[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 838 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 838

  To ensure that the reserve components are able to maintain adequate 
 retention and recruitment levels by protecting the financial security 
 of the families of activated members of the National Guard and of the 
                                Reserve.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 16, 2005

   Mr. Lantos (for himself, Mr. Graves, Mr. McGovern, Mr. Shays, Mr. 
  Olver, Ms. Watson, Mr. George Miller of California, Ms. Kaptur, Mr. 
Ruppersberger, Mrs. Capps, Mr. Strickland, Mr. Grijalva, Mr. Cummings, 
 Mr. Gene Green of Texas, Ms. DeLauro, Mrs. McCarthy, Mr. Blumenauer, 
 Mr. Owens, Mr. McDermott, Mr. Brown of Ohio, Mr. Jefferson, Mr. Moore 
of Kansas, Mr. Delahunt, Mr. Etheridge, Ms. Norton, Mr. Chandler, Mrs. 
 Maloney, Mr. Faleomavaega, Mr. Clay, Mr. Costello, Mr. Jones of North 
   Carolina, and Mr. Stark) introduced the following bill; which was 
  referred to the Committee on Ways and Means, and in addition to the 
    Committee on Government Reform, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To ensure that the reserve components are able to maintain adequate 
 retention and recruitment levels by protecting the financial security 
 of the families of activated members of the National Guard and of the 
                                Reserve.

    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 ``Help Our Patriotic Employers at 
Helping Our Military Employees Act'' or the ``HOPE at HOME Act''.

SEC. 2. NONREDUCTION IN PAY WHILE FEDERAL EMPLOYEE IS SERVING ON ACTIVE 
              DUTY IN A RESERVE COMPONENT OF THE UNIFORMED SERVICES.

    (a) In General.--Subchapter IV of chapter 55 of title 5, United 
States Code, is amended by adding at the end the following new section:
``Sec. 5538. Nonreduction in pay while serving on active duty in a 
              reserve component
    ``(a) An employee who is also a member of a reserve component and 
is absent from a position of employment with the Federal Government 
under a call or order to serve on active duty for a period of more than 
30 days shall be entitled to receive, for each pay period described in 
subsection (b), an amount equal to the difference (if any) between--
            ``(1) the amount of civilian basic pay that would otherwise 
        have been payable to the employee for such pay period if the 
        employee's civilian employment with the Government had not been 
        interrupted by the service on active duty; and
            ``(2) the amount of military compensation that is payable 
        to the employee for the service on active duty and is allocable 
        to such pay period.
    ``(b)(1) Amounts under this section shall be payable with respect 
to each pay period (which would otherwise apply if the employee's 
civilian employment had not been interrupted) that occurs--
            ``(A) while the employee serves on active duty for a period 
        of more than 30 days;
            ``(B) while the employee is hospitalized for, or 
        convalescing from, an illness or injury incurred in, or 
        aggravated during, the performance of such active duty; or
            ``(C) during the 14-day period beginning at the end of such 
        active duty or the end of the period referred to in 
        subparagraph (B).
    ``(2) Paragraph (1) shall not apply with respect to a pay period 
for which the employee receives civilian basic pay (including by taking 
any annual, military, or other paid leave) to which the employee is 
entitled by virtue of the employee's civilian employment with the 
Government.
    ``(c) Any amount payable under this section to an employee shall be 
paid--
            ``(1) by the employing agency of the employee;
            ``(2) from the appropriations or fund that would be used to 
        pay the employee if the employee were in a pay status; and
            ``(3) to the extent practicable, at the same time and in 
        the same manner as would civilian basic pay if the employee's 
        civilian employment had not been interrupted.
    ``(d) In consultation with Secretary of Defense, the Office of 
Personnel Management shall prescribe such regulations as may be 
necessary to carry out this section.
    ``(e) In consultation with the Office of Personnel Management, the 
head of each employing agency shall prescribe procedures to ensure that 
the rights under this section apply to the employees of such agency.
    ``(f) In this section:
            ``(1) The terms `active duty for a period of more than 30 
        days', `member', and `reserve component' have the meanings 
        given such terms in section 101 of title 37.
            ``(2) The term `civilian basic pay', with respect to an 
        employee, includes any amount payable under section 5304 of 
        this title or under such other law providing for the 
        compensation of the employee by the employing agency for work 
        performed.
            ``(3) The term `employing agency', as used with respect to 
        an employee entitled to any payments under this section, means 
        the agency with respect to which the employee has reemployment 
        rights under chapter 43 of title 38. The term `agency' has the 
        meaning given such term in subparagraph (C) of section 
        2302(a)(2) of this title, except that the term includes 
        Government corporations and agencies excluded by clause (i) or 
        (ii) of such subparagraph.
            ``(4) The term `military compensation' has the meaning 
        given the term `pay' in section 101(21) of title 37, except 
        that the term includes allowances under chapter 7 of such 
        title.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 55 of title 5, United States Code, is amended by inserting 
after the item relating to section 5537 the following new item:

