to improve the credit for Ready Reserve-National Guard employees, to provide a credit for replacement employees of Ready Reserve-National Guard employees called to active military duty, and for other purposes.

1. Rewrites page 441, line 1 through page 446, line 4

   ReplacesPrinted page

   Removes page 441, line 1 through page 446, line 4 of the printed bill. See that page

   Inserted: SEC. 632. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT AND READY RESERVE-NATIONAL GUARD REPLACEMENT EMPLOYEE CREDIT.

   Inserted: (a) Ready Reserve-National Guard Credit.--

   Inserted: (1) In general.--Subpart D of part IV of subchapter A of chapter 1 (relating to business-related credits), as amended by this Act, is amended by adding at the end the following:

   Inserted: "SEC. 45H. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.

   Inserted: "(a) General Rule.--For purposes of section 38, the Ready Reserve-National Guard employee credit determined under this section for any taxable year with respect to each Ready Reserve-National Guard employee of an employer is an amount equal to 50 percent of the lesser of--

   Inserted: "(1) the actual compensation amount with respect to such employee for such taxable year, or

   Inserted: "(2) $30,000.

   Inserted: "(b) Definition of Actual Compensation Amount.--For purposes of this section, the term 'actual compensation amount' means the amount of compensation paid or incurred by an employer with respect to a Ready Reserve-National Guard employee on any day when the employee was absent from employment for the purpose of performing qualified active duty.

   Inserted: "(c) Limitations.--No credit shall be allowed with respect to any day that a Ready Reserve-National Guard employee who performs qualified active duty was not scheduled to work (for reason other than to participate in qualified active duty).

   Inserted: "(d) Definitions and Special Rules.--For purposes of this section--

   Inserted: "(1) Qualified active duty.--The term 'qualified active duty' means--

   Inserted: "(A) active duty, other than the training duty specified in section 10147 of title 10, United States Code (relating to training requirements for the Ready Reserve), or section 502(a) of title 32, United States Code (relating to required drills and field exercises for the National Guard), in connection with which an employee is entitled to reemployment rights and other benefits or to a leave of absence from employment under chapter 43 of title 38, United States Code, and

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   Inserted: "(B) hospitalization incident to such duty.

   Inserted: "(2) Compensation.--The term 'compensation' means any remuneration for employment, whether in cash or in kind, which is paid or incurred by a taxpayer and which is deductible from the taxpayer's gross income under section 162(a)(1).

   Inserted: "(3) Ready reserve-national guard employee.--The term 'Ready Reserve-National Guard employee' means an employee who is a member of the Ready Reserve of a reserve component of an Armed Force of the United States as described in sections 10142 and 10101 of title 10, United States Code.

   Inserted: "(4) Certain rules to apply.--Rules similar to the rules of section 52 shall apply.

   Inserted: "(e) Portion of Credit Refundable.--

   Inserted: "(1) In general.--In the case of an employer of a qualified first responder, the aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of--

   Inserted: "(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 38(c), or

   Inserted: "(B) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection) would increase if the limitation imposed by section 38(c) for any taxable year were increased by the amount of employer payroll taxes imposed on the taxpayer during the calendar year in which the taxable year begins.

   Inserted: The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of the credit otherwise allowable under subsection (a) without regard to section 38(c).

   Inserted: "(2) Employer payroll taxes.--For purposes of this subsection--

   Inserted: "(A) In general.--The term 'employer payroll taxes' means the taxes imposed by--

   Inserted: "(i) section 3111(b), and

   Inserted: "(ii) sections 3211(a) and 3221(a) (determined at a rate equal to the rate under section 3111(b)).

   Inserted: "(B) Special rule.--A rule similar to the rule of section 24(d)(2)(C) shall apply for purposes of subparagraph (A).

   Inserted: "(3) Qualified first responder.--For purposes of this subsection, the term 'qualified first responder' means any person who is--

   Inserted: "(A) employed as a law enforcement official, a firefighter, or a paramedic, and

   Inserted: "(B) a Ready Reserve-National Guard employee.".

