Kerry-Smith Tax Credits Keep Promise to America's Military, Help Small Businesses

WASHINGTON, June 12  /PRNewswire-USNewswire/ -- Earlier in the year, U.S. Senators John Kerry (D-Mass.) and Gordon Smith (R-Ore.) introduced the Active Duty Military Tax Relief of 2007, which would bolster military families and small businesses that employ reservists.  Today, Senators Max Baucus (D-Mont.) and Charles Grassley (D-Iowa) are introducing the Defenders of Freedom Tax Relief Act of 2007 which includes several provisions from the Kerry-Smith legislation.

"Our men and women in uniform serve this country everyday and the very least we owe them is a fair tax policy," Senator Kerry said.  "Our military leaves behind their families and their businesses without complaint, yet we have a tax system that often punishes them if they serve overseas and collect combat pay. This new legislation would fix that, and make it easier for veterans to buy a home and keep up their small businesses while they are serving oversees. This package keeps a promise to our troops and veterans and helps with the unique financial burdens our military families face."

"If you are risking your life oversees, your family shouldn't have to risk their finances while you are away. Our guardsmen and reservists leave their homes, their children and their jobs to serve," Senator Smith said. "This legislation will help get the bills paid and families on their feet."

The provisions are adopted from Senator Kerry's Military Family Bill of Rights, a comprehensive set of benefits for military families -- parts of which have become law. The following provisions from the Active Duty Military Tax Relief Act of 2007 are included in the Defenders of Freedom Tax Relief Act of 2007.

  -- Tax Credit for Small Employers of Military Reservists and National
     Guardsman Called for Active Duty -- This credit helps small businesses
     who are paying a salary differential to employees that are called up
     for active duty.
  -- Allows survivors to invest their $100,000 death gratuity payment into a
     Roth IRA.
  -- Makes permanent the provision which provides an election to treat
     combat pay as earned income for purposes of computing the earned income
     tax credit. This provision is set to expire at the end of 2007
  -- Addresses tax issues related to differential pay

    *  Subject differential military pay to federal income tax withholding
    *  Identifies income from military pay and differential pay as
       compensation from the regular employer


U.S. Senate Committee on Small Business & Entrepreneurship


CONTACT:  Kathryn Seck (Kerry), +1-202-224-9431 or Amy Brundage or Vince
Morris (Kerry), +1-202-224-4159; or R.C. Hammond (Smith), +1-202-224-8320, all
of the U.S. Senate Committee on Small Business & Entrepreneurship