[Congressional Record Volume 151, Number 8 (Tuesday, February 1, 2005)]
[Senate]
[Pages S747-S749]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Leahy, Mrs. Murray, Mr. 
        Rockefeller, Mr. Durbin, and Ms. Stabenow):
  S. 240. A bill to mend the Internal Revenue Code of 1986 to allow 
small business employers a credit against income tax with respect to 
employees who participate in the military reserve components and are 
called to active duty and with respect to replacement employees and to 
allow a comparable credit for activated military reservists who are 
self-employed, and for other purposes; to the Committee on Finance.
  Mr. KERRY. Mr. President, the continuing activation of military 
reservists to serve in Iraq and the war on terror has imposed a 
tremendous burden on many of our country's small businesses, their 
employees and their employees' families. Too many small businesses, 
when their employees are asked to leave their jobs and serve the 
Nation, are unable to continue operating successfully and face severe 
financial difficulties, even bankruptcy. At the same time, more than 40 
percent of military reservists and National Guard members suffer a pay 
cut when they're called to defend our Nation. Most large businesses 
have the resources to provide supplemental income to resist employees 
called up for active duty and to replace them with a temporary 
employee. However, too many small businesses are unable to provide this 
assistance (or temporarily replace the employee called up to active 
duty. I believe the Federal Government must take action to help small 
businesses weather the loss of an employee to active duty and protect 
small business employees and their families from suffering unnecessary 
financial hardship to serve our Nation. That is why I am again 
introducing legislation that will provide an immediate tax credit 
assist both military reservists who are called to active duty and the 
small businesses who must endure their absence.
  The Small Business Military Reservist Tax Credit Act that I am 
introducing today will provide immediate

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help to affected small businesses through a Federal income tax credit 
and a reduced withholding requirement to help pay the difference in 
salary for a reservist called up to active duty and the cost of 
temporarily replacing that employee while he or she is serving our 
Nation. Specifically, the bill will provide a tax credit of up to 
$21,000 to any very small business, defined as any business with up to 
50 employees, whose employee has been called up for active duty. Up to 
$15,000 for businesses that pay any difference in salary for the 
activated reservist and up to an additional $6,000 for the business to 
offset the cost of hiring a temporary replacement. For small 
manufacturers with up to 100 employees, the bill will provide a tax 
credit of up to $30,000, up to $20,000 for small manufacturers that pay 
all or part of the difference in salary for the reservist called to 
duty and up to $10,000 for small manufacturers to offset the cost of 
hiring a temporary replacement. This tax credit is critically necessary 
if we are to immediately help struggling entrepreneurs keep their small 
businesses running after the loss of an employee to temporary military 
service. Too many American small manufacturers are already facing a 
difficult economy and strong international competition. This 
legislation provides higher thresholds for small manufacturers because 
they need greater help and they employ more technical workers who 
typically command higher salaries and are more difficult to replace. It 
will also help cushion the financial cost of being a citizen solder for 
our reservists.
  To fight our wars and to meet our military responsibilities, the 
United States supplements its regular, standing military with 
reservists, citizen soldiers who serve nobly. Since 1973, the United 
States has built an all-volunteer military of which reservists are an 
essential part. Our reservists are much more than weekend warriors. 
When they are called to active duty, they are an essential ingredient 
of any long-term or significant deployment of American forces. Everyone 
knows the contributions our reservists have made in the Army, Navy, Air 
Force, Marines and Coast Guard. They have been serving our country with 
distinction and pride for many years and should not be penalized 
financially for their honorable service. The use of reservists is a 
significant way to reduce the costs of maintaining a standing army, and 
those costs, in lieu of having a critical reservist component, are far 
higher than the cost of providing the small, targeted tax credit 
offered by this legislation.
  Reservists have become a vital component of U.S. forces in Iraq and 
the war on terror. On September 14, 2001, President Bush issued 
Executive Order 13223 authorizing the activation of up to 1 million 
military reservists for up to 2 years of active duty. Since October 
2002, there has been a presidentially approved ceiling of 300,000 on 
the number of reservists that can be on duty at anyone time. Some 
475,000 reserves have been called up cumulatively since the issuance of 
the original Executive Order. Today, there are about 193,458 reserves 
on active duty in the war against terrorism. Of the approximately 
150,000 troops serving in Iraq, 40 percent are reserves. This number is 
expected to increase to approximately 50 percent in the near future as 
current troop deployments mobilize.
  Earlier this month, published reports showed that Lt. Gen. James R. 
