Short title

This Act may be cited as the

Helping Our Patriotic Employers at Helping Our Military Employees Act of 2007

or the

HOPE at HOME Act of 2007

Nonreduction in pay while Federal employee is performing active service in 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:

5538.

Nonreduction in pay while serving in the uniformed services

(a)An employee who is absent from a position of employment with the Federal Government in order to perform service in the uniformed services for a period of more than 90 days shall be entitled to receive, for each pay period described in subsection (b), an amount equal to the amount by which— (1)the amount of basic pay which would otherwise have been payable to such employee for such pay period if such employee’s civilian employment with the Government had not been interrupted by that service, exceeds (if at all) (2)the amount of pay and allowances which (as determined under subsection (d))— (A)is payable to such employee for that service; and (B)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)— (A)during which such employee is entitled to reemployment rights under chapter 43 of title 38 with respect to the position from which such employee is absent (as referred to in subsection (a)); and (B)for which such employee does not otherwise receive basic pay (including by taking any annual, military, or other paid leave) to which such employee is entitled by virtue of such employee’s civilian employment with the Government. (2)For purposes of this section, the period during which an employee is entitled to reemployment rights under chapter 43 of title 38— (A)shall be determined disregarding the provisions of section 4312(d) of title 38; and (B)shall include any period of time specified in section 4312(e) of title 38 within which an employee may report or apply for employment or reemployment following completion of service in the uniformed services. (c)Any amount payable under this section to an employee shall be paid— (1)by such employee’s employing agency; (2)from the appropriation or fund which would be used to pay the employee if such employee were in a pay status; and (3)to the extent practicable, at the same time and in the same manner as would basic pay if such employee’s civilian employment had not been interrupted. (d)The Office of Personnel Management shall, in consultation with Secretary of Defense, prescribe any regulations necessary to carry out the preceding provisions of this section. (e)(1)The head of each agency referred to in section 2302(a)(2)(C)(ii) shall, in consultation with the Office, prescribe procedures to ensure that the rights under this section apply to the employees of such agency. (2)The Administrator of the Federal Aviation Administration shall, in consultation with the Office, prescribe procedures to ensure that the rights under this section apply to the employees of that agency. (f)For purposes of this section— (1)the terms employee, Federal Government, and uniformed services have the same respective meanings as given in section 4303 of title 38; (2)the term service in the uniformed services has the meaning given that term in section 4303 of title 38 and includes duty performed by a member of the National Guard under section 502(f) of title 32 at the direction of the Secretary of the Army or Secretary of the Air Force; (3)the term employing agency, as used with respect to an employee entitled to any payments under this section, means the agency or other entity of the Government (including an agency referred to in section 2302(a)(2)(C)(ii)) with respect to which such employee has reemployment rights under chapter 43 of title 38; and (4)the term basic pay includes any amount payable under section 5304.

(b)

Clerical amendment

The table of sections for chapter 55 of title 5, United States Code, is amended by inserting after the item relating to section 5537 the following:

5538. Nonreduction in pay while serving in the uniformed services.

(c)

Effective date

The amendments made by this section shall apply with respect to pay periods (as described in section 5538(b) of title 5, United States Code, as added by this section) beginning on or after September 11, 2001.

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:

45O.

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 any taxable year is an amount equal to 50 percent of the actual compensation amount for such taxable year. (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 employer with respect to a Ready Reserve-National Guard employee on any day during a taxable year when the employee was absent from employment for the purpose of performing qualified active duty. (c)

Limitation

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 reason other than to participate in qualified active duty). (d)

Definitions

For purposes of this section— (1)

Qualified active duty

The term qualified active duty means— (A)active duty, 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. (2)

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). (3)

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. (4)

Certain rules to apply

Rules similar to the rules of section 52 shall apply. (e)

Portion of credit made refundable

(1)

In general

In the case of an eligible employer of a Ready Reserve-National Guard employee, 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)

Eligible employer

For purposes of this subsection, the term eligible employer means an employer which is a State or local government or subdivision 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).

(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 (309), by striking the period at the end of paragraph (31) and inserting , plus, and by adding at the end the following:

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

(c)

Denial of double benefit

Section 280C(a) (relating to rule for employment credits) is amended by inserting 45O(a), after 45A(a),. (d)

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 45N the following:

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

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Ready Reserve-National Guard replacement employee credit

(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 after section 30C the following new section:

30D.

Ready Reserve-National Guard replacement employee credit

(a)

Allowance of credit

(1)

In general

In the case of an eligible taxpayer, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the sum of the employment credits for each qualified replacement employee under this section. (2)

Employment credit

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— (A)the individual’s qualified compensation attributable to service rendered as a qualified replacement employee, or (B)$12,000. (b)

Qualified compensation

The term qualified compensation means— (1)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), (2)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 (3)group health plan costs (if any) with respect to the qualified replacement employee. (c)

Qualified replacement employee

For purposes of this section— (1)

In general

The term qualified replacement employee means an individual who is hired to replace a Ready Reserve-National Guard employee or a Ready Reserve-National Guard self-employed taxpayer, but only with respect to the period during which— (A)such Ready Reserve-National Guard employee is receiving an actual compensation amount (as defined in section 45O(b)) from the employee's employer and is participating in qualified active duty, including time spent in travel status, or (B)such Ready Reserve-National Guard self-employed taxpayer is participating in such qualified active duty. (2)

Ready Reserve-National Guard employee

The term Ready Reserve-National Guard employee has the meaning given such term by section 45O(d)(3). (3)

Ready Reserve-National Guard self-employed taxpayer

The term Ready Reserve-National Guard 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 as described in section 10142 and 10101 of title 10, United States Code. (d)

Coordination with other credits

The amount of credit otherwise allowable under sections 51(a), 1396(a), or any other provision of this chapter with respect to any wages or other compensation paid to an employee shall be reduced by the credit allowed by this section with respect to such employee. (e)

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. (f)

General definitions and special rules

For purposes of this section— (1)

Eligible taxpayer

The term eligible taxpayer means a small business employer or a Ready Reserve-National Guard self-employed taxpayer. (2)

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. (3)

Qualified active duty

The term qualified active duty has the meaning given such term by section 45N(d)(1). (4)

Special rules for certain manufacturers

(A)

In general

In the case of any qualified manufacturer— (i)subsection (a)(2)(B) shall be applied by substituting $20,000 for $12,000, and (ii)paragraph (2)(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 (e)(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)

No deduction for compensation taken into account for credit

Section 280C(a) of the Internal Revenue Code of 1986 (relating to rule for employment credits), as amended by this Act, is amended— (1)by inserting or compensation after salaries, and (2)by inserting 30D, before 45A(a),. (c)

Conforming amendment

Section 55(c)(3) of the Internal Revenue Code of 1986 is amended by inserting 30D(e)(1), after 30C(d)(2),. (d)

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 after the item relating to section 30C the following new item:

Sec. 30D. Ready Reserve-National Guard Replacement Employee Credit.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

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:

(h)

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, 2006.

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(h)(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(h)(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(h)(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(h)(2)).. (c)

Effective date

The amendments made by this section shall apply to plan years beginning after December 31, 2006. (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, 2009. (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.