Coast Guard Combat-Injured Tax Fairness Act

This bill fixes a tax problem for Coast Guard members who were hurt in combat and got separation pay. It extends an earlier law so the Coast Guard is clearly covered, even when it isn’t operating under the Navy, and it updates which departments are responsible for handling these cases (Defense, Homeland Security, or Transportation, depending on the situation).

It tells the Department of Homeland Security and the Department of Transportation to find and report any severance pay amounts that were wrongly taxed within one year of the law taking effect. It also requires Homeland Security to make sure these taxes are not taken out going forward, starting on the day the law is enacted.

Key points

• Who is affected: Coast Guard veterans with combat-related injuries who received severance pay.
• What changes: Extends existing protections to the Coast Guard and clarifies which agencies must act; directs the government to identify and address amounts that were improperly withheld for taxes; and prevents future improper withholding.
• When: Identify and report past withholding within one year; stop improper withholding starting on the law’s enactment date.