From the June DAV magazine 1992       

  IRS RULING TO TAX PORTIONS OF VETS DISABILITY COMPENSATION DRAWS GROWING
                             OPPOSITION......

 Congressman Dan Burton
 (R-Indiana)

  A coalition of the three largest Veterans' service organizations and the
 leadership of both the House and Senate Veterans' Affairs Committees have 
 launched a number of efforst aimed at crushing a proposed tax collection
 on a portion of veterans' disability compensation by the Internal Revenue
 Service. (IRS)

  As reported in last month's DAV Magazine, the IRS ruled that a little-
 noticed porvision of the 1986 tax reform law opened up to taxation as regular
 income the cost-of-living adjustments paid to disabled veterans since that
 time.

  As a result of that disclosure by the DAV, and proposed draft legislation
 from the organization, both the Houe and Senate Veterans' Affairs Committees
 are considering bills that would close the loop hole and exempt all veterans'
 disability compensation from taxation.

  At the same time, the executive directors of The American Legion, DAV and
 Veterans of Foreign Wars have fired off joint letters to both the White House
 and the Secretary of the Treasury, urging swift action to administratively
 overturn the IRS opinion.

  In their letter to Secretary of the Treasury Nicholas F. Brady, the three
 VSO executive directors asked for an immediate meeting with the man who
 oversees the IRS because,"....never in the entire history of our country
 of no greater threat to the welfard of our country's disabled veterans than
 taxation of these hard earned and, by all standards, modest entitlements.

  "Needless to say, this IRS General Counsel opinion is inconsistent with
 the Bush Administration's pledge of "no new taxes."

  The joint letter to White House Chief of Staff Samuel K. Skinner outlined
 two possible solutions to the IRS opinion: rule the opinion was incorrect
 and revoke it administratively or provide White House support for legislation
 to remove veterans' benefits from the threat of taxation.

  In the House of Representatives, the chairman and ranking minority member 
 of the House Veterans' Affairs Committee, also sent a letter to Brady. "All
 IRS literature and information booklets continue to clearly state that benefits
 to veterans are exempt from taxation," wrote G.V."Sonny" Montgomery (D-Miss.)
 and Bob Stump (R-Ariz.) to Brady. "For IRS to now issue an opinion that bene-
 fits enacted or modified after 1986 are subject to taxation is clearly wrong,
 and we urge you to rescind or otherwise revise the IRS's position on this 
 issue."

  In the Senate, Veterans' Committee Chairman Alan Cranston (D-Calif.),
 and ranking minority member Arlen Specter (R-Penn.) asked VA Secretary Edward
 J. Derwinski for his comments on draft legislation designed to "clarify and
 reconfirm the tax-exempt status of veterans benefits." In addition, they
 asked Derwinski to expedite his review of the proposed legislation because,
 "Veterans already have started to express to us their understandable concerns
 about the IRS opinion and its potential effects."

  At press time, DAV officials were scheduled to meet with staff members of 
 both the Houe Ways and Means Committee and the Senate Finance Committee, 
 which have jurisdiction over the matter in their respective bodies.

  The DAV also learned that the White House had already been warned that the
 issue could do political damage to the party. In early February, Congressman
 Dan Burton (R-Ind.), a member of the House Veterans' Affairs Committeem, got
 wind of the IRS ruling even before it was made public. Burton wrote the
 President that, "this finding would do irreparable damage to the Republican
 Party's standing within the veterans' community, and most importantly,
 saddle American veterans with unjust financial burdens in tough economic
 times."

  Burton also warned that, "Our party will be blamed by America's veternas, and
 the veterans will be hit with a new tax at a time when the Administration is
 calling on Congress to provide the Americans some tax relief. "Burton sent a
 similar letter to Vice President Quayle, who only promised to "keep tracking"
 what he called the "veterans/IRS problem."

  According to DAV National Legislative Director John F. Heilman, the immediate
 key to solving the dilemma raised by the IRS ruling lies within the White 
 House's grasp. "We believe the IRS is guilty of misreading the law and 
 failing to consider the intent of Congress. In other words, one arm of the
 Administrative Branch of the government made an administrative error, which,
 fortunately, can be set right.

  "The White House certainly holds the authority to direct a simple, non-
 legislative solution to this problem and they should exercise that authority
 immediately."

  If the White House fails to act, Heilman warned, it would raise serious 
 concerns in the minds of many Americans as to the degree of committment the
 Administration truly has for veterans. "We should let the folks in the White
 House know, in this election year, that we expect decisive action in this
 matter. I urge your membership to contact the White House and let them know
 just how important an issue this is to all of us."

 * To call the White House and register your opposition to the IRS ruling that
 places veterans' disabilityu compensation and related entitlement payments at
 risk of taxation, telephone (202) 456-1414. Simply leave the message that you
 do not want the President to tax disabled veterans' benefits...

 Sent to me for public interest from A.W. Thank you...
 MJL
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