``5538. Nonreduction in pay while serving on active duty in a reserve 
                            component.''.
    (c) Application of Amendment.--Section 5538 of title 5, United 
States Code, as added by subsection (a), shall apply with respect to 
pay periods (as described in subsection (b) of such section) beginning 
on or after the date of the enactment of this Act.

SEC. 3. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE CREDIT ADDED TO GENERAL 
              BUSINESS CREDIT.

    (a) Addition of 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:

``SEC. 45J. ACTIVE-DUTY RESERVE COMPONENT EMPLOYEE CREDIT.

    ``(a) General Rule.--For purposes of section 38, 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 an employer is an amount equal to the lesser of--
            ``(1) 50 percent of the actual compensation amount paid 
        with respect to such Ready Reserve-National Guard employee for 
        such taxable year while the employee is absent from employment 
        for a reason described in subsection (b); or
            ``(2) $30,000.
    ``(b) Covered Pay Periods.--Subsection (a) shall apply with respect 
to a Ready Reserve-National Guard employee--
            ``(1) while the employee serves on active duty for a period 
        of more than 30 days;
            ``(2) while the employee is hospitalized for, or 
        convalescing from, an illness or injury incurred in, or 
        aggravated during, the performance of such active duty; or
            ``(3) during the 14-day period beginning at the end of such 
        active duty or the end of the period referred to in 
        subparagraph (B).
    ``(c) Limitation.--No credit shall be allowed under subsection (a) 
with respect to a Ready Reserve-National Guard employee on any day on 
which the employee was not scheduled to work (for a reason other than 
such service on active duty) and ordinarily would not have worked.
    ``(d) Portion of Credit Refundable.--
            ``(1) In general.--In the case of an employer described in 
        paragraph (2), the aggregate credits allowed to a taxpayer 
        under subpart C shall be increased by the lesser of--
                    ``(A) the credit which would be allowed under this 
                section without regard to this subsection and the 
                limitation under section 38(c), or
                    ``(B) the amount by which the aggregate amount of 
                credits allowed by this subpart (determined without 
                regard to this subsection) would increase if the 
                limitation imposed by section 38(c) for any taxable 
                year were increased by the amount of employer payroll 
                taxes imposed on the taxpayer during the calendar year 
                in which the taxable year begins.
        The amount of the credit allowed under this subsection shall 
        not be treated as a credit allowed under this subpart and shall 
        reduce the amount of the credit otherwise allowable under 
        subsection (a) without regard to section 38(c).
            ``(2) Employer described.--An employer is described in this 
        paragraph if the employer is--
                    ``(A) an organization exempt from tax under this 
                chapter,
                    ``(B) any State or political subdivision thereof, 
                the District of Columbia, any possession of the United 
                States, or any agency or instrumentality of any of the 
                foregoing, or
                    ``(C) any Indian tribal government (within the 
                meaning of section 7871) or any agency or 
                instrumentality thereof.
            ``(3) Employer payroll taxes.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `employer payroll 
                taxes' means the taxes imposed by--
                            ``(i) section 3111(b), and
                            ``(ii) sections 3211(a) and 3221(a) 
                        (determined at a rate equal to the rate under 
                        section 3111(b)).
                    ``(B) Special rule.--A rule similar to the rule of 
                section 24(d)(2)(C) shall apply for purposes of 
                subparagraph (A).
    ``(e) Definitions.--In this section--
            ``(1) The terms `active duty for a period of more than 30 
        days', `member', and `reserve component' have the meanings 
        given such terms in section 101 of title 37, United States 
        Code.
            ``(2) 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).
            ``(3) The term `Ready Reserve-National Guard employee' with 
        respect to an employer, means an employee of the employer who 
        is also a member of a reserve component during a taxable 
        year.''.
    (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 active-duty reserve component employee credit 
        determined under section 45J(a).''.
    (c) Conforming Amendment.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or 45J'' after ``section 
        35''.
            (2) 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 new item:

``Sec. 45J. Active-duty reserve component employee credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 4. DIFFERENTIAL WAGE PAYMENTS.

