[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2230 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2230

  To provide tax relief in relation to, and modify the treatment of, 
   members of a reserve component of the Armed Forces, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 9, 2000

   Mr. Grams introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To provide tax relief in relation to, and modify the treatment of, 
   members of a reserve component of the Armed Forces, 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 ``Military Guard and Reserve Fairness 
Act of 2000''.

         TITLE I--TAX BENEFITS FOR RESERVES OF THE ARMED FORCES

SEC. 101. INCOME EXCLUSION FOR PAY OF CERTAIN RESERVISTS DEPLOYED 
              OVERSEAS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 112 the 
following new section:

``SEC. 113. CERTAIN COMPENSATION OF MEMBERS OF RESERVE COMPONENT.

    ``(a) Enlisted Members.--Gross income does not include compensation 
received for active service as a member below the grade of commissioned 
officer in a reserve component of the Armed Forces of the United States 
by reason of such member's active duty performed, as designated in the 
member's military orders, in support of a contingency operation (as 
defined in section 101(a)(13) of title 10, United States Code) while 
deployed outside the United States.
    ``(b) Commissioned Officer.--Gross income does not include so much 
of the compensation as does not exceed the maximum enlisted amount 
received for active service as a commissioned officer in a reserve 
component of the Armed Forces of the United States by reason of such 
officer's active duty performed, as designated in the officer's 
military orders, in support of a contingency operation (as so defined) 
while deployed outside the United States.
    ``(c) Definitions.--For purposes of this section--
            ``(1) In general.--Any terms used in this section have the 
        meaning given such terms in section 112(c).
            ``(2) Deployed.--The term `deployed' means that a member is 
        performing services in a training exercise or operation at a 
        location or under circumstances that make it impossible for the 
        member to spend off-duty time at the member's official home of 
        record.
            ``(3) United states.--The term `United States' includes the 
        District of Columbia, American Samoa, the Federated States of 
        Micronesia, Guam, the Republic of the Marshall Islands, the 
        Commonwealth of the Northern Mariana Islands, the Commonwealth 
        of Puerto Rico, the Republic of Palau, and the United States 
        Virgin Islands.''.
    (b) Definition of Reserve Component.--Section 7701(a) of the 
Internal Revenue Code of 1986 (relating to definitions) is amended by 
adding at the end the following new paragraph:
            ``(47) Reserve component of the armed forces of the united 
        states.--The term `reserve component of the Armed Forces of the 
        United States' means a reserve component described in section 
        10101 of title 10, United States Code.''.
    (c) Conforming Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 112 the 
following new item:

                              ``Sec. 113. Certain compensation of 
                                        members of reserve 
                                        components.''.

    (d) Effective Date.--The amendments made by this section shall 
apply to service in taxable years beginning after December 31, 2000.

SEC. 102. TAX CREDIT FOR RESERVE FORCES PARTICIPATION.

    (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. 45D. RESERVE FORCE PARTICIPATION CREDIT.