   Inserted: (2) Credit to be part of general business credit.--Subsection (b) of section 38 (relating to general business credit), as amended by this Act, is amended by striking "plus" at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting ", plus", and by adding at the end the following:

   Inserted: "(17) the Ready Reserve-National Guard employee credit determined under section 45H(a).".

   Inserted: (3) Denial of double benefit.--Section 280C(a) (relating to rule for employment credits) is amended by inserting "45H(a)," after "45A(a),".

   Inserted: (4) Conforming amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by this Act, is amended by inserting after the item relating to section 45G the following:

   Inserted: "Sec. 45H. Ready Reserve-National Guard employee credit.".

   Inserted: (5) Effective date.--The amendments made by this subsection shall apply to amounts paid or incurred after September 30, 2004, in taxable years ending after such date.

   Inserted: (b) Ready Reserve-National Guard Replacement Employee Credit.--

   Inserted: (1) In general.--Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.), as amended by this Act, is amended by adding after section 30C the following new section:

   Inserted: "SEC. 30D. READY RESERVE-NATIONAL GUARD REPLACEMENT EMPLOYEE CREDIT.

   Inserted: "(a) Allowance of Credit.--

   Inserted: "(1) In general.--In the case of an eligible taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the sum of the employment credits for each qualified replacement employee under this section.

   Inserted: "(2) Employment credit.--The employment credit with respect to a qualified replacement employee of the taxpayer for any taxable year is equal to 50 percent of the lesser of--

   Inserted: "(A) the individual's qualified compensation attributable to service rendered as a qualified replacement employee, or

   Inserted: "(B) $12,000.

   Inserted: "(b) Qualified Compensation.--The term 'qualified compensation' means--

   Inserted: "(1) compensation which is normally contingent on the qualified replacement employee's presence for work and which is deductible from the taxpayer's gross income under section 162(a)(1),

   Inserted: "(2) compensation which is not characterized by the taxpayer as vacation or holiday pay, or as sick leave or pay, or as any other form of pay for a nonspecific leave of absence, and

   Inserted: "(3) group health plan costs (if any) with respect to the qualified replacement employee.

   Inserted: "(c) Qualified Replacement Employee.--For purposes of this section--

   Inserted: "(1) In general.--The term 'qualified replacement employee' means an individual who is hired to replace a Ready Reserve-National Guard employee or a Ready Reserve-National Guard self-employed taxpayer, but only with respect to the period during which such Ready Reserve-National Guard employee or Ready Reserve-National Guard self-employed taxpayer participates in qualified active duty, including time spent in travel status.

   Inserted: "(2) Ready reserve-national guard employee.--The term 'Ready Reserve-National Guard employee' has the meaning given such term by section 45H(d)(3).

   Inserted: "(3) Ready reserve-national guard self-employed taxpayer.--The term 'Ready Reserve-National Guard self-employed taxpayer' means a taxpayer who--

   Inserted: "(A) has net earnings from self-employment (as defined in section 1402(a)) for the taxable year, and

   Inserted: "(B) is a member of the Ready Reserve of a reserve component of an Armed Force of the United States as described in section 10142 and 10101 of title 10, United States Code.

   Inserted: "(d) Coordination With Other Credits.--The amount of credit otherwise allowable under sections 51(a) and 1396(a) with respect to any employee shall be reduced by the credit allowed by this section with respect to such employee.

   Inserted: "(e) Limitations.--

   Inserted: "(1) Application with other credits.--The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of--

   Inserted: "(A) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 29, and 30, over

   Inserted: "(B) the tentative minimum tax for the taxable year.

   Inserted: "(2) Disallowance for failure to comply with employment or reemployment rights of members of the reserve components of the armed forces of the united states.--No credit shall be allowed under subsection (a) to a taxpayer for--

   Inserted: "(A) any taxable year, beginning after the date of the enactment of this section, in which the taxpayer is under a final order, judgment, or other process issued or required by a district court of the United States under section 4323 of title 38 of the United States Code with respect to a violation of chapter 43 of such title, and

   Inserted: "(B) the 2 succeeding taxable years.