    (a) Income Tax Withholding.--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) Treatment of Differential Wage Payments for Retirement Plan 
Purposes.--
            (1) Pension plans.--
                    (A) In general.--Section 414(u) of such Code 
                (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).''.
                    (B) 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''.
            (2) Differential wage payments treated as compensation for 
        individual retirement plans.--Section 219(f)(1) of such Code 
        (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 Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to remuneration paid after December 31, 2004.
            (2) Subsection (b).--The amendments made by subsection (b) 
        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. CREDIT FOR INCOME DIFFERENTIAL FOR EMPLOYMENT OF ACTIVATED 
              MILITARY RESERVIST AND REPLACEMENT PERSONNEL.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to foreign tax credit, 
etc.) is amended by adding at the end the following new section:

``SEC. 30B. EMPLOYER WAGE CREDIT FOR ACTIVATED MILITARY RESERVISTS.

    ``(a) General Rule.--There shall be allowed as a credit against the 
tax imposed by this chapter for the taxable year an amount equal to the 
sum of--
            ``(1) in the case of a small business employer, the 
        employment credit with respect to all qualified employees and 
        qualified replacement employees of the taxpayer, plus
            ``(2) the self-employment credit of a qualified self-
        employed taxpayer.
    ``(b) Employment Credit.--For purposes of this section--
            ``(1) Qualified employees.--
                    ``(A) 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 lesser of--
                            ``(i) the excess, if any, of--
                                    ``(I) the qualified employee's 
                                average daily qualified compensation 
                                for the taxable year, over
                                    ``(II) the average daily military 
                                pay and allowances received by the 
                                qualified employee during the taxable 
                                year, while participating in qualified 
                                reserve component duty to the exclusion 
                                of the qualified employee's normal 
                                employment duties for the number of 
                                days the qualified employee 
                                participates in qualified reserve 
                                component duty during the taxable year, 
                                including time spent in a travel 
                                status, or
                            ``(ii) $30,000.
                The employment credit, with respect to all qualified 
                employees, is equal to the sum of the employment 
                credits for each qualified employee under this 
                subsection.
                    ``(B) Average daily qualified compensation and 
                average daily military pay and allowances.--As used 
                with respect to a qualified employee--
                            ``(i) the term `average daily qualified 
                        compensation' means the qualified compensation 
                        of the qualified employee for the taxable year 
                        divided by the difference between--
                                    ``(I) 365, and
                                    ``(II) the number of days the 
                                qualified employee participates in 
                                qualified reserve component duty during 
                                the taxable year, including time spent 
                                in a travel status, and
                            ``(ii) the term `average daily military pay 
                        and allowances' means--
                                    ``(I) the amount paid to the 
                                qualified employee during the taxable 
                                year as military pay and allowances on 
                                account of the qualified employee's 
                                participation in qualified reserve 
                                component duty, divided by
                                    ``(II) the total number of days the 
                                qualified employee participates in 
                                qualified reserve component duty, 
                                including time spent in travel status.
                    ``(C) Qualified compensation.--When used with 
                respect to the compensation paid or that would have 
                been paid to a qualified employee for any period during 
                which the qualified employee participates in qualified 
                reserve component duty, the term `qualified 
                compensation' means--
                            ``(i) compensation which is normally 
                        contingent on the qualified employee's presence 
                        for work and which would be deductible from the 
                        taxpayer's gross income under section 162(a)(1) 
                        if the qualified employee were present and 
                        receiving such compensation,
                            ``(ii) compensation 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 of 
                        absence, and with respect to which the number 
                        of days the qualified employee participates in 
                        qualified reserve component 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 
                        qualified employee, and
                            ``(iii) group health plan costs (if any) 
                        with respect to the qualified employee.
                    ``(D) Qualified employee.--The term `qualified 
                employee' means a person who--
                            ``(i) has been an employee of the taxpayer 
                        for the 31-day period immediately preceding the 
                        period during which the employee participates 
                        in qualified reserve component duty, and
                            ``(ii) is a member of the Ready Reserve of 
                        a reserve component of an Armed Force of the 
                        United States as defined in sections 10142 and 
                        10101 of title 10, United States Code.
            ``(2) Qualified replacement employees.--
                    ``(A) In general.--The employment credit with 
                respect to a qualified replacement employee of the 
                taxpayer for any taxable year is equal to 50 percent of 
                the lesser of--
                            ``(i) the individual's qualified 
                        compensation attributable to service rendered 
                        as a qualified replacement employee, or
                            ``(ii) $12,000.
                The employment credit, with respect to all qualified 
                replacement employees, is equal to the sum of the 
                employment credits for each qualified replacement 
                employee under this subsection.
                    ``(B) Qualified compensation.--When used with 
                respect to the compensation paid to a qualified 
                replacement employee, the term `qualified compensation' 
                means--
                            ``(i) compensation which is normally 
                        contingent on the qualified replacement 
                        employee's presence for work and which is 
                        deductible from the taxpayer's gross income 
                        under section 162(a)(1),
                            ``(ii) compensation 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 of 
                        absence, and
                            ``(iii) group health plan costs (if any) 
                        with respect to the qualified replacement 
