Ready Reserve-National Guard employee credit added to general business credit

(a)

Ready Reserve-National Guard credit

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:

45J.

Ready Reserve-National Guard employee credit

(a)

General rule

For purposes of section 38, the Ready Reserve-National Guard employee credit determined under this section for the taxable year is an amount equal to 10 percent of the unpaid compensation amount for the taxable year. (b)

Definition of unpaid compensation amount

For purposes of this section, the term unpaid compensation amount means the amount of compensation which ordinarily would have been paid or incurred by an employer with respect to a Ready Reserve-National Guard employee on any day during a taxable year but was not paid because the employee was absent from employment for the purpose of performing qualified active duty. (c)

Limitations

(1)

Maximum credit

The maximum credit allowable under subsection (a) shall not exceed $2,000 in any taxable year with respect to any one Ready Reserve-National Guard employee. (2)

Days other than work days

No credit shall be allowed with respect to a Ready Reserve-National Guard employee who performs qualified active duty on any day on which the employee was not scheduled to work (for a reason other than to participate in qualified active duty) and ordinarily would not have worked. (d)

Definitions

For purposes of this section— (1)

Qualified active duty

The term qualified active duty means— (A)active duty 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.

Such term shall not include 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).

(2)

Compensation

The term compensation means any remuneration for employment, whether in cash or in kind, which, if paid by the taxpayer, would have been deductible from the taxpayer’s gross income under section 162(a)(1). (3)

Ready Reserve-National Guard employee

The term Ready Reserve-National Guard employee means an employee who is a member of the Ready Reserve or of the National Guard. (4)

National Guard

The term National Guard has the meaning given such term by section 101(c)(1) of title 10, United States Code. (5)

Ready Reserve

The term Ready Reserve has the meaning given such term by section 10142 of title 10, United States Code.

(b)

Credit to be part of general business credit

Subsection (b) of section 38 of such Code (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 new paragraph:

(20)the Ready Reserve-National Guard employee credit determined under section 45J(a).

(c)

Conforming amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45I the following new item:

Sec. 45J. Ready Reserve-National Guard employee credit

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.