SPECIAL PERIOD OF LIMITATION WHEN UNIFORMED SERVICES RETIRED PAY IS REDUCED AS A RESULT OF AWARD OF DISABILITY COMPENSATION.

SEC. 106. SPECIAL PERIOD OF LIMITATION WHEN UNIFORMED SERVICES RETIRED PAY IS REDUCED AS A RESULT OF AWARD OF DISABILITY COMPENSATION.(a) In General.—Subsection (d) of section 6511 (relating to special rules applicable to income taxes) is amended by adding at the end the following new paragraph:“(8) Special rules when uniformed services retired pay is reduced as a result of award of disability compensation.—“(A) Period of limitation on filing claim.—If the claim for credit or refund relates to an overpayment of tax imposed by subtitle A on account of—“(i) the reduction of uniformed services retired pay computed under section 1406 or 1407 of title 10, United States Code, or“(ii) the waiver of such pay under section 5305 of title 38 of such Code,as a result of an award of compensation under title 38 of such Code pursuant to a determination by the Secretary of Veterans Affairs, the 3-year period of limitation prescribed in subsection (a) shall be extended, for purposes of permitting a credit or refund based upon the amount of such reduction or waiver, until the end of the 1-year period beginning on the date of such determination.“(B) Limitation to 5 taxable years.—Subparagraph (A) shall not apply with respect to any taxable year which began more than 5 years before the date of such determination.”.(b) Effective Date.—The amendment made by subsection (a) shall apply to claims for credit or refund filed after the date of the enactment of this Act note.(c) Transition Rules.—In the case of a determination described in paragraph (8) of section 6511(d) of the Internal Revenue Code of 1986 (as added by this section) which is made by the Secretary of Veterans Affairs after December 31, 2000, and before the date of the enactment of this Act, such paragraph—(1) shall not apply with respect to any taxable year which began before January 1, 2001, and(2) shall be applied by substituting for “the date of such determination” in subparagraph (A) thereof.122 STAT. 1631