[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1779 Engrossed Amendment Senate (EAS)]
In the Senate of the United States,
October 11, 2004.
Resolved, That the bill from the House of Representatives (H.R.
1779) entitled ``An Act to amend the Internal Revenue Code of 1986 to
allow penalty-free withdrawals from retirement plans during the period
that a military reservist or national guardsman is called to active
duty for an extended period, and for other purposes.'', do pass with
the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Guardsmen and Reservists Financial
Relief Act of 2004''.
SEC. 2. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS
CALLED TO ACTIVE DUTY FOR AT LEAST 179 DAYS.
(a) In General.--Paragraph (2) of section 72(t) of the Internal
Revenue Code of 1986 (relating to 10-percent additional tax on early
distributions from qualified retirement plans) is amended by adding at
the end the following new subparagraph:
``(G) Distributions from retirement plans to
individuals called to active duty.--
``(i) In general.--Any qualified reservist
distribution.
``(ii) Qualified reservist distribution.--
For purposes of this subparagraph, the term
`qualified reservist distribution' means any
distribution to an individual if--
``(I) such distribution is from any
qualified retirement plan (as defined
in section 4974(c)),
``(II) such individual was (by
reason of being a member of a reserve
component (as defined in section 101 of
title 37, United States Code)), ordered
or called to active duty for a period
in excess of 179 days or for an
indefinite period, and
``(III) such distribution is made
during the period beginning on the date
of such order or call and ending at the
close of the active duty period.
``(iii) Application of subparagraph.--This
subparagraph applies to individuals ordered or
called to active duty after September 11, 2001,
and before September 12, 2005.''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions after September 11, 2001.
SEC. 3. INCOME TAX WITHHOLDING ON DIFFERENTIAL WAGE PAYMENTS.
(a) In General.--Section 3401 of the Internal Revenue Code of 1986
(relating to definitions) is amended by adding at the end the following
new subsection:
``(i) Differential Wage Payments to Active Duty Members of the
Uniformed Services.--
``(1) In general.--For purposes of subsection (a), any
differential wage payment shall be treated as a payment of
wages by the employer to the employee.
``(2) Differential wage payment.--For purposes of paragraph
(1), the term `differential wage payment' means any payment
which--
``(A) is made by an employer to an individual with
respect to any period during which the individual is
performing service in the uniformed services while on
active duty for a period of more than 30 days, and
``(B) represents all or a portion of the wages the
individual would have received from the employer if the
individual were performing service for the employer.''.
(b) Effective Date.--The amendment made by this section shall apply
to remuneration paid after December 31, 2004.
SEC. 4. TREATMENT OF DIFFERENTIAL WAGE PAYMENTS FOR RETIREMENT PLAN
PURPOSES.
(a) Pension Plans.--
(1) In general.--Section 414(u) of the Internal Revenue
Code of 1986 (relating to special rules relating to veterans'
reemployment rights under USERRA) is amended by adding at the
end the following new paragraph:
``(11) Treatment of differential wage payments.--
``(A) In general.--Except as provided in this
paragraph, for purposes of applying this title to a
retirement plan to which this subsection applies--
``(i) an individual receiving a
differential wage payment shall be treated as
an employee of the employer making the payment,
``(ii) the differential wage payment shall
be treated as compensation, and
``(iii) the plan shall not be treated as
failing to meet the requirements of any
provision described in paragraph (1)(C) by
reason of any contribution which is based on
the differential wage payment.
``(B) Special rule for distributions.--
``(i) In general.--Notwithstanding
subparagraph (A)(i), for purposes of section
401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii),
403(b)(11)(A), or 457(d)(1)(A)(ii), an
individual shall be treated as having been
severed from employment during any period the
individual is performing service in the
uniformed services described in section
3401(i)(2)(A).
``(ii) Limitation.--If an individual elects
to receive a distribution by reason of clause
(i), the plan shall provide that the individual
may not make an elective deferral or employee
contribution during the 6-month period
beginning on the date of the distribution.
``(C) Nondiscrimination requirement.--Subparagraph
(A)(iii) shall apply only if all employees of an
employer performing service in the uniformed services
described in section 3401(i)(2)(A) are entitled to
receive differential wage payments on reasonably
equivalent terms and, if eligible to participate in a
retirement plan maintained by the employer, to make
contributions based on the payments. For purposes of
applying this subparagraph, the provisions of
paragraphs (3), (4), and (5), of section 410(b) shall
apply.
``(D) Differential wage payment.--For purposes of
this paragraph, the term `differential wage payment'
has the meaning given such term by section
3401(i)(2).''.
