§ 696. Income taxes of members of armed forces, astronauts, and
victims of certain terrorist attacks.--(a) Time to be disregarded.--In
the case of an individual serving in the armed forces of the United
States, or serving in support of such armed forces, in an area
designated by the president of the United States by executive order as a
"combat zone" at any time during the period designated by the president
by executive order as the period of combatant activities in such zone,
or when deployed outside the United States away from the individual's
permanent duty station while participating in an operation that is
either designated by the United States secretary of defense as a
"contingency operation" or which became a contingency operation due to
operation of law during the period of such contingency operation, or
hospitalized inside or outside the state as a result of injury received
while serving in such an area or operation during such time, the period
of service in such area or operation, plus the period of continuous
hospitalization inside or outside the state attributable to such injury,
and the next one hundred eighty days thereafter, shall be disregarded in
determining, under this article, in respect of the income tax liability
(including any interest, penalty, or addition to the tax) of such
individual --

(1) Whether any of the following acts was performed within the time
prescribed therefor:

(A) filing any return of income tax (except withholding tax);

(B) payment of any income tax (except withholding tax) or any
installment thereof or of any other liability to the state, in respect
thereof;

(C) filing a petition with the tax commission for credit or refund or
for redetermination of a deficiency, or application for review of a
decision rendered by the tax commission;

(D) allowance of a credit or refund of income tax;

(E) filing a claim for credit or refund of income tax;

(F) assessment of income tax;

(G) giving or making any notice or demand for the payment of any
income tax, or with respect to any liability to the state in respect of
income tax;

(H) collection, by the tax commission, by levy or otherwise of the
amount of any liability in respect of income tax;

(I) bringing suit by the state, or any officer, on its behalf, in
respect of any liability in respect of income tax; and

(J) any other act required or permitted under this article or
specified in regulations prescribed under this section by the tax
commission.

(2) The amount of any credit or refund.

(b) Special rule for overpayments. -- (1) Subsection (a) of this
section shall not apply for purposes of determining the amount of
interest on any overpayment of tax.

(2) If an individual is entitled to the benefits of subsection (a) of
this section with respect to any return, amended return, or claim for
credit or refund, and such return, amended return or claim is timely
filed (determined after the application of such subsection), paragraph
three of subsection (a) and subsection (c) of section six hundred
eighty-eight of this article shall not apply.

(c) Action taken before ascertainment of right to benefits.--The
assessment or collection of the tax imposed by this article or of any
liability to the state in respect of such tax, or any action or
proceeding by or on behalf of the state in connection therewith, may be
made, taken, begun, or prosecuted in accordance with law, without regard
to the provisions of subsection (a), unless prior to such assessment,
collection, action, or proceeding it is ascertained that the person
concerned is entitled to the benefits of subsection (a).

(d) Members of armed forces dying in action.--In the case of any
person who dies while in active service as a member of the armed forces
of the United States, if such death occurred while serving in a combat
zone during a period of combatant activities in such zone, as described
in subsection (a), or as a result of wounds, disease or injury incurred
while so serving, the tax imposed by this article shall not apply with
respect to the taxable year in which falls the date of his or her death,
or with respect to any prior taxable year ending on or after the first
day so served in a combat zone, and no returns shall be required in
behalf of such person or his or her estate for such year; and the tax
for any such taxable year which is unpaid at the date of death,
including interest, additions to tax and penalties, if any, shall not be
assessed and, if assessed, the assessment shall be abated and, if
collected, shall be refunded to the legal representative of such estate
if one has been appointed and has qualified, or, if no legal
representative has been appointed or has qualified, to the surviving
spouse.

(e) Treatment of individuals performing Desert Shield services. -- (1)
Any individual who performed Desert Shield services shall be entitled to
the benefits of subsections (a) and (b) of this section in the same
manner as if such services were services referred to in subsection (a)
of this section.

(2) For purposes of this subsection, the term "Desert Shield services"
means any services in the armed forces of the United States or in
support of such armed forces if

(A) such services are performed in the area designated by the
president of the United States as the "Persian Gulf Desert Shield area",
and

(B) such services are performed during the period beginning on August
second, nineteen hundred ninety, and ending on the date on which any
portion of the area referred to in subparagraph (A) of this paragraph is
designated by the president as a combat zone pursuant to section one
hundred twelve of the internal revenue code.

(f) Relief for personnel under hostile fire. -- For purposes of this
section, members of the armed forces of the United States who perform
military service in an area outside an area designated by the president
of the United States by executive order as a "combat zone", which
service is in direct support of military operations in such zone and is
performed under conditions which qualify such members for hostile fire
pay, as authorized under subdivision (a) of section nine of the federal
uniformed services pay act of nineteen hundred sixty-three, shall,
during the period of such qualifying service, be deemed to have served
in such combat zone.

(g) Application to spouse.-- The provisions of subsections (a), (b),
(c), (e) and (f) of this section shall apply to the spouse of any
individual entitled to the benefits of subsection (a) of this section;
provided, however, that such subsections shall not apply for any spouse
for any taxable year beginning more than two years after the date
designated under section one hundred twelve of the internal revenue code
as the date of termination of combatant activities in a combat zone.

(h) Individuals dying as a result of certain attacks and
astronauts.--(1) General. In the case of a specified terrorist victim or
astronaut, any tax imposed by this article shall not apply--

(A) with respect to the taxable year in which falls the date of death;
and

(B) with respect to any prior taxable year in the period beginning
with the last taxable year ending before the taxable year in which the
wounds or injury referred to in paragraph three of this subsection were
incurred.

(2) Taxation of certain benefits. Paragraph one of this subsection
shall not apply to the amount of any tax imposed by this article which
would be computed by only taking into account the items of income, gain,
or other amounts determined by the United States secretary of the
treasury to be taxable pursuant to paragraph 692(d)(3) of the internal
revenue code.

(3) Specified terrorist victim. For purposes of this subsection, the
term "specified terrorist victim" means any decedent who dies as a
result of wounds or injury incurred as a result of the terrorist attacks
against the United States on September eleventh, two thousand one,
provided, however, such term shall not include any individual identified
by the attorney general of the United States to have been a participant
or conspirator in any such attack or a representative of such an
individual.

(4) Astronaut. For purposes of this subsection, the term "astronaut"
means any astronaut whose death occurs in the line of duty after
December thirty-first, two thousand two.

(i) Collection period after assessment not extended as a result of
hospitalization. With respect to any period of continuous
hospitalization described in subsection (a) and the next one hundred
eighty days thereafter, subsection (a) shall not apply to the
collection, by the tax commission, by levy or otherwise of the amount of
any liability pursuant to section six hundred ninety-two of this
article.