[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1595 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 1595
To amend the Internal Revenue Code of 1986 to allow small business
employers a credit against income tax with respect to employees who
participate in the military reserve components and are called to active
duty and with respect to replacement employees and to allow a
comparable credit for activated military reservists who are self-
employed individuals, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 9, 2003
Mr. Kerry introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow small business
employers a credit against income tax with respect to employees who
participate in the military reserve components and are called to active
duty and with respect to replacement employees and to allow a
comparable credit for activated military reservists who are self-
employed individuals, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Military Reservist
Tax Credit Act''.
SEC. 2. CREDIT FOR INCOME DIFFERENTIAL FOR EMPLOYMENT OF ACTIVATED
MILITARY RESERVIST AND REPLACEMENT PERSONNEL.
(a) In General.--Subpart B of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to foreign tax credit,
etc.) is amended by adding at the end the following new section:
``SEC. 30B. EMPLOYER WAGE CREDIT FOR ACTIVATED MILITARY RESERVISTS.
``(a) General Rule.--There shall be allowed as a credit against the
tax imposed by this chapter for the taxable year an amount equal to the
sum of--
``(1) in the case of a small business employer, the
employment credit with respect to all qualified employees and
qualified replacement employees of the taxpayer, plus
``(2) the self-employment credit of a qualified self-
employed taxpayer.
``(b) Employment Credit.--For purposes of this section--
``(1) Qualified employees.--
``(A) In general.--The employment credit with
respect to a qualified employee of the taxpayer for any
taxable year is equal to 40 percent of the lesser of--
``(i) the excess, if any, of--
``(I) the qualified employee's
average daily qualified compensation
for the taxable year, over
``(II) the average daily military
pay and allowances received by the
qualified employee during the taxable
year,
while participating in qualified reserve
component duty to the exclusion of the
qualified employee's normal employment duties
for the number of days the qualified employee
participates in qualified reserve component
duty during the taxable year, including time
spent in a travel status, or
``(ii) $15,000.
The employment credit, with respect to all qualified
employees, is equal to the sum of the employment
credits for each qualified employee under this
subsection.
``(B) Average daily qualified compensation and
average daily military pay and allowances.--As used
with respect to a qualified employee--
``(i) the term `average daily qualified
compensation' means the qualified compensation
of the qualified employee for the taxable year
divided by the difference between--
``(I) 365, and
``(II) the number of days the
qualified employee participates in
qualified reserve component duty during
the taxable year, including time spent
in a travel status, and
``(ii) the term `average daily military pay
and allowances' means--
``(I) the amount paid to the
qualified employee during the taxable
year as military pay and allowances on
account of the qualified employee's
participation in qualified reserve
component duty, divided by
``(II) the total number of days the
qualified employee participates in
qualified reserve component duty,
including time spent in travel status.
``(C) Qualified compensation.--When used with
respect to the compensation paid or that would have
been paid to a qualified employee for any period during
which the qualified employee participates in qualified
reserve component duty, the term `qualified
compensation' means--
``(i) compensation which is normally
contingent on the qualified employee's presence
for work and which would be deductible from the
taxpayer's gross income under section 162(a)(1)
if the qualified employee were present and
receiving such compensation,
``(ii) 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 with respect to which the number
of days the qualified employee participates in
qualified reserve component duty does not
result in any reduction in the amount of
vacation time, sick leave, or other nonspecific
leave previously credited to or earned by the
qualified employee, and
``(iii) group health plan costs (if any)
with respect to the qualified employee.
``(D) Qualified employee.--The term `qualified
employee' means a person who--
``(i) has been an employee of the taxpayer
for the 91-day period immediately preceding the
period during which the employee participates
in qualified reserve component duty, and
``(ii) is a member of the Ready Reserve of
a reserve component of an Armed Force of the
United States as defined in sections 10142 and
10101 of title 10, United States Code.
``(2) Qualified replacement employees.--
``(A) In general.--The employment credit with
respect to a qualified replacement employee of the
taxpayer for any taxable year is equal to 40 percent of
the lesser of--
``(i) the individual's qualified
compensation attributable to service rendered
as a qualified replacement employee, or
``(ii) $15,000.
The employment credit, with respect to all qualified
replacement employees, is equal to the sum of the
employment credits for each qualified replacement
employee under this subsection.
``(B) Qualified compensation.--When used with
respect to the compensation paid to a qualified
replacement employee, the term `qualified compensation'
means--
``(i) 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),
``(ii) 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
``(iii) group health plan costs (if any)
with respect to the qualified replacement
employee.
``(C) Qualified replacement employee.--The term
`qualified replacement employee' means an individual
who is hired to replace a qualified employee or a
qualified self-employed taxpayer, but only with respect
to the period during which such employee or taxpayer
participates in qualified reserve component duty,
including time spent in travel status.
