A bill to amend the Internal Revenue Code of 1986 to exclude from gross income certain overseas pay of members of the Armed Forces of the United States.

Amends the Internal Revenue Code to exclude from gross income compensation for "covered service" in the U.S. military. Defines "covered service" as service outside the United States in a permanent change of station for which travel, transportation, and housing of dependents at Government expense would generally not be authorized under policies of the Secretary concerned, except in the case of service in such an assignment for which such travel, transportation, and housing is actually authorized as an exception to the applicable policy.