I

108TH CONGRESS

1ST SESSION H. R. 2168

To amend title 10, United States Code, to revise the age and service requirements for eligibility to receive retired pay for non-regular service; to

provide TRICARE eligibility for members of the Selected Reserve of

the Ready Reserve and their families; to amend the Internal Revenue

Code of 1986 to allow employers a credit against income tax with

respect to employees who participate in the military reserve components

and to allow a comparable credit for participating reserve component

self-employed individuals, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 20, 2003

Mr. ISRAEL introduced the following bill; which was referred to the Committee

on Armed Services, and in addition to the Committee on Ways and

Means, 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 amend title 10, United States Code, to revise the age

and service requirements for eligibility to receive retired

pay for non-regular service; to provide TRICARE eligibility for members of the Selected Reserve of the Ready

Reserve and their families; to amend the Internal Revenue Code of 1986 to allow employers a credit against

income tax with respect to employees who participate

in the military reserve components and to allow a comparable credit for participating reserve component selfemployed individuals, and for other purposes.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘National Guard and

5 Reserves Reform Act for the 21st Century’’.

6 SEC. 2. ELIGIBILITY FOR RETIRED PAY FOR NON-REGULAR

7 SERVICE.

8 (a) AGE AND SERVICE REQUIREMENTS.—Subsection

9 (a) of section 12731 of title 10, United States Code, is

10 amended to read as follows:

11 ‘‘(a)(1) Except as provided in subsection (c), a person

12 is entitled, upon application, to retired pay computed

13 under section 12739 of this title, if the person—

14 ‘‘(A) satisfies one of the combinations of re15 quirements for minimum age and minimum number

16 of years of service (computed under section 12732 of

17 this title) that are specified in the table in para18 graph (2);

19 ‘‘(B) performed the last six years of qualifying

20 service while a member of any category named in

21 section 12732(a)(1) of this title, but not while a

22 member of a regular component, the Fleet Reserve,

23 or the Fleet Marine Corps Reserve, except that in

24 the case of a person who completed 20 years of serv25 ice computed under section 12732 of this title before
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1 October 5, 1994, the number of years of qualifying

2 service under this subparagraph shall be eight; and

3 ‘‘(C) is not entitled, under any other provision

4 of law, to retired pay from an armed force or re5 tainer pay as a member of the Fleet Reserve or the

6 Fleet Marine Corps Reserve.

7 ‘‘(2) The combinations of minimum age and min8 imum years of service required of a person under subpara9 graph (A) of paragraph (1) for entitlement to retired pay

10 as provided in such paragraph are as follows:

‘‘Age, in years, is The minimum years of service

at least: required for that age is:

53 ...................................................................................................... 34

54 ...................................................................................................... 32

55 ...................................................................................................... 30

56 ...................................................................................................... 28

57 ...................................................................................................... 26

58 ...................................................................................................... 24

59 ...................................................................................................... 22

60 ...................................................................................................... 20.’’.

11 (b) 20-YEAR LETTER.—Subsection (d) of such sec12 tion is amended by striking ‘‘the years of service required

13 for eligibility for retired pay under this chapter’’ in the

14 first sentence and inserting ‘‘20 years of service computed

15 under section 12732 of this title.’’.

16 (c) EFFECTIVE DATE.—This section and the amend17 ments made by this subsection (a) shall take effect on the

18 first day of the first month beginning on or after the date

19 of the enactment of this Act and shall apply with respect
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1 to retired pay payable for that month and subsequent

2 months.

3 SEC. 2. EXPANDED ELIGIBILITY OF READY RESERVISTS

4 FOR TRICARE.

5 (a) ELIGIBILITY.—Chapter 55 of title 10, United

6 States Code, is amended by inserting after section 1097b

7 the following new section:

8 ‘‘§ 1097c. TRICARE program: Reserves not on active

9 duty

10 ‘‘(a) ELIGIBILITY.—A member of the Selected Re11 serve of the Ready Reserve of the armed forces not other12 wise eligible for enrollment in the TRICARE program

13 under this chapter for the same benefits as a member of

14 the armed forces eligible under section 1074(a) of this title

15 may enroll for self or for self and family for the same ben16 efits under this section.

