Credit for small employers providing retirement plans for military spouses

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

45U.

Small employer provision of retirement savings for military spouses

(a)

In general

For purposes of section 38, in the case of a covered small employer, the military spouse employee retirement plan credit determined under this section for the taxable year is an amount equal to the sum of—(1)$200 for each eligible military spouse employee who is eligible to participate in an eligible employer plan during the plan year ending with or within such taxable year, plus(2)with respect to each eligible military spouse employee participating in such plan, the lesser of—(A)the amount of employer contributions (other than any contribution described in subparagraph (B) or (C) of section 25B(d)(1)) made under all eligible employer plans on behalf of such eligible military spouse during the plan year ending with or within such taxable year, or(B)$300.

In the case of a defined benefit plan, the amount treated as an employer contribution under paragraph (2)(A) shall be the increase in the participant’s nonforfeitable accrued benefit (determined by using the rules of section 417(e)(3)) reduced by the amount of such increase attributable to employee contributions.

(b)

Eligible employer plan

For purposes of this section, the term eligible employer plan means a qualified employer plan (within the meaning of section 4972(d)) in which all eligible military spouse employees of the covered small employer—(1)are eligible to participate as of the later of the first day of the first plan year of the plan or the date the employee has been employed for at least 2 months, (2)are eligible to receive matching contributions (as defined in section 401(m)) and nonelective contributions in the same manner as an employee (other than a highly compensated employee) with at least 2 years of service, and(3)are fully vested in their accrued benefit under the plan upon commencement of participation.(c)

Covered small employer

For purposes of this section, the term covered small employer means an eligible employer (within the meaning of section 408(p)(2)(C)(i)). (d)

Eligible military spouse employee

(1)

In general

The term eligible military spouse employee means any employee of the covered small employer who—(A)has been employed by the employer for more than 2 months, (B)is not a highly compensated employee (within the meaning of section 414(q)), and(C)makes a certification to the small employer that, as of the date such employee is hired by the employer, such employee is married to an individual who has performed service in the uniformed services (as defined in chapter 43 of title 38, United States Code) while on active duty for a period of more than 30 days (including the date such employee is hired).

Any certification under subparagraph (C) shall include the servicemember's name, rank, and military branch and the employee's uniformed services identification card number.

(2)

Limitation

An individual may not be treated as an eligible military spouse with respect to any covered small employer for more than 3 taxable years.

(b)

Credit To be part of general business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting , plus, and by adding at the end the following new paragraph:

(34)the military spouse employee retirement plan credit determined under section 45U(a).

(c)

Clerical 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 adding at the end the following new item:

Sec. 45U. Small employer provision of retirement savings for military spouses.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.