S. 878 — Coast Guard Combat-Injured Tax Fairness Act

This section extends the Combat-Injured Veterans Tax Fairness Act of 2016—which authorizes refunds of federal income taxes improperly withheld from disability severance pay (10 U.S.C. 1212) of service members separated for combat-related disabilities, identifies affected members, reports to Congress, and prevents future improper withholding—to members of the Coast Guard when not operating as a service in the Department of the Navy (under the Secretary of Homeland Security) and during past periods under the Department of Transportation (under the Secretary of Transportation). It further requires (1) the Secretaries of Homeland Security and Transportation to identify improperly withheld amounts and report under section 3(a) of the Act within one year of enactment and to notify affected former members under section 5(a) within one year of enactment, and (2) the Secretary of Homeland Security to ensure no future improper withholding under section 4 of the Act beginning on the date of enactment.