[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1779 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                      October 11, 2004.
    Resolved, That the bill from the House of Representatives (H.R. 
1779) entitled ``An Act to amend the Internal Revenue Code of 1986 to 
allow penalty-free withdrawals from retirement plans during the period 
that a military reservist or national guardsman is called to active 
duty for an extended period, and for other purposes.'', do pass with 
the following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Guardsmen and Reservists Financial 
Relief Act of 2004''.

SEC. 2. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS 
              CALLED TO ACTIVE DUTY FOR AT LEAST 179 DAYS.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans) is amended by adding at 
the end the following new subparagraph:
                    ``(G) Distributions from retirement plans to 
                individuals called to active duty.--
                            ``(i) In general.--Any qualified reservist 
                        distribution.
                            ``(ii) Qualified reservist distribution.--
                        For purposes of this subparagraph, the term 
                        `qualified reservist distribution' means any 
                        distribution to an individual if--
                                    ``(I) such distribution is from any 
                                qualified retirement plan (as defined 
                                in section 4974(c)),
                                    ``(II) such individual was (by 
                                reason of being a member of a reserve 
                                component (as defined in section 101 of 
                                title 37, United States Code)), ordered 
                                or called to active duty for a period 
                                in excess of 179 days or for an 
                                indefinite period, and
                                    ``(III) such distribution is made 
                                during the period beginning on the date 
                                of such order or call and ending at the 
                                close of the active duty period.
                            ``(iii) Application of subparagraph.--This 
                        subparagraph applies to individuals ordered or 
                        called to active duty after September 11, 2001, 
                        and before September 12, 2005.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions after September 11, 2001.

SEC. 3. INCOME TAX WITHHOLDING ON DIFFERENTIAL WAGE PAYMENTS.

    (a) 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:
    ``(i) 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.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to remuneration paid after December 31, 2004.

SEC. 4. TREATMENT OF DIFFERENTIAL WAGE PAYMENTS FOR RETIREMENT PLAN 
              PURPOSES.

    (a) Pension Plans.--
            (1) 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 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(i)(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 performing service in the uniformed services 
                described in section 3401(i)(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. 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(i)(2).''.
            (2) 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''.
    (b) 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(i)(2)).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2004.
    (d) 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, 
                        2007.
                    (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. 5. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT AND READY RESERVE-
              NATIONAL GUARD REPLACEMENT EMPLOYEE CREDIT.

    (a) Ready Reserve-National Guard Credit.--
            (1) 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 inserting after section 
        45I the following new section:

``SEC. 45J. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible taxpayer, the Ready Reserve-National Guard employee credit 
determined under this section for any taxable year with respect to each 
Ready Reserve-National Guard employee of such taxpayer is an amount 
equal to 50 percent of the lesser of--
            ``(1) the actual compensation amount with respect to such 
        employee for such taxable year, or
            ``(2) $30,000.
    ``(b) Definition of Actual Compensation Amount.--For purposes of 
this section, the term `actual compensation amount' means the amount of 
compensation paid or incurred by an eligible taxpayer with respect to a 
Ready Reserve-National Guard employee on any day when the employee was 
absent from employment for the purpose of performing qualified active 
duty.
    ``(c) Limitations.--No credit shall be allowed with respect to any 
day that a Ready Reserve-National Guard employee who performs qualified 
active duty was not scheduled to work (for reason other than to 
participate in qualified active duty).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible taxpayer.--
                    ``(A) In general.--The term `eligible taxpayer' 
                means a small business employer.
                    ``(B) Small business employer.--
                            ``(i) 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.
                            ``(ii) Controlled groups.--For purposes of 
                        clause (i), 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) Qualified active duty.--The term `qualified active 
        duty' means--
                    ``(A) active duty under an order or call for a 
                period in excess of 179 days or for an indefinite 
                period, other than the training duty specified in 
                section 10147 of title 10, United States Code (relating 
                to training requirements for the Ready Reserve), or 
                section 502(a) of title 32, United States Code 
                (relating to required drills and field exercises for 
                the National Guard), in connection with which an 
                employee is entitled to reemployment rights and other 
                benefits or to a leave of absence from employment under 
                chapter 43 of title 38, United States Code, and
                    ``(B) hospitalization incident to such duty.
            ``(3) Compensation.--The term `compensation' means any 
        remuneration for employment, whether in cash or in kind, which 
        is paid or incurred by a taxpayer and which is deductible from 
        the taxpayer's gross income under section 162(a)(1).
            ``(4) Ready reserve-national guard employee.--The term 
        `Ready Reserve-National Guard employee' means an employee who 
        is a member of the Ready Reserve of a reserve component of an 
        Armed Force of the United States as described in sections 10142 
        and 10101 of title 10, United States Code.
            ``(5) Certain rules to apply.--Rules similar to the rules 
        of section 52 shall apply.
            ``(e) Termination.--This section shall not apply to any 
        amount paid or incurred after December 31, 2005.''.
            (2) Credit to be part of general business credit.--
        Subsection (b) of section 38 of the Internal Revenue Code of 
        1986 (relating to general business credit) is amended by 
        striking ``plus'' at the end of paragraph (18), by striking the 
        period at the end of paragraph (19) and inserting ``, plus'', 
        and by adding at the end the following:
            ``(20) the Ready Reserve-National Guard employee credit 
        determined under section 45J(a).''.
            (3) Denial of double benefit.--Section 280C(a) of the 
        Internal Revenue Code of 1986 (relating to rule for employment 
        credits) is amended by inserting ``45J(a),'' after ``45A(a),''.
            (4) Conforming 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 45I the following:

