2008.06.24: June 24, 2008: Headlines: Congress: Benefits: Older Volunteers: Legislation: Taxes: Accounting: PCOL Exclusive: Senegal RPCV Chuck Ludlam writes: Congress Enacts Tax Law Protecting Volunteers and Peace Corps Staff

Peace Corps Online: Peace Corps News: Library: Peace Corps: Congress: Peace Corps: Congress: Newest Stories: 2008.06.24: June 24, 2008: Headlines: Congress: Benefits: Older Volunteers: Legislation: Taxes: Accounting: PCOL Exclusive: Senegal RPCV Chuck Ludlam writes: Congress Enacts Tax Law Protecting Volunteers and Peace Corps Staff

By Admin1 (admin) (70.250.245.178) on Sunday, July 13, 2008 - 4:21 pm: Edit Post

Senegal RPCV Chuck Ludlam writes: Congress Enacts Tax Law Protecting Volunteers and Peace Corps Staff

Senegal RPCV Chuck Ludlam writes: Congress Enacts Tax Law Protecting Volunteers and Peace Corps Staff

Then, again with no help from the Peace Corps, I persuaded the Senate Finance Committee to include the waiver for Volunteers and Peace Corps staff in their version of the legislation, which was then adopted by the Senate. With the waiver inserted in both the House and Senate bills, we finally felt confident that we'd prevail and indeed, after five years of work, we have. The final bill – just sent to the President for his signature – includes the waiver for Volunteers and Peace Corps staff. It will become law. This project shouldn't have taken five years to complete. But in the end we've amended the capital gains laws to protect Volunteers and Peace Corps staff when they sell their homes. We've made sure that their Peace Corps service won't count against them in determining their eligibility for the capital gains exclusion. A hard won and sweet victory.

Senegal RPCV Chuck Ludlam writes: Congress Enacts Tax Law Protecting Volunteers and Peace Corps Staff

The House and Senate have passed H.R. 6081, the Heroes Earnings Assistance and Relief Tax Act of 2008. President Bush will shortly sign it into law.

I am pleased to report that Section 110 of this legislation fixes the capital gains home sale tax problem for Peace Corps Volunteers and Staff. It's taken five years of work, but we've finally won the fight.

The tax problem for Volunteers and Peace Corps staff is easy to explain. The capital gains tax law provides that homeowners who sell their homes do not pay tax on the first $250,000 (for individuals) or $500,000 (for couples) of their gains on the sale – as long as they have lived in their home for 2 of the last 5 years. Unfortunately, this time clock runs while a Volunteer or staff is serving overseas in the Peace Corps (and renting their home), so that when they return they might find that they don't qualify for the huge capital gains tax exclusion. This could cost them tens of thousands of dollars in extra capital gains taxes.

The rationale for the waiver provided in Public Law 108-121 is obvious. Military personnel and foreign service officers often reside overseas as part of their government employment and during this time the 2-of-5 year clock counts against them. This is basically a penalty for serving their country abroad. Of course, this same problem applies to Peace Corps Volunteers.

This provision will be particularly relevant to the older Volunteers who the Peace Corps is attempting to recruit. They are much more likely than the younger Volunteers to own homes. Of course, the provision is often relevant to Peace Corps staff.

I first tried to fix this tax problem back when I was working in the Senate in 2003. (I worked as staff on Capital Hill from 1965 to 2005.) The House version of a then pending bill (H.R. 878) suspended the 2-out-of-5 year clock during the overseas service of a Volunteer or Peace Corps staff. Unfortunately, the Senate version of the bill did not include this provision, so I made multiple pleas to the Peace Corps Congressional Liaison asking her to help me ensure that the House provision was enacted into law. She refused to help and the House provision did not survive when the House and Senate bills were reconciled. The law – the Military Family Tax Relief Act of 2003 (Public Law 108-121) – provided a waiver of the clock for armed forces and Foreign Service personnel, but not for Volunteers or Peace Corps staff.

When Senators Chris Dodd and Ted Kennedy introduced the Peace Corps Volunteer Empowerment Act on March 1, 2007, S. 732, they included Section 304 which states:

It is the sense of Congress that the Department of the Treasury should propose and Congress should enact legislation to provide tax treatment related to gain from sales of principal residence by Peace Corps volunteers during their period of active service that is similar to the treatment given members of the uniformed services and the foreign service.

At the hearing of the Dodd Subcommittee of the Senate Foreign Relations Committee on July 25, 2007, my wife, Paula Hirschoff, and I flew to Washington DC from Senegal, where we were serving as Volunteers to testify in favor of the Dodd/Kennedy bill, including this provision. The portion of our testimony focusing on this issue is printed below.

In the Fall of 2007, as I approached COS in Senegal, I continued to press Congress to enact this fix. I persuaded Congressman Jim McDermott to introduce the waiver as H.R. 3764, the Peace Corps Volunteer Tax Improvements Act (October 4, 2007). Congressman Van Hollen cosponsored the bill. I again urged Peace Corps Congressional Liaison to help and again she refused.

Paula and I submitted written testimony for the McDermott Subcommittee hearing endorsing the waiver and urging the Subcommittee to apply the waiver to both Volunteers and Peace Corps staff. A copy is attached.

Despite the fact that the Peace Corps expressed no support for the waiver, the Subcommittee, House Ways and Means Committee and then the House passed the waiver as H.R. 3997– applying it to both Volunteers and Peace Corps staff – and sent it to the Senate.

Then, again with no help from the Peace Corps, I persuaded the Senate Finance Committee to include the waiver for Volunteers and Peace Corps staff in their version of the legislation, which was then adopted by the Senate. With the waiver inserted in both the House and Senate bills, we finally felt confident that we'd prevail and indeed, after five years of work, we have. The final bill – just sent to the President for his signature – includes the waiver for Volunteers and Peace Corps staff. It will become law.

This project shouldn't have taken five years to complete. But in the end we've amended the capital gains laws to protect Volunteers and Peace Corps staff when they sell their homes. We've made sure that their Peace Corps service won't count against them in determining their eligibility for the capital gains exclusion. A hard won and sweet victory.

Thanks.

Chuck Ludlam
RPCV Nepal (1968-1970)
RPCV Senegal (2005-2007)



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