    ``(a) General Rule.--For purposes of section 38, the reserve force 
participation credit determined under this section for the taxable year 
is an amount equal to the sum of--
            ``(1) the employment credit with respect to all qualified 
        employees of the taxpayer, plus
            ``(2) the self-employment credit of a qualified self-
        employed taxpayer.
    ``(b) Limitation on Maximum Credit.--The credit allowed under 
subsection (a) with respect to a taxpayer for the taxable year shall 
not exceed $30,000.
    ``(c) Employment Credit.--For purposes of this section--
            ``(1) In general.--The employment credit with respect to a 
        qualified employee of the taxpayer for any taxable year is 
        equal to 50 percent of the amount of qualified compensation 
        that the taxpayer would have paid to the employee during the 
        taxable year had the employee not been participating in 
        qualified reserve duty, but only with respect to periods during 
        which the employee participates in such duty to the exclusion 
        of normal employment duties.
            ``(2) Qualified compensation.--
                    ``(A) In general.--The term `qualified 
                compensation' means compensation which is--
                            ``(i) normally contingent on the employee's 
                        presence for work and which would be deductible 
                        from the taxpayer's gross income under section 
                        162 if the employee were present and receiving 
                        such compensation, and
                            ``(ii) 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 the receipt 
                        of which 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 with respect to the 
                        number of days covered by such compensation.
                    ``(B) Only first $2,000 per year taken into 
                account.--The amount of qualified compensation which 
                may be taken into account with respect to a qualified 
                employee shall not exceed $2,000 per year.
            ``(3) Qualified employee.--The term `qualified employee' 
        means a person who--
                    ``(A) has been an employee of the 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 (as 
                described in section 10142 of title 10, United States 
                Code) of a reserve component of the Armed Forces of the 
                United States.
    ``(d) Self-Employment Credit.--
            ``(1) In general.--The self-employment credit of a 
        qualified self-employed taxpayer for any taxable year is 50 
        percent of an amount equal to--
                    ``(A) the excess, if any, of--
                            ``(i) the average daily self-employment 
                        income of the self-employed taxpayer for the 
                        taxable year, over
                            ``(ii) the average daily military pay and 
                        allowances received by the self-employed 
                        taxpayer, while participating in qualified 
                        reserve duty to the exclusion of the taxpayer's 
                        normal self-employment duties, multiplied by
                    ``(B) the number of days the taxpayer participates 
                in qualified reserve duty during the taxable year.
            ``(2) Average daily self-employment income; average daily 
        military pay and allowances.--For purposes of paragraph (1)--
                    ``(A) Average daily self-employment income.--The 
                term `average daily self-employment income' means an 
                amount equal to--
                            ``(i) the self-employment income (as 
                        defined in section 1402(b)) of the taxpayer for 
                        the taxable year, divided by
                            ``(ii) a number equal to the excess, if 
                        any, of--
                                    ``(I) 365, over
                                    ``(II) the number of days the 
                                taxpayer participates in qualified 
                                reserve duty during the taxable year.
                    ``(B) Average daily military pay and allowances.--
                The term `average daily military pay and allowances' 
                means an amount equal to--
                            ``(i) the amount received by the taxpayer 
                        during the taxable year as military pay and 
                        allowances in relation to the taxpayer's 
                        participation in qualified reserve duty, 
                        divided by
                            ``(ii) the total number of days the 
                        taxpayer participates in qualified reserve duty 
                        during the taxable year.
            ``(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 (as so 
                described) of a reserve component of the Armed Forces 
                of the United States.
    ``(e) Credit in Addition to Deduction.--The employment credit 
allowed under this section with respect to a taxpayer shall be in 
addition to any other deduction allowable with respect to compensation 
paid to a qualified employee during any period the employee 
participates in qualified reserve duty to the exclusion of normal 
employment duties.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Military pay.--The term `military pay' has the same 
        meaning as the term `pay' under section 101(21) of title 37, 
        United States Code.
            ``(2) Allowances.--The term `allowances' means the 
        allowances payable to a member of the Armed Forces of the 
        United States under chapter 7 of such title.
            ``(3) Qualified reserve duty.--The term `qualified reserve 
        duty', with respect to a Reserve who is a qualified employee or 
        qualified self-employed taxpayer, means active duty performed, 
        as designated in the Reserve's military orders, in support of a 
        contingency operation (as defined in section 101(a)(13) of 
        title 10, United States Code). Such term includes any period in 
        which the Reserve is in a travel status in connection with such 
        duty.
    ``(g) Special Rules.--
            ``(1) Treatment of employer.--All employers treated as a 
        single employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414 shall be treated as a 
        single employer for purposes of this section.
            ``(2) Failure to comply with employment or reemployment 
        rights of members of the reserve components of the armed 
        forces.--No credit shall be allowed under subsection (a) with 
        respect to a taxpayer for any taxable year, and the 2 taxable 
        years immediately following such year, 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, United States Code, with respect to a 
        violation of chapter 43 of such title.
            ``(3) Persons ordered to active duty for training.--An 
        individual shall not be treated as a qualified employee or 
        qualified self-employed taxpayer with respect to any period 
        during which the individual is called or ordered to active duty 
        for any portion of such period 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).
            ``(4) Normal employment and self-employment duties.--For 
        purposes of subsection (c)(1) or (d)(1), an individual shall be 
        deemed not to be participating in qualified reserve duty to the 
        exclusion of normal employment or self-employment duties with 
        respect to the entire period of qualified reserve duty if, for 
        any portion of such period, such individual engages in or 
        undertakes any substantial activity related to the normal 
        employment or self-employment duties of such individual, other 
        than activities engaged in or undertaken while such individual 
        is in an authorized leave status or other authorized absence 
        from military duties.
            ``(5) Certain rules to apply.--Rules similar to the rules 
        of subsections (c), (d), and (e) of section 52 shall apply for 
        purposes of this section.''.
    (b) Conforming Amendment.--Section 38(b) of the Internal Revenue 
Code of 1986 (relating to general business credit) is amended by 
striking ``plus'' at the end of paragraph (11), by striking the period 
at the end of paragraph (12) and inserting ``, plus'', and by adding at 
the end the following new paragraph:
            ``(13) the reserve force participation credit determined 
        under section 45D(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 inserting after the item relating to section 45C the 
following new item:

                              ``Sec. 45D. Reserve force participation 
                                        credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 103. DEDUCTION OF CERTAIN EXPENSES OF RESERVISTS.

    (a) Deduction Allowed.--Section 162 of the Internal Revenue Code of 
1986 (relating to trade or business expenses) is amended by 
redesignating subsection (p) as subsection (q) and inserting after 
subsection (o) the following new subsection:
    ``(p) Treatment of Expenses of Members of Reserve Component of 
Armed Forces of the United States.--For purposes of subsection (a), in 
the case of an individual who performs services as a member of a 
reserve component of the Armed Forces of the United States at any time 
during the taxable year, such individual shall be deemed to be away 
from home in the pursuit of a trade or business during any period for 
which such individual is away from home in connection with such 
service.''.
    (b) Deduction Allowed Whether or Not Taxpayer Elects To Itemize.--
Section 62(a)(2) of the Internal Revenue Code of 1986 (relating to 
certain trade and business deductions of employees) is amended by 
adding at the end the following new subparagraph:
                    ``(D) Certain expenses of members of reserve 
                components of the armed forces of the united states.--
                The deduction allowed by section 162 paid or incurred 
                by the taxpayer in connection with the performance of 
                services by such taxpayer as a member of a reserve 
                component of the Armed Forces of the United States.''.
    (c) Allowance of Deduction for Entertainment Expenses.--Subsection 
(e) of section 274 of the Internal Revenue Code of 1986 (relating to 
disallowance of certain entertainment, etc., expenses) is amended by 
adding at the end the following new paragraph:
            ``(10) Expenses incurred by members of reserve components 
        of the armed forces of the united states.--Expenses paid or 
        incurred by a taxpayer in connection with the performance of 
        services by such taxpayer as a member of a reserve component of 
        the Armed Forces of the United States.''.
    (d) Inapplicability of 50 Percent Ceiling on Deduction for Meal and 
Entertainment Expenses.--Subparagraph (A) of section 274(n)(2) of the 
Internal Revenue Code of 1986 (relating to exceptions) is amended by 
striking ``or (9)'' and inserting ``(9), or (10)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2000.

     TITLE II--ADDITIONAL BENEFITS FOR RESERVES OF THE ARMED FORCES

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Reserve Components Equity Act of 
2000''.

SEC. 202. TRAVEL BY RESERVES ON MILITARY AIRCRAFT OUTSIDE CONTINENTAL 
              UNITED STATES.

    (a) Space-Required Travel for Travel to Duty Stations OCONUS.--(1) 
Subsection (a) of section 18505 of title 10, United States Code, is 
amended--
            (A) by inserting ``annual training duty or'' before 
        ``inactive-duty training'' both places it appears; and
            (B) by inserting ``duty or'' before ``training if''.
    (2) The heading of such section is amended to read as follows:
``Sec. 18505. Space-required travel: Reserves traveling to annual 
              training duty or inactive-duty training OCONUS''
    (b) Space-Available Travel for Members of Selected Reserve and Gray 
Area Retirees.--(1) Chapter 1805 of such title is amended by adding at 
the end the following new section:
``Sec. 18506. Space-available travel: Selected Reserve members and 
              reserve retirees under age 60; dependents
    ``(a) Eligibility for Space-Available Travel.--The Secretary of 
Defense shall prescribe regulations to provide persons described in 
subsection (b) with transportation on aircraft of the Department of 
Defense on a space-available basis under the same terms and conditions 
(including terms and conditions applicable to travel outside the United 
States) as apply to members and former members of the armed forces 
entitled to retired pay.
    ``(b) Eligible Persons.--Subsection (a) applies to the following 
persons:
            ``(1) A person who is a member of the Selected Reserve in 
        good standing (as determined by the Secretary concerned).
            ``(2) A person who is a member or former member of a 
        reserve component under age 60 who, but for age, would be 
        entitled to retired pay under chapter 1223 of this title.
    ``(c) Dependents.--A dependent of a person described in subsection 
(b) shall be provided transportation under this section on the same 
basis as dependents of members and former members of the armed forces 
entitled to retired pay.
    ``(d) Limitation on Required Identification.--Neither the 
`Authentication of Reserve Status for Travel Eligibility' form (DD Form 
1853) nor any other form, other military identification and duty orders 
or other forms of identification required of active duty personnel, may 
be required to be presented by persons requesting space-available 
transportation within or outside the continental United States under 
this section.
    ``(e) Dependent Defined.--In this section, the term `dependent' has 
the meanings given that term in subparagraphs (A), (B), (C), (D), and 
(I) of section 1074(2) of this title.''.
    (2) The table of sections at the beginning of such chapter is 
amended by striking the item relating to section 18505 and inserting 
the following:

