1.
This Act may be cited as the
Small Business Military Reservist Tax
Credit Act
.
2.
Credit for income differential for employment of activated
military reservist and replacement personnel
(a)
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:
30B.
Employer wage credit for activated military
reservists
(a)
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)
For purposes of this
section—
(1)
(A)
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)
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)
The term qualified
employee means a person who—
(i)
has been an employee of the
taxpayer for the 91-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)
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)
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.
(c)
For purposes of this
section—
(1)
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)
(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)
(A)
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)
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 rules for certain manufacturers
(A)
In the case of any
qualified manufacturer—
(i)
subsections (b)(1)(A)(ii)
and (c)(1)(B) shall be applied by substituting $40,000
for
$30,000
,
(ii)
subsection (b)(2)(A)(ii)
shall be applied by substituting $20,000
for
$12,000
, and
(iii)
paragraph (1)(A) of this
subsection shall be applied by substituting 100
for
50
.
(B)
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)
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 similar to the rules
of section 39 shall apply with respect to the credit carryback and credit
carryforward under subparagraph (A).
(6)
Rules similar to the rules
of subsections (c), (d), and (e) of section 52 shall apply.
.
(b)
Section 55(c)(2) of the
Internal Revenue Code of 1986 is amended by inserting 30B(f)(1),
after 30(b)(3),
.
(c)
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; special rule
(1)
The amendments made by this
section shall apply to amounts paid after September 11, 2001, in taxable years
ending after such date.
(2)
If refund or credit of any
overpayment of tax resulting from the amendments made by this section is
prevented at any time before the close of the 1-year period beginning on the
date of the enactment of this Act by the operation of any law or rule of law
(including res judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such period.