17 ‘‘(b) PREMIUMS.—(1) An enlisted member of the

18 armed forces enrolled in the TRICARE program under

19 this section shall pay an annual premium of $330 for self

20 only coverage and $560 for self and family coverage for

21 which enrolled under this section.

22 ‘‘(2) An officer of the armed forces enrolled in the

23 TRICARE program under this section shall pay an annual

24 premium of $380 for self only coverage and $610 for self
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1 and family coverage for which enrolled under this sec2 tion.’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 at the beginning of such chapter is amended by inserting

5 after the item relating to section 1097b the following new

6 item:

‘‘1097c. Section 101 head.’’.

7 SEC. 3. CREDIT FOR EMPLOYMENT OF RESERVE COMPO8 NENT PERSONNEL.

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of

11 1986 (relating to business-related credits) is amended by

12 adding at the end the following new section:

13 ‘‘SEC. 45G. RESERVE COMPONENT EMPLOYMENT CREDIT.

14 ‘‘(a) GENERAL RULE.—For purposes of section 38,

15 the reserve component employment credit determined

16 under this section is an amount equal to the sum of—

17 ‘‘(1) the employment credit with respect to all

18 qualified employees of the taxpayer, plus

19 ‘‘(2) the self-employment credit of a qualified

20 self-employed taxpayer.

21 ‘‘(b) EMPLOYMENT CREDIT.—For purposes of this

22 section—

23 ‘‘(1) IN GENERAL.—The employment credit

24 with respect to a qualified employee of the taxpayer
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1 for any taxable year is equal to the excess, if any,

2 of—

3 ‘‘(A) the qualified employee’s average daily

4 qualified compensation for the taxable year,

5 over

6 ‘‘(B) the average daily military pay and al7 lowances received by the qualified employee

8 during the taxable year,

9 while participating in qualified reserve component

10 duty to the exclusion of the qualified employee’s nor11 mal employment duties for the number of days the

12 qualified employee participates in qualified reserve

13 component duty during the taxable year, including

14 time spent in a travel status. The employment cred15 it, with respect to all qualified employees, is equal to

16 the sum of the employment credits for each qualified

17 employee under this subsection.

18 ‘‘(2) AVERAGE DAILY QUALIFIED COMPENSA19 TION AND AVERAGE DAILY MILITARY PAY AND AL20 LOWANCES.—As used with respect to a qualified

21 employee—

22 ‘‘(A) the term ‘average daily qualified com23 pensation’ means the qualified compensation of

24 the qualified employee for the taxable year di25 vided by the difference between—
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1 ‘‘(i) 365, and

2 ‘‘(ii) the number of days the qualified

3 employee participates in qualified reserve

4 component duty during the taxable year,

5 including time spent in a travel status, and

6 ‘‘(B) the term ‘average daily military pay

7 and allowances’ means—

8 ‘‘(i) the amount paid to the qualified

9 employee during the taxable year as mili10 tary pay and allowances on account of the

11 qualified employee’s participation in quali12 fied reserve component duty, divided by

13 ‘‘(ii) the total number of days the

14 qualified employee participates in qualified

15 reserve component duty, including time

16 spent in travel status.

17 ‘‘(3) QUALIFIED COMPENSATION.—When used

18 with respect to the compensation paid or that would

19 have been paid to a qualified employee for any pe20 riod during which the qualified employee participates

21 in qualified reserve component duty, the term ‘quali22 fied compensation’ means—

23 ‘‘(A) compensation which is normally con24 tingent on the qualified employee’s presence for

25 work and which would be deductible from the
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1 taxpayer’s gross income under section 162(a)(1)

2 if the qualified employee were present and re3 ceiving such compensation,

4 ‘‘(B) compensation which is not character5 ized by the taxpayer as vacation or holiday pay,

6 or as sick leave or pay, or as any other form

7 of pay for a nonspecific leave of absence, and

8 with respect to which the number of days the

9 qualified employee participates in qualified re10 serve component duty does not result in any re11 duction in the amount of vacation time, sick

12 leave, or other nonspecific leave previously cred13 ited to or earned by the qualified employee, and

14 ‘‘(C) group health plan costs (if any) with

15 respect to the qualified employee.

