Family Fights to Waive Tax Bill for Dead Serviceman

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The family of the late Lance Corporal Andrew Carpenter is fighting for a waiver of a tax bill the IRS imposed on them. 27-year old Lance Corporal Carpenter died of a sniper attack in Germany while on active duty in Afghanistan in 2011. At that point, he had a privately funded study loan that was still being repaid as he was a college student before joining the Marines. Upon his demise, the private lender forgave the debt but recently Carpenter’s parents received a notice from the Department of Education informing them they had to pay taxes on the debt that was forgiven.

Under the law, any forgiven debt including student loans is considered as income, and taxes are due on it. The only exceptions are government-backed loans. These are not subject to taxes once forgiven. But this is not the case for privately-funded loans. However, in the case of a veteran killed in combat as in the case of Lance Corporal Carpenter, there is a growing opinion that such persons should be exempted from this regulation.

Rep. Scott DesJarlais (R – Tenn) is representing the Carpenters in seeking such a waiver. He is proposing a new bill, the Andrew P. Carpenter Tax Act that says forgiven loans should not be considered taxable income for anyone who dies while on active duty as a result of a service-connected injury or illness. This proposed law (currently referred to as H.R. 5044) would be retroactive to October 7, 2001, the date the US started active military operations in Afghanistan, so that other families similarly affected would benefit. “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.

The number of people who would be helped if this law is passed is unknown at this point. It is also not clear how much tax revenue would be lost so it will be up to the nonpartisan Congressional Budget Office, which prepares cost estimates for pending legislation, at the request of the House Ways and Means Committee to calculate these figures.

DesJarlais’ spokesman Robert Jameson said other forms of revenue to cover the loss of tax revenue from the proposed Act would have to be found before the Act could be passed.

Lance Corporal Carpenter’s widow was pregnant when he was killed. But the tax bill, which amounted to about $1,000, was sent to his parents instead because they signed the loan agreement as co-borrowers of the loan. When the bill arrived, the parents paid for it without knowing what it was for. Only after paying the taxes did they realize what it was for and started looking for help and turned to Rep DesJarlais, the lawmaker who represents the Carpenters’ hometown of Columbia, Tennessee.

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