                        employee.
                    ``(C) Qualified replacement employee.--The term 
                `qualified replacement employee' means an individual 
                who is hired to replace a qualified employee or a 
                qualified self-employed taxpayer, but only with respect 
                to the period during which such employee or taxpayer 
                participates in qualified reserve component duty, 
                including time spent in travel status.
                    ``(D) Failure to make differential wage payments.--
                The employment credit with respect to a qualified 
                replacement employee of the taxpayer for any taxable 
                year shall be zero if the taxpayer does not make all 
                differential wage payments (as defined by section 
                3401(i)(2)) for the taxable year to the qualified 
                employee or the qualified self-employed taxpayer (as 
                the case may be) who is replaced by the qualified 
                replacement employee.
    ``(c) Self-Employment Credit.--For purposes of this section--
            ``(1) In general.--The self-employment credit of a 
        qualified self-employed taxpayer for any taxable year is equal 
        to 50 percent of the lesser of--
                    ``(A) the excess, if any, of--
                            ``(i) the self-employed taxpayer's average 
                        daily self-employment income for the taxable 
                        year over
                            ``(ii) the average daily military pay and 
                        allowances received by the taxpayer during the 
                        taxable year, while participating in qualified 
                        reserve component duty to the exclusion of the 
                        taxpayer's normal self-employment duties for 
                        the number of days the taxpayer participates in 
                        qualified reserve component duty during the 
                        taxable year, including time spent in a travel 
                        status, or
                    ``(B) $30,000.
            ``(2) Average daily self-employment income and average 
        daily military pay and allowances.--As used with respect to a 
        self-employed taxpayer--
                    ``(A) the term `average daily self-employment 
                income' means the self-employment income (as defined in 
                section 1402(b)) of the taxpayer for the taxable year 
                plus the amount paid for insurance which constitutes 
                medical care for the taxpayer for such year (within the 
                meaning of section 162(l)) divided by the difference 
                between--
                            ``(i) 365, and
                            ``(ii) the number of days the taxpayer 
                        participates in qualified reserve component 
                        duty during the taxable year, including time 
                        spent in a travel status, and
                    ``(B) the term `average daily military pay and 
                allowances' means--
                            ``(i) the amount paid to the taxpayer 
                        during the taxable year as military pay and 
                        allowances on account of the taxpayer's 
                        participation in qualified reserve component 
                        duty, divided by
                            ``(ii) the total number of days the 
                        taxpayer participates in qualified reserve 
                        component duty, including 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(a)) 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) Credit in Addition to Deduction.--The employment credit or 
the self-employment credit provided in this section is in addition to 
any deduction otherwise allowable with respect to compensation actually 
paid to a qualified employee, qualified replacement employee, or 
qualified self-employed taxpayer during any period the qualified 
employee or qualified self-employed taxpayer participates in qualified 
reserve component duty to the exclusion of normal employment duties.
    ``(e) Coordination With Other Credits.--The amount of credit 
otherwise allowable under sections 51(a) and 1396(a) with respect to 
any employee shall be reduced by the credit allowed by this section 
with respect to such employee.
    ``(f) Limitations.--
            ``(1) Application with other credits.--The credit allowed 
        under subsection (a) for any taxable year shall not exceed the 
        excess (if any) of--
                    ``(A) the regular tax for the taxable year reduced 
                by the sum of the credits allowable under subpart A and 
                sections 27, 29, and 30, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(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 
        under subsection (a) to a taxpayer for--
                    ``(A) 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
                    ``(B) the 2 succeeding taxable years.
            ``(3) Disallowance with respect to persons ordered to 
        active duty for training.--No credit shall be allowed under 
        subsection (a) to a taxpayer with respect to any period by 
        taking into account any person who 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, 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.
    ``(g) General Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Small business employer.--
                    ``(A) 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.
                    ``(B) Controlled groups.--For purposes of 
                subparagraph (A), 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) 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.
            ``(3) Qualified reserve component duty.--The term 
        `qualified reserve component duty' includes only active duty 
        performed, as designated in the reservist's military orders, in 
        support of a contingency operation as defined in section 
        101(a)(13) of title 10, United States Code.
            ``(4) Special rule for certain manufacturers.--
                    ``(A) In general.--In the case of any qualified 
                manufacturer, paragraph (1)(A) of this subsection shall 
                be applied by substituting `100' for `50'.
                    ``(B) Qualified manufacturer.--For purposes of this 
                paragraph, the term `qualified manufacturer' means any 
                person if--
                            ``(i) the primary business of such person 
                        is classified in sector 31, 32, or 33 of the 
                        North American Industrial Classification 
                        System, and
                            ``(ii) all of such person's facilities 
                        which are used for production in such business 
                        are located in the United States.
            ``(5) Carryback and carryforward allowed.--
                    ``(A) In general.--If the credit allowable under 
                subsection (a) for a taxable year exceeds the amount of 
                the limitation under subsection (f)(1) for such taxable 
                year (in this paragraph referred to as the `unused 
                credit year'), such excess shall be a credit carryback 
                to each of the 3 taxable years preceding the unused 
                credit year and a credit carryforward to each of the 20 
                taxable years following the unused credit year.
                    ``(B) Rules.--Rules similar to the rules of section 
                39 shall apply with respect to the credit carryback and 
                credit carryforward under subparagraph (A).
            ``(6) Certain rules to apply.--Rules similar to the rules 
        of subsections (c), (d), and (e) of section 52 shall apply.''.
    (b) Conforming Amendment.--Section 55(c)(2) of the Internal Revenue 
Code of 1986 is amended by inserting ``30B(f)(1),'' after 
``30(b)(3),''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end of 30A the following new item:

