[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1168 Introduced in House (IH)]

  1st Session
                                H. R. 1168

 To amend the Internal Revenue Code of 1986 to allow a credit against 
income tax to employers who employ members of the reserve components of 
the Armed Forces of the United States and to self-employed individuals 
              who are members of such reserve components.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 8, 1995

Mr. Montgomery 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 allow a credit against 
income tax to employers who employ members of the reserve components of 
the Armed Forces of the United States and to self-employed individuals 
              who are members of such reserve components.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. RESERVE FORCES PARTICIPATION CREDIT.

    (a) 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 adding at the end the following new section:

``SEC. 45C. RESERVE FORCES PARTICIPATION CREDIT.

    ``(a) General Rule.--For purposes of section 38, the reserve forces 
participation credit determined under this section is an amount equal 
to the sum of--
            ``(1) the aggregate of the employment credits with respect 
        to qualified employees of a taxpayer, plus
            ``(2) if the taxpayer is a qualified self-employed 
        taxpayer, the self-employment credit.
    ``(b) Employment Credit.--For purposes of this section--
            ``(1) In general.--The employment credit with respect to a 
        qualified employee of a taxpayer for any taxable year is an 
        amount equal to the lesser of--
                    ``(A) 50 percent of the amount of qualified 
                compensation that would have been paid to the employee 
                with respect to all periods during which the employee 
                participates in qualified reserve duty to the exclusion 
                of normal employment duties, including time spent in a 
                travel status had the employee not been participating 
                in qualified reserve duty, or
                    ``(B) $2,000.
            ``(2) Qualified compensation.--The term `qualified 
        compensation' means compensation--
                    ``(A) which is normally contingent on the 
                employee's presence for work and which would be 
                deductible from the taxpayer's gross income under 
                section 162(a)(1) if the employee were present and 
                receiving such compensation; and
                    ``(B) 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 absence, 
                and with respect to which the number of days the 
                employee participates in qualified reserve 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 employee.
            ``(3) Qualified employee.--The term `qualified employee' 
        means a person who--
                    ``(A) has been a full-time employee of a taxpayer 
                for the 21-day period immediately preceding the period 
                during which the employee participates in qualified 
                reserve duty, and
                    ``(B) is a member of the Ready Reserve of a reserve 
                component of an Armed Force of the United States.
            ``(4) Credit in addition to deduction.--The employment 
        credit provided in this section is in addition to any deduction 
        otherwise allowable with respect to compensation actually paid 
        to a qualified employee during any period the employee 
        participates in qualified reserve duty to the exclusion of 
        normal employment duties.
    ``(c) Self-Employment Credit.--
            ``(1) In general.--In the case of a qualified self-employed 
        taxpayer, the self-employment credit for any taxable year is 
        equal to 50 percent of the excess (if any) of--
                    ``(A) the taxpayer's average daily self-employment 
                income 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 duty to the 
                exclusion of the taxpayer's normal self-employment 
                duties for the number of days the taxpayer participates 
                in qualified reserve duty during the taxable year, 
                including time spent in a travel status.
            ``(2) Average daily self-employment income and average 
        daily military pay and allowances.--As used with respect to a 
        self-employed taxpayer--
                    ``(A) Average daily self-employment income.--The 
                term `average daily self-employment income' means the 
                net earnings from self-employment (as defined in 
                section 1402) of the taxpayer for the taxable year 
                divided by the difference between--
                            ``(i) 365, and
                            ``(ii) the number of days the taxpayer 
                        participates in qualified reserve duty during 
                        the taxable year, including time spent in a 
                        travel status.
                    ``(B) Average daily military pay and allowances.--
                The term `average daily military pay and allowances' 
                means--
                            ``(i) the amount paid to the taxpayer 
                        during a taxable year as military pay on 
                        account of the taxpayer's participation in 
                        qualified reserve duty, divided by
                            ``(ii) the total number of days the 
                        taxpayer participates in qualified reserve 
                        duty, including, if applicable, 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) 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) Limitations.--
            ``(1) Maximum credit.--The credit determined under 
        subsection (a) for the taxable year shall not exceed $7,500.
            ``(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 
        by reason of subsection (a) to a taxpayer for--
                    ``(A) any taxable year in which the taxpayer 
                complies with 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 two succeeding taxable years.
            ``(3) Disallowance with respect to persons ordered to 
        active duty for training.--No credit shall be allowed by reason 
        of subsection (a) to a taxpayer with respect to any period for 
        which the person on whose behalf the credit would otherwise be 
        allowable 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 of the United States Code;
                    ``(B) training at encampments, maneuvers, outdoor 
                target practice, or other exercises under chapter 5 of 
                title 32, United States Code; or
                    ``(C) full-time National Guard duty, as defined in 
                section 101(d)(5) of title 10, United State Code.
    ``(e) General Definitions.--
            ``(1) 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.
            ``(2) Qualified reserve duty.--The term `qualified reserve 
        duty' includes only active duty performed in support of, as 
        designated in the reservist's military orders, a contingency 
        operation as defined in section 101(a)(13), of title 10, United 
        States Code.
            ``(3) Normal employment and self-employment duties.--A 
        person shall be deemed to be participating in qualified reserve 
        duty to the exclusion of normal employment or self-employment 
        duties if the person does not engage in or undertake any 
        substantial activity related to the person's normal employment 
        or self-employment duties while participating in qualified 
        reserve duty unless in an authorized leave status or other 
        authorized absence form military duties. If a person engages in 
        or undertakes any substantial activity related to the person's 
        normal employment or self-employment duties at any time while 
        participating in a period of qualified reserve duty, unless 
        during a period of authorized leave or other authorized absence 
        from military duties, the person shall be deemed to have 
        engaged in or undertaken such activity for the entire period of 
        qualified reserve duty.
    ``(f) Controlled groups.--All persons treated as a single employer 
under subsection (a) or (b) of section 52 shall be treated as a single 
employer for purposes of this section.''
    (b) Credit to be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended--
            (1) by striking ``plus'' at the end of paragraph (10);
            (2) by striking the period at the end of paragraph (11) and 
        inserting ``, plus''; and
            (3) by adding at the end the following new paragraph:
            ``(12) the reserve forces participation credit determined 
        under section 45C(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 45C. Reserve forces participation 
                                        credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.
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