16 ‘‘(4) QUALIFIED EMPLOYEE.—The term ‘quali17 fied employee’ means a person who—

18 ‘‘(A) has been an employee of the taxpayer

19 for the 21-day period immediately preceding the

20 period during which the employee participates

21 in qualified reserve component duty, and

22 ‘‘(B) is a member of the Ready Reserve of

23 a reserve component of an Armed Force of the

24 United States as defined in sections 10142 and

25 10101 of title 10, United States Code.
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1 ‘‘(c) SELF-EMPLOYMENT CREDIT.—

2 ‘‘(1) IN GENERAL.—The self-employment credit

3 of a qualified self-employed taxpayer for any taxable

4 year is equal to the excess, if any, of—

5 ‘‘(A) the self-employed taxpayer’s average

6 daily self-employment income for the taxable

7 year over

8 ‘‘(B) the average daily military pay and al9 lowances received by the taxpayer during the

10 taxable year, while participating in qualified re11 serve component duty to the exclusion of the

12 taxpayer’s normal self-employment duties for

13 the number of days the taxpayer participates in

14 qualified reserve component duty during the

15 taxable year, including time spent in a travel

16 status.

17 ‘‘(2) AVERAGE DAILY SELF-EMPLOYMENT IN18 COME AND AVERAGE DAILY MILITARY PAY AND AL19 LOWANCES.—As used with respect to a self-em20 ployed taxpayer—

21 ‘‘(A) the term ‘average daily self-employ22 ment income’ means the self-employment in23 come (as defined in section 1402) of the tax24 payer for the taxable year plus the amount paid

25 for insurance which constitutes medical care for
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1 the taxpayer for such year (within the meaning

2 of section 162(l)) divided by the difference

3 between—

4 ‘‘(i) 365, and

5 ‘‘(ii) the number of days the taxpayer

6 participates in qualified reserve component

7 duty during the taxable year, including

8 time spent in a travel status, and

9 ‘‘(B) the term ‘average daily military pay

10 and allowances’ means—

11 ‘‘(i) the amount paid to the taxpayer

12 during the taxable year as military pay

13 and allowances on account of the tax14 payer’s participation in qualified reserve

15 component duty, divided by

16 ‘‘(ii) the total number of days the tax17 payer participates in qualified reserve com18 ponent duty, including time spent in travel

19 status.

20 ‘‘(3) QUALIFIED SELF-EMPLOYED TAXPAYER.—

21 The term ‘qualified self-employed taxpayer’ means a

22 taxpayer who—

23 ‘‘(A) has net earnings from self-employ24 ment (as defined in section 1402) for the tax25 able year, and
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1 ‘‘(B) is a member of the Ready Reserve of

2 a reserve component of an Armed Force of the

3 United States.

4 ‘‘(d) CREDIT IN ADDITION TO DEDUCTION.—The

5 employment credit provided in this section is in addition

6 to any deduction otherwise allowable with respect to com7 pensation actually paid to a qualified employee during any

8 period the qualified employee participates in qualified re9 serve component duty to the exclusion of normal employ10 ment duties.

11 ‘‘(e) LIMITATIONS.—

12 ‘‘(1) MAXIMUM CREDIT.—

13 ‘‘(A) IN GENERAL.—The credit allowed by

14 subsection (a) for the taxable year shall not ex15 ceed $25,000 with respect to each qualified em16 ployee.

17 ‘‘(B) CONTROLLED GROUPS.—For pur18 poses of applying the limitation in subpara19 graph (A)—

20 ‘‘(i) all members of a controlled group

21 shall be treated as one taxpayer, and

22 ‘‘(ii) such limitations shall be allo23 cated among the members of such group in

24 such manner as the Secretary may pre25 scribe.
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1 For purposes of this subparagraph, all persons

2 treated as a single employer under subsection

3 (a) or (b) of section 52 or subsection (m) or (o)

4 of section 414 shall be treated as members of

5 a controlled group.