``18505. Space-required travel: Reserves traveling to annual training 
                            duty or inactive-duty training OCONUS.
``18506. Space-available travel: Selected Reserve members and reserve 
                            retirees under age 60; dependents.''.
    (c) Effective Date.--The regulations required under section 18506 
of title 10, United States Code, as added by subsection (b), shall be 
prescribed not later than 180 days after the date of the enactment of 
this Act.

SEC. 203. BILLETING SERVICES FOR RESERVE MEMBERS TRAVELING FOR INACTIVE 
              DUTY TRAINING.

    (a) In General.--(1) Chapter 1217 of title 10, United States Code, 
is amended by inserting after section 12603 the following new section:
``Sec. 12604. Billeting in Department of Defense facilities: Reserves 
              attending inactive-duty training
    ``(a) Authority for Billeting on Same Basis as Active Duty Members 
Traveling Under Orders.--The Secretary of Defense shall prescribe 
regulations authorizing a Reserve traveling to inactive-duty training 
at a location more than 50 miles from that Reserve's residence to be 
eligible for billeting in Department of Defense facilities on the same 
basis and to the same extent as a member of the armed forces on active 
duty who is traveling under orders away from the member's permanent 
duty station.
    ``(b) Proof of Reason for Travel.--The Secretary shall include in 
the regulations the means for confirming a Reserve's eligibility for 
billeting under subsection (a).''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 12603 the 
following new item:

``12604. Billeting in Department of Defense facilities: Reserves 
                            attending inactive-duty training.
    (b) Effective Date.--Section 12604 of title 10, United States Code, 
as added by subsection (a), shall apply with respect to periods of 
inactive-duty training beginning more than 180 days after the date of 
the enactment of this Act.

SEC. 204. ELIMINATION OF CAP ON MAXIMUM RESERVE RETIREMENT POINTS THAT 
              MAY BE CREDITED IN ANY YEAR.

    Section 12733(3) of title 10, United States Code, is amended by 
striking ``but not more than'' and all that follows and inserting ``but 
not more than--
                    ``(A) 60 days in any one year of service before the 
                year of service that includes September 23, 1996; and
                    ``(B) 75 days in the year of service that includes 
                September 23, 1996, and in any subsequent year of 
                service before the year of service that includes the 
                date of the enactment of the Reserve Components Equity 
                Act of 2000.''.

SEC. 205. AUTHORITY FOR PROVISION OF LEGAL SERVICES TO RESERVE 
              COMPONENT MEMBERS FOLLOWING RELEASE FROM ACTIVE DUTY.

    (a) Legal Services.--Section 1044(a) of title 10, United States 
Code, is amended--
            (1) by redesignating paragraph (4) as paragraph (5); and
            (2) by inserting after paragraph (3) the following new 
        paragraph (4):
            ``(4) Members of reserve components of the armed forces not 
        covered by paragraph (1) or (2) following release from active 
        duty under a call or order to active duty for more than 30 days 
        issued under a mobilization authority (as determined by the 
        Secretary of Defense), but only during the period that begins 
        on the date of the release and is equal to twice the length of 
        the period served on active duty under such call or order to 
        active duty.''.
    (b) Dependents.--Paragraph (5) of such section, as redesignated by 
subsection (a)(1), is amended by striking ``and (3)'' and inserting 
``(3), and (4)''.
    (c) Implementing Regulations.--Regulations to implement the 
amendments made by this section shall be prescribed not later than 180 
days after the date of the enactment of this Act.
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