Nashville, TN (written by Rick Maze/Military Times) -- A Tennessee lawmaker is trying to protect a Marine's parents from having to pay taxes on student loans that were waived after the Marine's death.
Lance Cpl. Andrew Carpenter died in 2011 in Germany from injuries suffered when he was shot by a sniper in Afghanistan. The 27-year-old, who had attended college before enlisting in the Marine Corps, died with outstanding student loans from a private lender. The lender waived the debt, but family was notified by the Department of Education that the waived debt was considered as income for tax purposes.
While the survivors never expected it, IRS policy holds that forgiven debt on credit cards, personal loans and student loans is treated as income, just like wages - and taxable, just like wages.
Rep. Scott DesJarlais, R-Tenn., a freshman lawmaker representing Carpenter's hometown of Columbia, Tenn., is trying to help the Carpenter family and ensure similar situations don't happen to other military families.
"It is simply not right to require the families of deceased veterans, having already sacrificed so greatly for our country, to pay more in taxes for loans that have already been forgiven," DesJarlais said.
His legislation, the Andrew P. Carpenter Tax Act, would exempt loan forgiveness as taxable income of anyone who dies while on active duty as a result of a service-connected injury or illness. It would be retroactive to Oct. 7, 2001, so that it would cover all deaths since the start of combat operations in Afghanistan.
DesJarlais spokesman Robert Jameson said it is not clear how many families might be helped, or what the price tag in lost revenue would be. Those details are likely to be calculated by the nonpartisan Congressional Budget Office, which prepares cost estimates for pending legislation, at the request of the House Ways and Means Committee, where H.R. 5044 was referred.
Jameson said offsets in other programs to pay for the bill would have to be found by the committee, which is responsible for tax law, before the measure could pass.
Cindy Carpenter, the Marine's mother, said the family continues to pay off the student loan, but ultimately asked for the debt to be waived. "It is very hard to have to write a letter to ask not to pay his bills," she said. "But my son did give his all."
The tax bill was for about $1,000. "We paid it when we got it, without really knowing what it was for," she said.
Only after paying the taxes did the family realize why they were being charged, and began asking for help.
Carpenter was married, and his wife was pregnant, at the time of his death, but the tax bill went to his parents rather than his widow because the parents had co-signed the student loan.
Federal law already requires government-backed student loans to be waived for deceased veterans, but that does not apply to private lenders, and DesJarlais' bill would still leave the decision to the lender.