[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1168 Introduced in House (IH)]
1st Session
H. R. 1168
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax to employers who employ members of the reserve components of
the Armed Forces of the United States and to self-employed individuals
who are members of such reserve components.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 8, 1995
Mr. Montgomery introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax to employers who employ members of the reserve components of
the Armed Forces of the United States and to self-employed individuals
who are members of such reserve components.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. RESERVE FORCES PARTICIPATION CREDIT.
(a) In General.--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. 45C. RESERVE FORCES PARTICIPATION CREDIT.
``(a) General Rule.--For purposes of section 38, the reserve forces
participation credit determined under this section is an amount equal
to the sum of--
``(1) the aggregate of the employment credits with respect
to qualified employees of a taxpayer, plus
``(2) if the taxpayer is a qualified self-employed
taxpayer, the self-employment credit.
``(b) Employment Credit.--For purposes of this section--
``(1) In general.--The employment credit with respect to a
qualified employee of a taxpayer for any taxable year is an
amount equal to the lesser of--
``(A) 50 percent of the amount of qualified
compensation that would have been paid to the employee
with respect to all periods during which the employee
participates in qualified reserve duty to the exclusion
of normal employment duties, including time spent in a
travel status had the employee not been participating
in qualified reserve duty, or
``(B) $2,000.
``(2) Qualified compensation.--The term `qualified
compensation' means compensation--
``(A) which is normally contingent on the
employee's presence for work and which would be
deductible from the taxpayer's gross income under
section 162(a)(1) if the employee were present and
receiving such compensation; and
``(B) 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 absence,
and with respect to which the number of days the
employee participates in qualified reserve 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 employee.
``(3) Qualified employee.--The term `qualified employee'
means a person who--
``(A) has been a full-time employee of a taxpayer
for the 21-day period immediately preceding the period
during which the employee participates in qualified
reserve duty, and
``(B) is a member of the Ready Reserve of a reserve
component of an Armed Force of the United States.
``(4) Credit in addition to deduction.--The employment
credit provided in this section is in addition to any deduction
otherwise allowable with respect to compensation actually paid
to a qualified employee during any period the employee
participates in qualified reserve duty to the exclusion of
normal employment duties.
``(c) Self-Employment Credit.--
``(1) In general.--In the case of a qualified self-employed
taxpayer, the self-employment credit for any taxable year is
equal to 50 percent of the excess (if any) of--
``(A) the taxpayer's average daily self-employment
income for the taxable year over
``(B) the average daily military pay and allowances
received by the taxpayer during the taxable year while
participating in qualified reserve duty to the
exclusion of the taxpayer's normal self-employment
duties for the number of days the taxpayer participates
in qualified reserve duty during the taxable year,
including time spent in a travel status.
``(2) Average daily self-employment income and average
daily military pay and allowances.--As used with respect to a
self-employed taxpayer--
``(A) Average daily self-employment income.--The
term `average daily self-employment income' means the
net earnings from self-employment (as defined in
section 1402) of the taxpayer for the taxable year
divided by the difference between--
``(i) 365, and
``(ii) the number of days the taxpayer
participates in qualified reserve duty during
the taxable year, including time spent in a
travel status.
``(B) Average daily military pay and allowances.--
The term `average daily military pay and allowances'
means--
``(i) the amount paid to the taxpayer
during a taxable year as military pay on
account of the taxpayer's participation in
qualified reserve duty, divided by
``(ii) the total number of days the
taxpayer participates in qualified reserve
duty, including, if applicable, 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) 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) Limitations.--
``(1) Maximum credit.--The credit determined under
subsection (a) for the taxable year shall not exceed $7,500.
``(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
by reason of subsection (a) to a taxpayer for--
``(A) any taxable year in which the taxpayer
complies with 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 two succeeding taxable years.
``(3) Disallowance with respect to persons ordered to
active duty for training.--No credit shall be allowed by reason
of subsection (a) to a taxpayer with respect to any period for
which the person on whose behalf the credit would otherwise be
allowable 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 of the United States Code;
``(B) training at encampments, maneuvers, outdoor
target practice, or other exercises under chapter 5 of
title 32, United States Code; or
``(C) full-time National Guard duty, as defined in
section 101(d)(5) of title 10, United State Code.
``(e) General Definitions.--
``(1) 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.
``(2) Qualified reserve duty.--The term `qualified reserve
duty' includes only active duty performed in support of, as
designated in the reservist's military orders, a contingency
operation as defined in section 101(a)(13), of title 10, United
States Code.
``(3) Normal employment and self-employment duties.--A
person shall be deemed to be participating in qualified reserve
duty to the exclusion of normal employment or self-employment
duties if the person does not engage in or undertake any
substantial activity related to the person's normal employment
or self-employment duties while participating in qualified
reserve duty unless in an authorized leave status or other
authorized absence form military duties. If a person engages in
or undertakes any substantial activity related to the person's
normal employment or self-employment duties at any time while
participating in a period of qualified reserve duty, unless
during a period of authorized leave or other authorized absence
from military duties, the person shall be deemed to have
engaged in or undertaken such activity for the entire period of
qualified reserve duty.
``(f) Controlled groups.--All persons treated as a single employer
under subsection (a) or (b) of section 52 shall be treated as a single
employer for purposes of this section.''
(b) Credit to be Part of General Business Credit.--Subsection (b)
of section 38 of such Code (relating to general business credit) is
amended--
(1) by striking ``plus'' at the end of paragraph (10);
(2) by striking the period at the end of paragraph (11) and
inserting ``, plus''; and
(3) by adding at the end the following new paragraph:
``(12) the reserve forces participation credit determined
under section 45C(a).''.
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45C. Reserve forces participation
credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1995.
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