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Foxx shepherds bill through House, but Senate must still vote on it
By Mary M. Shaffrey
WINSTON SALEM JOURNAL WASHINGTON BUREAU

The U.S. House of Representatives passed a bill yesterday sponsored by Rep. Virginia Foxx, R-5th, that would allow military personnel in Iraq or Afghanistan to put their salaries into individual retirement accounts.

Foxx's legislation would change current IRS regulations that prevent military personnel serving in combat zones from putting part of their salaries into IRAs.

The bill was passed by voice vote on the House floor with little debate.

It now will go to the Senate.

Under current law, money for an IRA must come from "taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment," according to the IRS Web site.

Combat pay - the bonus paid to military personnel serving in war zones - is considered as nontaxable income. Foxx's bill would count all money earned while serving in a war zone as taxable income for the purpose of IRA contributions, but service members would not have to pay taxes on the combat pay. Base pay would remain taxable; combat pay would not.

"Our current tax code wrongfully prohibits many of our brave men and women serving in combat zones from taking advantage of (IRAs)," Foxx said on the House floor yesterday.

"The men and women defending America in harm's way overseas should not be excluded from fully participating in the important retirement investment opportunity that IRAs provide because of a glitch in our tax code," she said.

The bill has widespread support from various military organizations, because it helps fix what some call a "Catch-22" situation.

In a letter to Foxx earlier this month, Ret. VADM Norbert R. Ryan, the president of the Military Officers Association of America, wrote, "Our service-members serving in harm's way are inadvertently penalized by separate rules under the Internal Revenue Code.

"This change makes perfect sense," he wrote.

Foxx got the idea for the legislation after a soldier from Clemmons brought it to her attention. Spc. Michael Hensley of Clemmons spent most of 2004 stationed at Camp Steicher in Tikrit , Iraq . He did not know he could not contribute to his IRA until he began preparing his tax returns. He used the online service Turbo Tax, and when he got the message denying him the right to contribute, he thought that it was an error.

Hensley, a graduate of West Forsyth High School , spent most of 2004 stationed in Iraq . As a result of the IRS rules, only a small part of his year's income was eligible for setting aside in an IRA.

His father, Robert Hensley - also of Clemmons - contacted Foxx in March to ask for help. "The best ideas usually come from constituents because the government is doing something that needs to be changed, and they bring it to our attention," Foxx said.

Foxx was the main sponsor of the bill. She is the first freshman legislator have substantive legislation passed in the 109th Congress.

Al Eisele, the editor of The Hill, a newspaper that covers Congress, said that it was unusual for a freshman to have success at major legislation this early on. "Its even more unusual that it came from a constituent directly. It's a feather in her cap (because) usually a more senior member would take the initiative," Eisele said.

Robert Hensley was equally surprised.

"I am a little surprised because it seemed to move pretty fast. You just don't think that things can move that fast when the government gets involved," Hensley said.

Spc. Hensley last talked with his father a few days ago and was glad to hear that the changes were being made, said Robert Hensley. Spc. Hensley is currently stationed in Germany and was unavailable for comment.

The bill now goes before the Senate. Should it become law, it would affect all income earned by military personnel on or after Jan. 1, 2005.

• Mary M. Shaffrey can be reached in Washington at (202) 662-7672 or at mshaffrey@wsjournal.com