Helmly, the Commander of the Reserve, has told Army Chief of Staff 
General Peter J. Schoomaker that the burdens placed on military 
reservists since the September 11, 2001 attacks, combined with 
dysfunctional Pentagon policies, have damaged morale and retention and 
threaten to turn the Army Reserve into a broken force. Lt. Gen. Helmly 
criticized Pentagon decisions to extend reservists tours in war zones, 
giving troops as little as 3 days' notice before mobilizations, and 
calling reservists to active duty after they had served and returned to 
civilian life. Such policies have strained the Army Reserve to the 
point that the 200,000 force could be unable to carry out future 
missions.
  Both the Army Reserve and National Guard have suffered shortfalls in 
recruitment because of the unpredictability, extended call-ups and stop 
loss policies associated with the Iraq war. National Guard officials 
said last month that the service must be overhauled.
  Everyone knows that small businesses continue to be a most effective 
at creating new jobs and spurring economic growth nationwide. Small 
businesses employ over 50 percent of the nation's workforce. 
Nationwide, small businesses are currently creating 75 percent of new 
jobs. Furthermore, many of these small businesses provide quality goods 
and services that are a vital link in the supply chain for our national 
defense. Many of these small companies need immediate help to keep 
their business going while their employees are sacrificing for our 
country in Iraq and elsewhere.
  Many of our reservists left their companies in good shape. They were 
profitable, providing goods or services, creating jobs, adding to the 
tax base. Our Nation should do everything possible to ensure that upon 
their return, reservists and their businesses do not suffer unnecessary 
hardships, which range from impaired operations and financial ruin to 
deserted clients, layoffs, and even closure. Pedro Sotelo, a 33-year-
old veteran from Kansas City, MO, was a reservist for 9 years. From 
1997 to 2004 he was called up to active duty 10 times. Each time he was 
activated, he saw his income drop from $60,000 a year as a small 
business sheet metal worker to about $30,000 the Army paid him as a 
staff sergeant. While he was away serving his country, the bills would 
just keep pilling up. Eventually his credit rating plummeted. The 
continual financial strain contributed to the end of his first 
marriage, and after 9 years of service, Mr. Sotelo left the military to 
take a job selling cars. He is still recovering from the financial ruin 
created by his service, but I am happy to say that Mr. Sotelo has 
remarried and was recently promoted to manager at his dealership. Had 
the bill I introduce today been available for Staff Sergeant Sotelo, 
his small business employer could have kept his income steady and 
received a tax credit to cover half of the costs of doing so.
  Beyond the hardship of leaving their families, their homes and their 
regular employment, 41 percent of military reservists and National 
Guard members, like Staff Sergeant Sotelo, face a pay cut when they're 
called for active duty in our armed forces. Many of these reservists 
have families who depend upon that paycheck to survive and can least 
afford a substantial reduction in pay. Unlike many big businesses that 
can afford to provide supplemental income to make up for the salary 
disparity for military reservists called to active duty, most small 
businesses cannot afford to provide this benefit. This makes it more 
difficult for small businesses to attract and keep workers. I think it 
is imperative that we help families of reservists maintain their 
standard of living while their loved one serves our Nation. We must 
ensure that our great tradition of citizen soldiers does not fade or 
stop because of the effect service has on work and family.
  Back in 1999, I wrote the Military Reservist Small Business Relief 
Act, which was enacted into law during the 106th Congress and 
authorized the Small Business Administration (SBA) to defer existing 
loan repayments and to reduce the interest rates on direct loans that 
may be outstanding, including disaster loans, for small businesses that 
have had a military reservist called up for active duty. It also 
established a low-interest economic injury loan program administered by 
the SBA through its disaster loan program. These loans have been 
available to provide interim operating capital to any small business 
when the departure of a military reservist for active duty causes 
economic injury. However, in today's economy, many small businesses are 
unable to take on additional debt to continue their operations. These 
small businesses need immediate tax relief to assist them in hiring a 
replacement and to pay their reservist worker who is away serving our 
country.
  This bill will help every small business whose owner, manager or 
employee is called to active duty. Most immediately, this bill will 
assist those small businesses whose employees are in service in Iraq 
and elsewhere but the act also applies to future contingency 
operations, military conflicts, or national emergencies.
  By helping our reservists and the small businesses that employ them, 
we can ensure that our great tradition of

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citizen soldiers does not fade or stop because of the effect service 
has on work and family.
  I ask all my colleagues to support this important legislation to help 
both military reservists and the small businesses they are forced to 
leave when they are called up for active duty.
                                 ______