6 ‘‘(2) DISALLOWANCE FOR FAILURE TO COMPLY

7 WITH EMPLOYMENT OR REEMPLOYMENT RIGHTS OF

8 MEMBERS OF THE RESERVE COMPONENTS OF THE

9 ARMED FORCES OF THE UNITED STATES.—No credit

10 shall be allowed under subsection (a) to a taxpayer

11 for—

12 ‘‘(A) any taxable year in which the tax13 payer is under a final order, judgment, or other

14 process issued or required by a district court of

15 the United States under section 4323 of title 38

16 of the United States Code with respect to a vio17 lation of chapter 43 of such title, and

18 ‘‘(B) the 2 succeeding taxable years.

19 ‘‘(3) DISALLOWANCE WITH RESPECT TO PER20 SONS ORDERED TO ACTIVE DUTY FOR TRAINING.—

21 No credit shall be allowed under subsection (a) to a

22 taxpayer with respect to any period for which the

23 person on whose behalf the credit would otherwise be

24 allowable is called or ordered to active duty for any

25 of the following types of duty:
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1 ‘‘(A) active duty for training under any

2 provision of title 10, United States Code,

3 ‘‘(B) training at encampments, maneuvers,

4 outdoor target practice, or other exercises under

5 chapter 5 of title 32, United States Code, or

6 ‘‘(C) full-time National Guard duty, as de7 fined in section 101(d)(5) of title 10, United

8 States Code.

9 ‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.—

10 ‘‘(1) MILITARY PAY AND ALLOWANCES.—The

11 term ‘military pay’ means pay as that term is de12 fined in section 101(21) of title 37, United States

13 Code, and the term ‘allowances’ means the allow14 ances payable to a member of the Armed Forces of

15 the United States under chapter 7 of that title.

16 ‘‘(2) QUALIFIED RESERVE COMPONENT

17 DUTY.—The term ‘qualified reserve component duty’

18 includes only active duty performed, as designated in

19 the reservist’s military orders, in support of a con20 tingency operation as defined in section 101(a)(13)

21 of title 10, United States Code.

22 ‘‘(3) NORMAL EMPLOYMENT AND SELF-EM23 PLOYMENT DUTIES.—A person shall be deemed to

24 be participating in qualified reserve component duty

25 to the exclusion of normal employment or self-em-
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1 ployment duties if the person does not engage in or

2 undertake any substantial activity related to the per3 son’s normal employment or self-employment duties

4 while participating in qualified reserve component

5 duty unless in an authorized leave status or other

6 authorized absence from military duties. If a person

7 engages in or undertakes any substantial activity re8 lated to the person’s normal employment or self-em9 ployment duties at any time while participating in a

10 period of qualified reserve component duty, unless

11 during a period of authorized leave or other author12 ized absence from military duties, the person shall

13 be deemed to have engaged in or undertaken such

14 activity for the entire period of qualified reserve

15 component duty.

16 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

17 to the rules of subsections (c), (d), and (e) of section

18 52 shall apply for purposes of this section.’’.

19 (b) CONFORMING AMENDMENT.—Section 38(b) of

20 such Code (relating to general business credit) is

21 amended—

22 (1) by striking ‘‘plus’’ at the end of paragraph

23 (14),

24 (2) by striking the period at the end of para25 graph (15) and inserting ‘‘, plus’’, and
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1 (3) by adding at the end the following new

2 paragraph:

3 ‘‘(16) the reserve component employment credit

4 determined under section 45G(a).’’.

5 (c) CLERICAL AMENDMENT.—The table of sections

6 for subpart D of part IV of subchapter A of chapter 1

7 of such Code is amended by inserting after the item relat8 ing to section 45F the following new item:

‘‘Sec. 45G. Reserve component employment credit.’’.

9 (d) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 2002.

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