   Inserted: "(f) General Definitions and Special Rules.--For purposes of this section--

   Inserted: "(1) Eligible taxpayer.--The term 'eligible taxpayer' means a small business employer or a Ready Reserve-National Guard self-employed taxpayer.

   Inserted: "(2) Small business employer.--

   Inserted: "(A) In general.--The term 'small business employer' means, with respect to any taxable year, any employer who employed an average of 50 or fewer employees on business days during such taxable year.

   Inserted: "(B) Controlled groups.--For purposes of subparagraph (A), all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer.

   Inserted: "(3) Qualified active duty.--The term 'qualified active duty' has the meaning given such term by section 45H(d)(1).

   Inserted: "(4) Special rules for certain manufacturers.--

   Inserted: "(A) In general.--In the case of any qualified manufacturer--

   Inserted: "(i) subsection (a)(2)(B) shall be applied by substituting '$20,000' for '$12,000', and

   Inserted: "(ii) paragraph (2)(A) of this subsection shall be applied by substituting '100' for '50'.

   Inserted: "(B) Qualified manufacturer.--For purposes of this paragraph, the term 'qualified manufacturer' means any person if--

   Inserted: "(i) the primary business of such person is classified in sector 31, 32, or 33 of the North American Industrial Classification System, and

   Inserted: "(ii) all of such person's facilities which are used for production in such business are located in the United States.

   Inserted: "(5) Carryback and carryforward allowed.--

   Inserted: "(A) In general.--If the credit allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (e)(1) for such taxable year (in this paragraph referred to as the 'unused credit year'), such excess shall be a credit carryback to each of the 3 taxable years preceding the unused credit year and a credit carryforward to each of the 20 taxable years following the unused credit year.

   Inserted: "(B) Rules.--Rules similar to the rules of section 39 shall apply with respect to the credit carryback and credit carryforward under subparagraph (A).

   Inserted: "(6) Certain rules to apply.--Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.".

   Inserted: (2) No deduction for compensation taken into account for credit.--Section 280C(a) (relating to rule for employment credits), as amended by this Act, is amended--

   Inserted: (A) by inserting "or compensation" after "salaries", and

   Inserted: (B) by inserting "30D," before "45A(a),".

   Inserted: (3) Conforming amendment.--Section 55(c)(2), as amended by this Act, is amended by inserting "30D(e)(1)," after "30C(e),".

   Inserted: (4) Clerical amendment.--The table of sections for subpart B of part IV of subchapter A of chapter 1, as amended by this Act, is amended by adding after the item relating to section 30C the following new item:

   Inserted: "Sec. 30D. Credit for replacement of activated military reservists.".

   Inserted: (5) Effective date.--The amendments made by this subsection shall apply to amounts paid or incurred after September 30, 2004, in taxable years ending after such date.

   Inserted: (c) Application of Annual Exclusion Limit Under Section 911 to Housing Costs.--

   Inserted: (1) In general.--Section 911(c) (relating to housing cost amount) is amended by adding at the end the following new paragraph:

   Inserted: "(4) Limit on exclusion for employer provided housing costs.--The housing cost amount for any individual for any taxable year attributable to employer provided amounts shall not exceed the excess (if any) of--

   Inserted: "(A) the product of--

   Inserted: "(i) the exclusion amount determined under subsection (b)(2)(D) for the taxable year, and

   Inserted: "(ii) a fraction equal to the number of days of the taxable year within the applicable period described in subparagraph (A) or (B) of subsection (d)(1) divided by the number of days in the taxable year, over

   Inserted: "(B) the foreign earned income of the individual excluded under subsection (a)(1) for the taxable year."

   Inserted: (2) Conforming amendment.--Section 911(c)(1) is amended by striking "The" and inserting "Except as provided in paragraph (4), the".

   Inserted: (3) Effective date.--The amendments made by this subsection shall apply to taxable years beginning after December 31, 2003.

   Original wording

   Beginning on page 441, strike line 1 through page 446, line 4, and insert the following:

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As printed