[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3827 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 3827
To amend the Internal Revenue Code of 1986 to provide tax relief to
active duty military personnel and employers who assist them, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 15, 2007
Mr. Altmire introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide tax relief to
active duty military personnel and employers who assist them, 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 ``Active Duty Military Tax Relief Act
of 2007''.
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. 30D. 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 an eligible 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 so much of the
excess (if any) paid by the taxpayer to such qualified
employee 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 aggregate number of days the qualified employee
participates in qualified reserve component duty during
the taxable year (including time spent in a travel
status) as does not exceed $25,000. 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 365, 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 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
so much of the individual's qualified compensation
attributable to service rendered as a qualified
replacement employee as does not exceed $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, and, in the case
of a qualified employee, is receiving qualified
compensation (as defined in paragraph (1)(C)) for which
an employment credit is allowed as determined under
paragraph (1).
``(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 so much of the excess (if any) of--
``(A) the qualified self-employed taxpayer's
average daily qualified compensation for the taxable
year, over
``(B) 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 aggregate number of days the taxpayer participates in
qualified reserve component duty during the taxable year
(including time spent in a travel status) as does not exceed
$25,000.
``(2) Average daily qualified compensation and average
daily military pay and allowances.--As used with respect to a
qualified self-employed taxpayer--
``(A) the term `average daily qualified
compensation' means the qualified compensation of the
qualified self-employed taxpayer for the taxable year
divided by 365 days, 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 compensation.--When used with respect to
the compensation paid to a qualified self-employed taxpayer for
any period during which the qualified self-employed taxpayer
participates in qualified reserve component duty, the term
`qualified compensation' means--
``(A) the self-employment income (as defined in
section 1402(b) of the taxpayer which is normally
contingent on the taxpayer's presence for work,
``(B) 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
``(C) the amount paid for insurance which
constitutes medical care for the taxpayer for such year
(within the meaning of section 162(l)).
``(4) 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) Coordination With Other Credits.--The amount of credit
otherwise allowable under this chapter with respect to compensation
paid to any employee shall be reduced by the credit allowed by this
section with respect to such employee.
``(e) 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, 30, 30B, and 30C, 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.
``(f) General Definitions and Special Rules.--For purposes of this
section--
``(1) Eligible small business employer.--
``(A) In general.--The term `eligible small
business employer' means, with respect to any taxable
year, any employer which--
``(i) employed an average of 100 or fewer
employees on business days during such taxable
year, and
``(ii) under a written plan of the
employer, provides the excess amount described
in subsection (b)(1)(A) to every qualified
employee of the employer.
``(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) 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 the taxable year 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).
``(5) Certain rules to apply.--Rules similar to the rules
of subsections (c), (d), and (e) of section 52 shall apply.''.
(b) No Deduction for Compensation Taken Into Account for Credit.--
Section 280C(a) of the Internal Revenue Code of 1986 (relating to rule
for employment credits) is amended--
(1) by inserting ``or compensation'' after ``salaries'',
and
(2) by inserting ``30D,'' before ``45A(a),''.
(c) Conforming Amendment.--Section 55(c)(2) of the Internal Revenue
Code of 1986 is amended by inserting ``30D(e)(1),'' after
``30(b)(3),''.
(d) 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 following new item:
``Sec. 30D. Employer wage credit for activated military reservists.''.
(e) Effective Date.--The amendments made by this section shall
apply to amounts paid in taxable years beginning after December 31,
2006.
SEC. 3. DIFFERENTIAL WAGE PAYMENTS.
(a) Income Tax Withholding on Differential Wage Payments.--
(1) 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:
``(h) 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.''.
(2) Effective date.--The amendment made by this subsection
shall apply to remuneration paid after December 31, 2007.
(b) Treatment of Differential Wage Payments for Retirement Plan
Purposes.--
(1) Pension plans.--
(A) 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 or benefit 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(h)(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 (as determined under subsections (b), (c),
(m), and (o)) performing service in the uniformed
services described in section 3401(h)(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
on reasonably equivalent terms. 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(h)(2).''.
(B) 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''.
(2) 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(h)(2)).''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2007.
(c) 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,
2009.
(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. 4. CONTRIBUTIONS OF MILITARY DEATH GRATUITIES TO CERTAIN TAX-
FAVORED ACCOUNTS.
(a) Roth IRAs.--
(1) Provision in effect before pension protection act.--
Subsection (e) of section 408A of the Internal Revenue Code of
1986 (relating to qualified rollover contribution), as in
effect before the amendments made by section 824 of the Pension
Protection Act of 2006, is amended to read as follows:
``(e) Qualified Rollover Contribution.--For purposes of this
section--
``(1) In general.--The term `qualified rollover
contribution' means a rollover contribution to a Roth IRA from
another such account, or from an individual retirement plan,
but only if such rollover contribution meets the requirements
of section 408(d)(3). Such term includes a rollover
contribution described in section 402A(c)(3)(A). For purposes
of section 408(d)(3)(B), there shall be disregarded any
qualified rollover contribution from an individual retirement
plan (other than a Roth IRA) to a Roth IRA.
``(2) Military death gratuity.--
``(A) In general.--The term `qualified rollover
contribution' includes a contribution to a Roth IRA
maintained for the benefit of an individual to the
extent that such contribution does not exceed the
amount received by such individual under section 1477
of title 10, United States Code, or under section 1967
of title 38 of such Code, if such contribution is made
not later than 1 year after the day on which such
individual receives such amount.
``(B) Annual limit on number of rollovers not to
apply.--Section 408(d)(3)(B) shall not apply with
respect to amounts treated as a rollover by the
subparagraph (A).