``(c) Self-Employment Credit.--For purposes of this section--
``(1) In general.--The self-employment credit of a
qualified self-employed taxpayer for any taxable year is equal
to 40 percent of the lesser of--
``(A) the excess, if any, of--
``(i) the self-employed taxpayer's average
daily self-employment income for the taxable
year over
``(ii) the average daily military pay and
allowances received by the taxpayer during the
taxable year, while participating in qualified
reserve component duty to the exclusion of the
taxpayer's normal self-employment duties for
the number of days the taxpayer participates in
qualified reserve component duty during the
taxable year, including time spent in a travel
status, or
``(B) $15,000.
``(2) Average daily self-employment income and average
daily military pay and allowances.--As used with respect to a
self-employed taxpayer--
``(A) the term `average daily self-employment
income' means the self-employment income (as defined in
section 1402(b)) of the taxpayer for the taxable year
plus the amount paid for insurance which constitutes
medical care for the taxpayer for such year (within the
meaning of section 162(l)) divided by the difference
between--
``(i) 365, and
``(ii) the number of days the taxpayer
participates in qualified reserve component
duty during the taxable year, including time
spent in a travel status, and
``(B) the term `average daily military pay and
allowances' means--
``(i) the amount paid to the taxpayer
during the taxable year as military pay and
allowances on account of the taxpayer's
participation in qualified reserve component
duty, divided by
``(ii) the total number of days the
taxpayer participates in qualified reserve
component duty, including time spent in travel
status.
``(3) Qualified self-employed taxpayer.--The term
`qualified self-employed taxpayer' means a taxpayer who--
``(A) has net earnings from self-employment (as
defined in section 1402(a)) for the taxable year, and
``(B) is a member of the Ready Reserve of a reserve
component of an Armed Force of the United States.
``(d) Credit in Addition to Deduction.--The employment credit or
the self-employment credit provided in this section is in addition to
any deduction otherwise allowable with respect to compensation actually
paid to a qualified employee, qualified replacement employee, or
qualified self-employed taxpayer during any period the qualified
employee or qualified self-employed taxpayer participates in qualified
reserve component duty to the exclusion of normal employment duties.
``(e) 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.
``(f) Limitations.--
``(1) Application with other credits.--The credit allowed
under subsection (a) for any taxable year shall not exceed the
excess (if any) of--
``(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
``(B) the tentative minimum tax for the taxable
year.
``(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--
``(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
``(B) the 2 succeeding taxable years.
``(3) Disallowance with respect to persons ordered to
active duty for training.--No credit shall be allowed under
subsection (a) to a taxpayer with respect to any period by
taking into account any person who is called or ordered to
active duty for any of the following types of duty:
``(A) Active duty for training under any provision
of title 10, United States Code.
``(B) Training at encampments, maneuvers, outdoor
target practice, or other exercises under chapter 5 of
title 32, United States Code.
``(C) Full-time National Guard duty, as defined in
section 101(d)(5) of title 10, United States Code.
``(g) General Definitions and Special Rules.--For purposes of this
section--
``(1) Small business employer.--
``(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.
``(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.
``(2) Military pay and allowances.--The term `military pay'
means pay as that term is defined in section 101(21) of title
37, United States Code, and the term `allowances' means the
allowances payable to a member of the Armed Forces of the
United States under chapter 7 of that title.
``(3) Qualified reserve component duty.--The term
`qualified reserve component duty' includes only active duty
performed, as designated in the reservist's military orders, in
support of a contingency operation as defined in section
101(a)(13) of title 10, United States Code.
``(4) Special rules for certain manufacturers.--
``(A) In general.--In the case of any qualified
manufacturer--
``(i) subsections (b)(1)(A)(ii),
(b)(2)(A)(ii), and (c)(1)(B) shall be applied
by substituting `$25,000' for `$15,000', and
``(ii) paragraph (1)(A) of this subsection
shall be applied by substituting `100' for
`50'.
``(B) Qualified manufacturer.--For purposes of this
paragraph, the term `qualified manufacturer' means any
person if--
``(i) the primary business of such person
is classified in sector 31, 32, or 33 of the
North American Industrial Classification
System, and
``(ii) all of such person's facilities
which are used for production in such business
are located in the United States.
``(5) Carryback and carryforward allowed.--
``(A) In general.--If the credit allowable under
subsection (a) for a taxable year exceeds the amount of
the limitation under subsection (f)(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.
``(B) Rules.--Rules similar to the rules of section
39 shall apply with respect to the credit carryback and
credit carryforward under subparagraph (A).
``(6) Certain rules to apply.--Rules similar to the rules
of subsections (c), (d), and (e) of section 52 shall apply.''.
(b) Conforming Amendment.--Section 55(c)(2) of the Internal Revenue
Code of 1986 is amended by inserting ``30B(f)(1),'' after
``30(b)(3),''.
(c) Clerical Amendment.--The table of sections for subpart B of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end 30A the following new item:
``Sec. 30B. Employer wage credit for
activated military
reservists.''.
(d) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to amounts paid after September 11, 2001, in
taxable years ending after such date.
(2) Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-year
period beginning on the date of the enactment of this Act by
the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period.
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