``Sec. 30B. Employer wage credit for activated military reservists.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 6. EMPLOYER CONTRIBUTIONS TO IRAS OF CERTAIN MEMBERS OF THE 
              UNIFORMED SERVICES.

    (a) In General.--Section 3121 of the Internal Revenue Code of 1986 
is amended by adding at the end the following:
    ``(z) Employer Contributions to IRAs of Certain Members of the 
Uniformed Services.--Nothing in any paragraph of subsection (a) (other 
than paragraphs (1) and (5)) shall exclude from the term `wages' any 
employer payment on behalf of an individual to an individual retirement 
plan if such payment is made by the employer to such plan 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.''.
    (b) Railroad Retirement.--Subsection (e) of Section 3231 of such 
Code is amended by adding at the end the following new paragraph:
            ``(1) Employer contributions to iras of certain members of 
        the uniformed services.--Nothing in any paragraph of this 
        subsection (other than paragraph (2)) shall exclude from the 
        term `compensation' any amount described in section 3121(z).''.
    (c) Federal Unemployment Tax.--Section 3306 of such Code is amended 
by adding at the end the following:
    ``(u) Employer Contributions to IRAs of Certain Members of the 
Uniformed Services.--Nothing in any paragraph of subsection (b) (other 
than paragraphs (1) and (5)) shall exclude from the term `wages' any 
employer payment on behalf of an individual to an individual retirement 
plan if such payment is made by the employer to such plan 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.''.
    (d) Withholding.--Section 3401(a) of such Code is amended by adding 
at the end the following new subsection:
    ``(u) Employer Contributions to IRAs of Certain Members of the 
Uniformed Services.--Nothing in any paragraph of subsection (a) (other 
than paragraph (12)) shall exclude from the term `wages' any amount 
described in section 3121(z).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid after December 31, 2004.
                                 <all>