                              ``Sec. 45J. Ready Reserve-National Guard 
                                        employee credit.''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred after September 30, 
        2004, in taxable years ending after such date.
    (b) Ready Reserve-National Guard Replacement Employee Credit.--
            (1) In general.--Paragraph (1) of section 51(d) of the 
        Internal Revenue Code of 1986 (relating to members of targeted 
        groups) is amended by striking ``or'' at the end of 
        subparagraph (G), by striking the period at the end of 
        subparagraph (H) and inserting ``, or'' and by adding at the 
        end the following new subparagraph:
                    ``(I) a qualified replacement employee.''.
            (2) Qualified replacement employee.--Section 51(d) of the 
        Internal Revenue Code of 1986 is amended by redesignating 
        paragraphs (10), (11), and (12) as paragraphs (11), (12), and 
        (13), respectively, and by inserting after paragraph (9) the 
        following new paragraph:
            ``(10) Qualified replacement employee.--
                    ``(A) In general.--The term `qualified replacement 
                employee' means an individual who is certified by the 
                designated local agency as being hired by an eligible 
                taxpayer to replace a Ready Reserve-National Guard 
                employee of such taxpayer, but only with respect to the 
                period during which such Ready Reserve-National Guard 
                employee participates in qualified active duty, 
                including time spent in travel status.
                    ``(B) General definitions and special rules.--For 
                purposes of this paragraph--
                            ``(i) Eligible taxpayer.--The term 
                        `eligible taxpayer' means a small business 
                        employer.
                            ``(ii) Small business employer.--
                                    ``(I) 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.
                                    ``(II) Controlled groups.--For 
                                purposes of subclause (I), all persons 
                                treated as a single employer under 
                                subsection (b), (c), (m), or (o) of 
                                section 414 shall be treated as a 
                                single employer.
                            ``(iii) Ready reserve-national guard 
                        employee.--The term `Ready Reserve-National 
                        Guard employee' has the meaning given such term 
                        by section 45J(d)(3).
                            ``(iv) Qualified active duty.--The term 
                        `qualified active duty' has the meaning given 
                        such term by section 45J(d)(1).
                    ``(C) 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) by reason of paragraph (1)(I) to a taxpayer for--
                            ``(i) 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
                            ``(ii) the 2 succeeding taxable years.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred to an individual who 
        begins work for the employer after September 30, 2004.
    (c) Study by GAO.--
            (1) In general.--The Comptroller General of the United 
        States shall study the following:
                    (A) What, if any, problems exist in recruiting 
                individuals for a reserve component of an Armed Force 
                of the United States.
                    (B) What, if any, problems exist as the result of 
                providing differential wage payments (as defined in 
                section 3401(i)(2) of the Internal Revenue Code of 1986 
                (as added by this Act)) to individuals described in 
                subparagraph (A) in the recruitment and retention of 
                individuals as regular members of the Armed Forces of 
                the United States.
                    (C) Whether the credit allowed under section 45J of 
                the Internal Revenue Code of 1986 (as added by this 
                section) is an effective incentive for the hiring and 
                retention of employees who are individuals described in 
                subparagraph (A) and whether there exists any 
                compliance problems in the administration of such 
                credit.
            (2) Report.--The Comptroller General of the United States 
        shall report on the results of the study required under 
        paragraph (1) to the Committee of Finance of the Senate and the 
        Committee on Ways and Means of the House of Representatives 
        before July 1, 2005.