``(C) Application of section 72.--For purposes of
applying section 72 in the case of a distribution which
is not a qualified distribution, the amount treated as
a rollover by reason of subparagraph (A) shall be
treated as investment in the contract.''.
(2) Provision in effect after pension protection act.--
Subsection (e) of section 408A, as in effect after the
amendments made by section 824 of the Pension Protection Act of
2006, is amended to read as follows:
``(e) Qualified Rollover Contribution.--For purposes of this
section--
``(1) In general.--The term `qualified rollover
contribution' means a rollover contribution--
``(A) to a Roth IRA from another such account,
``(B) from an eligible retirement plan, but only
if--
``(i) in the case of an individual
retirement plan, such rollover contribution
meets the requirements of section 408(d)(3),
and
``(ii) in the case of any eligible
retirement plan (as defined in section
402(c)(8)(B) other than clauses (i) and (ii)
thereof), such rollover contribution meets the
requirements of section 402(c), 403(b)(8), or
457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall be
disregarded any qualified rollover contribution from an
individual retirement plan (other than a Roth IRA) to a Roth
IRA.
``(2) Military death gratuity.--
``(A) In general.--The term `qualified rollover
contribution' includes a contribution to a Roth IRA
maintained for the benefit of an individual to the
extent that such contribution does not exceed the
amount received by such individual under section 1477
of title 10, United States Code, or under section 1967
of title 38 of such Code, if such contribution is made
not later than 1 year after the day on which such
individual receives such amount.
``(B) Annual limit on number of rollovers not to
apply.--Section 408(d)(3)(B) shall not apply with
respect to amounts treated as a rollover by the
subparagraph (A).
``(C) Application of section 72.--For purposes of
applying section 72 in the case of a distribution which
is not a qualified distribution, the amount treated as
a rollover by reason of subparagraph (A) shall be
treated as investment in the contract.''.
(b) Health Savings Accounts and Archer MSAs.--Sections 220(f)(5)
and 223(f)(5) of the Internal Revenue Code of 1986 are each amended by
adding at the end the following flush sentence:
``For purposes of subparagraphs (A) and (B), rules similar to
the rules of section 408A(e)(2) (relating to rollover treatment
for contributions of military death gratuity) shall apply.''.
(c) Education Savings Accounts.--Section 530(d)(5) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
sentence: ``For purposes of this paragraph, rules similar to the rules
of section 408A(e)(2) (relating to rollover treatment for contributions
of military death gratuity) shall apply.''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraphs (2) and
(3), the amendments made by this section shall apply with
respect to deaths from injuries occurring on or after the date
of the enactment of this Act.
(2) Application of amendments to deaths from injuries
occurring on or after october 7, 2001, and before enactment.--
The amendments made by this section shall apply to any
contribution made pursuant to section 408A(e)(2), 220(f)(5),
223(f)(5), or 530(d)(5) of the Internal Revenue Code of 1986,
as amended by this Act, with respect to amounts received under
section 1477 of title 10, United States Code, or under section
1967 of title 38 of such Code, for deaths from injuries
occurring on or after October 7, 2001, and before the date of
the enactment of this Act if such contribution is made not
later than 1 year after the date of the enactment of this Act.
(3) Pension protection act changes.--Section 408A(e)(1) of
the Internal Revenue Code of 1986 (as in effect after the
amendments made by subsection (a)(2)) shall apply to taxable
years beginning after December 31, 2007.
SEC. 5. TEMPORARY INCREASE IN STANDARD DEDUCTION FOR ACTIVE DUTY
MILITARY PERSONNEL.
(a) In General.--Paragraph (3) of section 63(c) of the Internal
Revenue Code of 1986 (defining additional standard deduction for the
aged and blind) is amended to read as follows:
``(3) Additional standard deduction.--For the purposes of
paragraph (1), the additional standard deduction is the sum
of--
``(A) the sum of each additional amount to which
the taxpayer is entitled under subsection (f), plus
``(B) in the case of a taxable year beginning in
2007 or 2008, an additional amount of $1,000 for an
individual for such taxable year if the individual who
at any time during such taxable year is performing
service in the uniformed services while on active duty
for a period of more than 30 days.''.
(b) Conforming Amendments.--
(1) Section 3402(m)(3) of the the Internal Revenue Code of
1986 is amended by striking ``for the aged and blind''.
(2) Section 6012(a)(1)(B) of such Code is amended by adding
at the end the following new sentence: ``The preceding sentence
shall be applied without regard to section 63(c)(3)(B) and each
of the amounts specified in subparagraph (A) shall be increased
by the portion of any additional standard deduction to which
the individual is entitled by reason of section 63(c)(3)(B).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 6. ELECTION TO INCLUDE COMBAT PAY AS EARNED INCOME FOR PURPOSES OF
EARNED INCOME TAX CREDIT.
(a) In General.--Clause (vi) of section 32(c)(2)(B) of the Internal
Revenue Code of 1986 (defining earned income) is amended to read as
follows:
``(vi) a taxpayer may elect to treat
amounts excluded from gross income by reason of
section 112 as earned income.''.
(b) Provision Not Subject to EGTRRA Sunset.--Section 105 of the
Working Families Tax Relief Act of 2004 (relating to application of
EGTRRA sunset to this title) shall not apply to section 104(b) of such
Act.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years ending after December 31, 2007.
SEC. 7. DISTRIBUTIONS FROM RETIREMENT PLANS TO INDIVIDUALS CALLED TO
ACTIVE DUTY.
(a) In General.--Clause (iv) of section 72(t)(2)(G) of the Internal
Revenue Code of 1986 is amended by striking ``, and before December 31,
2007''.
(b) Effective Date.--The amendment made by this section shall apply
to individuals ordered or called to active duty on or after December
31, 2007.
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