(2) Conforming amendment.--The heading for section 414(u)
of such Code is amended by inserting ``and to Differential Wage
Payments to Members on Active Duty'' after ``USERRA''.
(b) Differential Wage Payments Treated as Compensation for
Individual Retirement Plans.--Section 219(f)(1) of the Internal Revenue
Code of 1986 (defining compensation) is amended by adding at the end
the following new sentence: ``The term `compensation' includes any
differential wage payment (as defined in section 3401(i)(2)).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2004.
(d) Provisions Relating to Plan Amendments.--
(1) In general.--If this subsection applies to any plan or
annuity contract amendment--
(A) such plan or contract shall be treated as being
operated in accordance with the terms of the plan or
contract during the period described in paragraph
(2)(B)(i), and
(B) except as provided by the Secretary of the
Treasury, such plan shall not fail to meet the
requirements of the Internal Revenue Code of 1986 or
the Employee Retirement Income Security Act of 1974 by
reason of such amendment.
(2) Amendments to which section applies.--
(A) In general.--This subsection shall apply to any
amendment to any plan or annuity contract which is
made--
(i) pursuant to any amendment made by this
section, and
(ii) on or before the last day of the first
plan year beginning on or after January 1,
2007.
(B) Conditions.--This subsection shall not apply to
any plan or annuity contract amendment unless--
(i) during the period beginning on the date
the amendment described in subparagraph (A)(i)
takes effect and ending on the date described
in subparagraph (A)(ii) (or, if earlier, the
date the plan or contract amendment is
adopted), the plan or contract is operated as
if such plan or contract amendment were in
effect; and
(ii) such plan or contract amendment
applies retroactively for such period.
SEC. 5. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT AND READY RESERVE-
NATIONAL GUARD REPLACEMENT EMPLOYEE CREDIT.
(a) Ready Reserve-National Guard Credit.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business-related credits) is amended by inserting after section
45I the following new section:
``SEC. 45J. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible taxpayer, 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 such taxpayer is an amount
equal to 50 percent of the lesser of--
``(1) the actual compensation amount with respect to such
employee for such taxable year, or
``(2) $30,000.
``(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 eligible taxpayer 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.
``(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).
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Eligible taxpayer.--
``(A) In general.--The term `eligible taxpayer'
means a small business employer.
``(B) Small business employer.--
``(i) 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.
``(ii) Controlled groups.--For purposes of
clause (i), all persons treated as a single
employer under subsection (b), (c), (m), or (o)
of section 414 shall be treated as a single
employer.
``(2) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty under an order or call for a
period in excess of 179 days or for an indefinite
period, 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
``(B) hospitalization incident to such duty.
``(3) 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).
``(4) 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.
``(5) Certain rules to apply.--Rules similar to the rules
of section 52 shall apply.
``(e) Termination.--This section shall not apply to any
amount paid or incurred after December 31, 2005.''.
(2) Credit to be part of general business credit.--
Subsection (b) of section 38 of the Internal Revenue Code of
1986 (relating to general business credit) is amended by
striking ``plus'' at the end of paragraph (18), by striking the
period at the end of paragraph (19) and inserting ``, plus'',
and by adding at the end the following:
``(20) the Ready Reserve-National Guard employee credit
determined under section 45J(a).''.
(3) Denial of double benefit.--Section 280C(a) of the
Internal Revenue Code of 1986 (relating to rule for employment
credits) is amended by inserting ``45J(a),'' after ``45A(a),''.
(4) Conforming amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after the
item relating to section 45I the following:
``Sec. 45J. Ready Reserve-National Guard
employee credit.''.
(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.
(b) Ready Reserve-National Guard Replacement Employee Credit.--
(1) In general.--Paragraph (1) of section 51(d) of the
Internal Revenue Code of 1986 (relating to members of targeted
groups) is amended by striking ``or'' at the end of
subparagraph (G), by striking the period at the end of
subparagraph (H) and inserting ``, or'' and by adding at the
end the following new subparagraph:
``(I) a qualified replacement employee.''.
(2) Qualified replacement employee.--Section 51(d) of the
Internal Revenue Code of 1986 is amended by redesignating
paragraphs (10), (11), and (12) as paragraphs (11), (12), and
(13), respectively, and by inserting after paragraph (9) the
following new paragraph:
``(10) Qualified replacement employee.--
``(A) In general.--The term `qualified replacement
employee' means an individual who is certified by the
designated local agency as being hired by an eligible
taxpayer to replace a Ready Reserve-National Guard
employee of such taxpayer, but only with respect to the
period during which such Ready Reserve-National Guard
employee participates in qualified active duty,
including time spent in travel status.
``(B) General definitions and special rules.--For
purposes of this paragraph--
``(i) Eligible taxpayer.--The term
`eligible taxpayer' means a small business
employer.
