WASHINGTON, D.C. — April 23, 2025, U.S. Representatives Don Davis (D-NC) and Don Bacon (R-NE) have introduced bipartisan legislation aimed at correcting a long-standing oversight in federal tax law that excludes U.S. Coast Guard combat-injured veterans from receiving full disability severance pay benefits.
The new bill, H.R. 2973, the Coast Guard Combat-Injured Tax Fairness Act, seeks to extend the same tax relief that members of the Army, Navy, Air Force, and Marine Corps received under the Combat-Injured Veterans Tax Fairness Act of 2016, which corrected improper taxation of severance payments to wounded servicemembers.
“It is essential that we prioritize the well-being of our U.S. Coast Guard combat-injured veterans, closing this loophole and ensuring they receive full benefits,” said Rep. Davis, a U.S. Air Force veteran and vice ranking member of the House Armed Services Committee. “We must not stop advocating passionately for our U.S. Coast Guard veterans, who have devoted their lives to serving our country.”
Rep. Bacon, also a military veteran, added that while the 2016 law restored tax refunds to over 130,000 veterans across other service branches, it inadvertently left out the Coast Guard. “The Coast Guard Combat-Injured Tax Fairness Act would ensure that combat-injured Coast Guard veterans receive their full benefits as combat-injured veterans in their sister services and will prevent similar oversight in the future,” he said.
According to data from the U.S. Department of Defense and the IRS, while the 2016 law enabled approximately $280 million in tax refunds for non-Coast Guard veterans, an estimated 4,860 Coast Guard veterans with service-connected disabilities remain ineligible for similar refunds. The potential tax relief for these veterans is estimated at $11 million.
H.R. 2973 would close this gap by directing the Department of Defense to identify eligible Coast Guard veterans who had disability severance payments wrongly taxed and ensure they are notified of their eligibility for a refund.
Under current IRS rules, affected veterans would have up to three years after the original tax return filing deadline, or two years after the tax was paid, to file for a refund—depending on the specific circumstances of their case. The legislation aims to align the Coast Guard’s treatment with that of other military branches retroactively.
If passed, this legislation would represent a significant step toward equitable treatment of all U.S. servicemembers injured in the line of duty.
For more information on the bill or updates on its progress, visit DonDavis.house.gov or follow Congressman Davis on social media at @RepDonDavis.
