the Combat-Injured Veterans Tax Fairness Act of 2016 to include the Coast Guard explicitly, regardless of whether they were operating under the Navy at the time of injury.
Clearing Up the Chain of Command
One of the main goals of this legislation is administrative clarity. The bill changes references in the existing law to specifically name the Secretary of Defense and the Secretary of Homeland Security (who oversees the Coast Guard) as the officials responsible for fixing these tax errors. This move ensures that there’s no bureaucratic confusion about whose job it is to process these corrections and refunds. For the Coast Guard veteran, this means the right people are now legally on the hook to make things right, eliminating the risk of agencies pointing fingers at each other.
The Deadline for Fixing Past Errors
This isn't just a promise for the future; it includes a mandate to fix the past. The bill sets a clear deadline: the Secretary of Homeland Security must identify and report all amounts that were wrongly withheld from combat-related severance payments within one year of the bill becoming law. This provision (referencing sections 3(a) and 5 of the 2016 Act) means that if you are a Coast Guard veteran who received taxed severance pay after a combat injury, the clock starts ticking for the government to find your file and calculate your refund. Think of it as a mandatory audit focused solely on getting veterans their money back.
Stopping the Bleeding Immediately
While the past errors are being sorted out over the next year, the bill requires immediate action on future payments. The Secretary of Homeland Security must start following the updated rules right away, effective the day this new legislation is enacted. This means that any future combat-injured Coast Guard members receiving severance pay will not have those funds improperly taxed in the first place (as per section 4 of the 2016 Act). This two-pronged approach—fixing the past and correcting the present—ensures that no more combat-injured veterans face an unexpected tax bill on funds intended to help them transition after service.