``(ii) Small business employer.--
``(I) 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.
``(II) Controlled groups.--For
purposes of subclause (I), all persons
treated as a single employer under
subsection (b), (c), (m), or (o) of
section 414 shall be treated as a
single employer.
``(iii) Ready reserve-national guard
employee.--The term `Ready Reserve-National
Guard employee' has the meaning given such term
by section 45J(d)(3).
``(iv) Qualified active duty.--The term
`qualified active duty' has the meaning given
such term by section 45J(d)(1).
``(C) 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) by reason of paragraph (1)(I) to a taxpayer for--
``(i) 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
``(ii) the 2 succeeding taxable years.''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred to an individual who
begins work for the employer after September 30, 2004.
(c) Study by GAO.--
(1) In general.--The Comptroller General of the United
States shall study the following:
(A) What, if any, problems exist in recruiting
individuals for a reserve component of an Armed Force
of the United States.
(B) What, if any, problems exist as the result of
providing differential wage payments (as defined in
section 3401(i)(2) of the Internal Revenue Code of 1986
(as added by this Act)) to individuals described in
subparagraph (A) in the recruitment and retention of
individuals as regular members of the Armed Forces of
the United States.
(C) Whether the credit allowed under section 45J of
the Internal Revenue Code of 1986 (as added by this
section) is an effective incentive for the hiring and
retention of employees who are individuals described in
subparagraph (A) and whether there exists any
compliance problems in the administration of such
credit.
(2) Report.--The Comptroller General of the United States
shall report on the results of the study required under
paragraph (1) to the Committee of Finance of the Senate and the
Committee on Ways and Means of the House of Representatives
before July 1, 2005.
SEC. 6. PENALTY FREE WITHDRAWALS FROM RETIREMENT PLANS FOR VICTIMS OF
FEDERALLY DECLARED NATURAL DISASTERS.
(a) In General.--Paragraph (2) of section 72(t) of the Internal
Revenue Code of 1986 (relating to 10-percent additional tax on early
distributions from qualified retirement plans), as amended by this Act,
is amended by adding at the end the following new subparagraph:
``(H) Distributions from retirement plans to
victims of federally declared natural disasters.--
``(i) In general.--Any qualified disaster-
relief distribution.
``(ii) Qualified disaster-relief
distribution.--For purposes of this
subparagraph, the term `qualified disaster-
relief distribution' means any distribution to
an individual who has sustained a loss in
excess of $100 as a result of a major disaster
declared under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act--
``(I) if such distribution is made
from any qualified retirement plan (as
defined in section 4974(c)) during the
1-year period beginning on the date
such declaration is made, and
``(II) to the extent such
distribution does not exceed the amount
of such loss and is not compensated for
by insurance or otherwise.
For purposes of subclause (II), the amount of
any loss shall be determined using the greater
of the fair market value of the property on the
day before the date of such disaster or the
adjusted basis of the property as provided in
section 1011, less any compensation for such
loss that the individual has received as of the
date of such distribution and any compensation
for such loss that the individual expects to
receive, based on a reasonable estimate. Any
difference between the amount of compensation
that an individual expects to receive on the
basis of such an estimate and actually receives
shall not be included in the individual's gross
income.''.
(b) Exemption of Distributions from Withholding.--Paragraph (4) of
section 402(c) of the Internal Revenue Code of 1986 (relating to
eligible rollover distribution) is amended by striking ``and'' at the
end of subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by inserting at the end
the following new subparagraph:
``(D) any qualified disaster-relief distribution
(within the meaning of section 72(t)(2)(H).''.
(c) Conforming Amendments.--
(1) Section 401(k)(2)(B)(i) of the Internal Revenue Code of
1986 is amended by striking ``or'' at the end of subclause
(III), by striking ``and'' at the end of subclause (IV) and
inserting ``or'', and by inserting after subclause (IV) the
following new subclause:
``(V) the date on which a period
referred to in section
72(t)(2)(H)(ii)(I) begins (but only to
the extent provided in section
72(t)(2)(H)), and''.
(2) Section 403(b)(7)(A)(ii) of such Code is amended by
inserting ``sustains a loss as a result of a major disaster
declared under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (but only to the extent provided in
section 72(t)(2)(H)),'' before ``or''.
(3) Section 403(b)(11) of such Code is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) for distributions to which section
72(t)(2)(H) applies.''.
(d) Effective Date.--The amendments made by this section shall
apply to distributions received in taxable years beginning after
December 31, 2003.
Attest:
Secretary.
108th CONGRESS
2d Session
H. R. 1779
_______________________________________________________________________
AMENDMENT