SEC. 6. PENALTY FREE WITHDRAWALS FROM RETIREMENT PLANS FOR VICTIMS OF 
              FEDERALLY DECLARED NATURAL DISASTERS.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans), as amended by this Act, 
is amended by adding at the end the following new subparagraph:
                    ``(H) Distributions from retirement plans to 
                victims of federally declared natural disasters.--
                            ``(i) In general.--Any qualified disaster-
                        relief distribution.
                            ``(ii) Qualified disaster-relief 
                        distribution.--For purposes of this 
                        subparagraph, the term `qualified disaster-
                        relief distribution' means any distribution to 
                        an individual who has sustained a loss in 
                        excess of $100 as a result of a major disaster 
                        declared under the Robert T. Stafford Disaster 
                        Relief and Emergency Assistance Act--
                                    ``(I) if such distribution is made 
                                from any qualified retirement plan (as 
                                defined in section 4974(c)) during the 
                                1-year period beginning on the date 
                                such declaration is made, and
                                    ``(II) to the extent such 
                                distribution does not exceed the amount 
                                of such loss and is not compensated for 
                                by insurance or otherwise.
                        For purposes of subclause (II), the amount of 
                        any loss shall be determined using the greater 
                        of the fair market value of the property on the 
                        day before the date of such disaster or the 
                        adjusted basis of the property as provided in 
                        section 1011, less any compensation for such 
                        loss that the individual has received as of the 
                        date of such distribution and any compensation 
                        for such loss that the individual expects to 
                        receive, based on a reasonable estimate. Any 
                        difference between the amount of compensation 
                        that an individual expects to receive on the 
                        basis of such an estimate and actually receives 
                        shall not be included in the individual's gross 
                        income.''.
    (b) Exemption of Distributions from Withholding.--Paragraph (4) of 
section 402(c) of the Internal Revenue Code of 1986 (relating to 
eligible rollover distribution) is amended by striking ``and'' at the 
end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by inserting at the end 
the following new subparagraph:
                    ``(D) any qualified disaster-relief distribution 
                (within the meaning of section 72(t)(2)(H).''.
    (c) Conforming Amendments.--
            (1) Section 401(k)(2)(B)(i) of the Internal Revenue Code of 
        1986 is amended by striking ``or'' at the end of subclause 
        (III), by striking ``and'' at the end of subclause (IV) and 
        inserting ``or'', and by inserting after subclause (IV) the 
        following new subclause:
                                    ``(V) the date on which a period 
                                referred to in section 
                                72(t)(2)(H)(ii)(I) begins (but only to 
                                the extent provided in section 
                                72(t)(2)(H)), and''.
            (2) Section 403(b)(7)(A)(ii) of such Code is amended by 
        inserting ``sustains a loss as a result of a major disaster 
        declared under the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act (but only to the extent provided in 
        section 72(t)(2)(H)),'' before ``or''.
            (3) Section 403(b)(11) of such Code is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) for distributions to which section 
                72(t)(2)(H) applies.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions received in taxable years beginning after 
December 31, 2003.

            Attest:

                                                             Secretary.
108th CONGRESS

  2d Session

                               H. R. 1779

_______________________________________________________________________

                               AMENDMENT