MILITARY SALUTE FOR THE FLAG OF THE U.S.A.
The National Defense Authorization Act of 2008 contained an amendment which allowed non-uniformed service members, military retirees, and veterans to render a hand salute during the passing, lowering and / or raising of the flag of the U.S.A. A subsequent amendment further authorized hand salutes during the playing of the national anthem by veterans and out of uniform military personnel. This amendment was was included in the Defense Authorization Act of 2009. The actual text of the law is:
SEC.595 MILITARY SALUTE FOR THE FLAG DURING THE NATIONAL ANTHEM BY MEMBERS OF THE ARMED FORCES NOT IN UNIFORM AND VETERANS
Section 301 (b)(1) 0f title 36, United States Code, is amended by striking subparagraphs (A) through (C) and inserting the following new subparagraphs:
"(A) individuals in uniform should give the military salute at the first note of the anthem and maintain that position until the last note;
(B) members of the armed forces and veterans who are present but not in uniform may render the military salute in the manner provided for individuals in uniform; and
(C) all other persons present should face the flag and stand at attention with their right hand over their heart, and men not in uniform, if applicable, should remove their head dress with their right hand and hold it at the left shoulder, the hand being over their heart."
NOTE: Part (C) applies to non-veterans and those not in the military service. The term "men not in uniform" refers to civil service uniforms like police, firefighters, and postal carriers - non-veteran civil servants who might normally render the hand salute when in uniform.
STOLEN VALOR ACT DEEMED UNCONSTITUTIONAL 28 JUNE 2012
UPDATE: United States v. Alvarez, 567 U.S. __(2012), was a United States Supreme Court case in which the Court held that the Stolen Valor Act, 18 U.S.C. '704, is an unconstitutional abridgement of the freedom of speech under the First Amendment. You can read the details at http://en.wikipedia.org/wiki/united_states_v._alvarez
For a copy of the decision, visit the following link at the US Supreme Court: http://www.supremecourt.gov/opinions/11pdf/11-210d4e9.pdf